Here Is What Janet Yellen Answered When Steve Liesman Asked If The Fed "Has A Credibility Problem"

Tyler Durden's picture

The most amusing moment of today's Janet Yellen press conference occured when none other than Steve Liesman asked Yellen a question, one which he may regret as it is dangerously close to "Pedro da Costa" territory, which goes to the heart of the matter: "does the Fed have a credibility problem?"

The question goes to the Fed's self-described role of being "data-dependent", because if the Fed indeed adhered to the data, it would be hiking right now: it's latest forecast sees long-term unemployment of 4.7-5.0%, right where the official unemployment rate is currently, while the Core PCE of 1.7% is already higher than the high range of the Fed's 2016 year end forecast of 1.4%. In light of this data, it makes no sense for the Fed not to be hiking, and certainly makes no sense to be reducing the number of expected rate hikes in 2016 from four to two.

The jarring congitive dissonance appears to have finally hit Liesman, who asked the following question:

Madam Chair, as you know, inflation has gone up the last two months. We had another strong jobs report. The tracking forecasts for GDP have returned to two percent. And yet the Fed stands pat while it's in a process of what it said at launch in December was a process of normalization.


So I have two questions about this. Does the Fed have a credibility problem in the sense that it says it will do one thing under certain conditions, but doesn't end up doing it? And then, frankly, if the current conditions are not sufficient for the Fed to raise rates, well, what would those conditions ever look like?

The answer was a 261 word jumbled nightmare of James Joyceian stream of consciousness interspersed with high-end econobabble that we, for one, were completely unable to follow. This is what Yellen responded verbatim:

Well, let me start -- let me start with the question of the Fed's credibility. And you used the word "promises" in connection with that. And as I tried to emphasize in my opening statement, the paths that the participants project for the federal funds rate and how it will evolve are not a pre-set plan or commitment or promise of the committee. Indeed, they are not even -- the median should not be interpreted as a committee-endorsed forecast.  And there's a lot of uncertainty around each participant's projection. And they will evolve. Those assessments of appropriate policy are completely contingent on each participant's forecasts of the economy and how economic events will unfold. And they are, of course, uncertain. And you should fully expect that forecasts for the appropriate path of policy on the part of all participants will evolve over time as shocks, positive or negative, hit the economy that alter those forecasts. So, you have seen a shift this time in most participants' assessments of the appropriate path for policy. And as I tried to indicate, I think that largely reflects a somewhat slower projected path for global growth -- for growth in the global economy outside the United States, and for some tightening in credit conditions in the form of an increase in spreads. And those changes in financial conditions and in the path of the global economy have induced changes in the assessment of individual participants in what path is appropriate to achieve our objectives. So that's what you see -- that's what you see now. 

Got that?

Apparently neither did Liesman, who openly admitted in his traditional post-Fed spar with Rick Santelli, the following:

Santelli: Steve, could you understand any of it? Any of it seriously? Just a yes or no.

Liesman: Not much, it was not precisely responsive to the question i asked.

To be sure, Yellen's response to Liesman's very simple question merely confirms that any credibility the Fed may have had is long gone; but the real emerging problem for the Yellen Fed is when such stalwart adherents to the Fed's party line as Steve Liesman are not only losing the plot, but are openly admitting that Yellen no longer makes sense.

And if the Fed can not make a favorable impression on those who are paid to at least pretend that they "get it", what about the rest of the market. 

Worst of all, since the Fed peddles only in faith and "perpetuating the narrative" du jour, in this case one that the Fed has credibility despite not doing what it has explicitly said it would do, how long until it is not just Liesman, but everyone else, who openly admits that the Fed's emperor is fully naked.

The exchange between Liesman and Santelli is below. We apologize for the poor picture quality: CNBC appears to have edited this particular segment out.

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Osmium's picture

Liesman is still a dickhead

Truther's picture

Yellen: "As to the credibility thingy, I don't fucking know why I'm still here!!"

jcaz's picture

Wow.................... Her Masters are already measuring her coffin......

jcaz's picture

She's the Derrick Zoolander of Finance-  Mugato and crew will serve her up to save Micronesia.......

SoilMyselfRotten's picture

I would have replied by asking him if CNBC has a credibility problem. Guess it was too low hangin fruit.

OrangeJews's picture

I can't believe he actually asked it.  He definitely didn't want to answer Santelli though.

Occident Mortal's picture

When asked about the Fed's credability Yellen basically says...


"All the stuff we say doesn't mean shit, we just make it up, same as everyone else"


- she answered the question brilliantly, albeit via a Greenspan filter.

rosiescenario's picture let me help....via a Greenspam diffusion filter....

The communication style is a composite of Faulkner and Joyce but employs words that only have any meaning to a few erudite scholars who got their PhD's from Princeton and have never done an honest days work.


Squid-puppets a-go-go's picture

i understood what yellen was saying. it was very coherent but uneccessarily lengthy. To sum:

we're making it up as we go along

Big Corked Boots's picture

Santelli for Treasury Secretary - under President Trump.

Beam Me Up Scotty's picture

In summary, the "Baffle 'Em With Bullshit" meme will continue.

espirit's picture

Until it doesn't.

Woodchipper bait.

Richard Chesler's picture

Jenet and Liesman,

All lies, all the time.


cheka's picture

as if liesman and frbny are not one in same

Divided States of America's picture

I know why Yellen keeps spewing jibberish....each word she mutters is worth 1 Dow point

pods's picture

She studied under John Madden.

mainstream media is useless's picture

Signed in just to up vote you, made me laugh out loud.

NoDebt's picture

If I was Liesman I would have told Rick the truth:  "Rick, as you well know, I am not an economist.  I have no degree or formal eduction of any kind in economics.  My dereee is in journalism.  I cover economics as a journalist, but I am not an economist.  How, therefore, could you expect me to understand any of this?"


Squid-puppets a-go-go's picture

of what merit an 'education' when keynesianism remains the domineering philosophy?

nscholten's picture

Do you really think a degree from an institution that indoctrinates its participants is going to help understand the full take over of the world economy via debt monetary system. I think not. 

PirateOfBaltimore's picture

How do I trade baffling bullshit? VIX?

Tall Tom's picture

Long Dazzling Brillance and short Baffling Bullshit is the proper trade.


Don't fight the FED


When they are attempting to sell Baffling Bullshit it is long past time to exit that position as it no longer has any value whatsoever.


Whatever you do, just do not buy their Baffling Bullshit as it will end up ruining you.

bigkahuna's picture

That would be interesting - perhaps fun even...

Barnaby's picture

That wasn't Greenspan, that was full-on Rumsfeld.

Big Brother's picture

Exactly, if one cannot define a "line-in-the-sand" for normalization of interests, but instead redefine the criteria for normalization after every meeting.  Then that's equivalent to "making it up as you go along". 

Also, I would add that "shocks, whether negative or positive" are basically caused by the Fed (and other Central Banks to some extent), so it's circular logic that the Fed could ever react to it.  The image of Ouroboros appears in my mind upon reading this.  The catalyst for change would be from an external source.  Internally, this cycle, from Ivory Tower perspective, is infinite. 

Dancing Disraeli's picture

Another translation:  Hey, those numbers you quoted are just the bs we lay on you guys.  Low unemployment?  You bought that?  Look, we're treading water here until we can get Cankles across the finish line.  Then, if she loses, we'll raise rates then.  Have a nice day.

djcando's picture

Translation:  Grab your ankles!  We're not sure what's coming next, so get ready for anything.

TheRideNeverEnds's picture

I can't believe people actually believe the FED has the intention or even capability to raise rates.


Pull up a monthly chart of TNX and TYX.


Interest rates have been declining since forever.  If rates ever do start increasing meaningfully the entire system will implode.


The ten year rate is less today than it was in the depths of the 2008/09 equity selloff. 


Rates are not going higher, they are going sharply lower.



MFL8240's picture

We had another strong jobs report.  80% were miniumun wage, how is this a strong report?  Where does the bullshit end?

epicurious's picture

You meant the Mogambo right JCAZ

JLee2027's picture

Names are very important because of their meanings. Liesman is well named. So is Trump.

El Oregonian's picture

"the participants project for the federal funds rate and how it will evolve are not a pre-set plan or commitment or promise of the committee."

In simple terms, We only fly by the seat of our pants and powered solely by mouth-manure developed over time thru necessity to baffle the bewildered... Next question...

Yukon Cornholius's picture

Maybe he changed it from Truman?

Antifaschistische's picture

we don't follow a "pre set plan"!!  bull shit.  They are under secret oath to never publish or discuss their pre set plan to elevate the stock and bond market.  So they dance around all the other statistics which are irrelevant to them.  Bow to your wall street overlords and move on.

new game's picture

she could have been honest and straight forward and said: the statistics you mention are goal seeking only. also, she should have said there are two sets of numbers we adhere to, the ones you get are only to paint a picture of faith and other set says we are cornered and will be buying crappy assets such as; mbs, college loans, and sub par auto securities to keep the banks balance sheets from becoming impaired . we will let member fed banks use there descretion as to assisting hy credit impairment and of course those district banks have the full backing of the ny fed. we have not ruled out qe 4 and direct infusions while working with congress to fully stimulate spending. with near zero interest rates we have obviously failed to get the economy back to the desired growth and have very few options left as all macro economic data is leading to 2 quarters of below o gdp growth. Congress needs to help with reduced spending as our balance sheet is loading up with treasuries as we continue to suppliment the out of control spending with creation of money through our primary dealers and see a day when there are fewer buyers as is happening in japan. so we have done all the markets will let us do til it gets worse and we have to buy treasuries direct to fund a fiscally bankrupt us treasury...

venturen's picture

actually she has no hand in the decision...Dudley walks in and says we will do this! THAT IS IT! 

Pick any movie with a figure head that has no idea....I will pick Ironman where Ben Kingsley plays The Mandarin....BUT HAS NO IDEA what is happening. NO DIFFERENT!

Puncher75's picture

Yellen successfully wrapped herself in an impenetrable veneer of econ-babble. 

jcaz's picture

I'd say "unsuccessfully" as of now-  she blew the facade today.

ebworthen's picture

Yes, but it was good to see the cognitive dissonance on his face and hear it in his voice; getting close to a Jeff Mackey moment maybe?

Little Kelly still obviously a devout acolyte of the "Church of the Holy Sepulcher of Debt" (the FED). (love you Jeff!)

Mr. BaGoggles's picture

Kudos to Lies Man for asking a difficult question. We certainly didn't expect it from him.

rosiescenario's picture

probably drunk at the time....when he emerges from the blackout..."I did WHAT?"

KesselRunin12Parsecs's picture

Kudos my ass... It's all fucking softball bullshit...


The FED has a JEW problem... I hope that 'helps' a little.

Tall Tom's picture

Then get him plowed before the nect press conference?


But he may have a fortunate nailgun accident after this one.

rosiescenario's picture

probably drunk at the time....when he emerges from the blackout..."I did WHAT?"

Keloid's picture

The data that the fed is reacting to is the devaluation of a few sister fiat currencies.  

The whole inflation/employment-rate thing takes a backseat to stability.  How much would technological capabilities of an Apple i6 cost have cost back in 1985?

Sorry if  you have to pay more for food and housing to get to play with technological marvels such as the earth has never seen. Next year will be even crazier! Innovation keeps on going faster and faster.

PirateOfBaltimore's picture

You're promoting the idea that all things low interest rates promote are good investments. 


Bluntly, that's bullshit.


Valuable tech that we play with is still valuable in higher interest rate markets. What isn't is what's building in jnventories right now, including the binge on shale producers.  Tech that has never been seen before still occurs because it is groundbreaking, and still a valid investment as it actually moves humanity forward. Stock buybacks do not.

moonmac's picture

Building strip malls 10-15 years before the first tenant moves in has far more to do with Keynesian economics than technology advancements. People like you had a boner for tech when we had Sound Money too!

orez65's picture

This is how low and moronic this country has become. 

And they wander why people are angry and follow Trump.

To believe that a bank, yes a fu.king bank, called the Federal Reserve, can manage the US economy or any other economy in the world is like living in the Middle Ages and believing that the Earth is flat and that the Sun revolves around the Earth.

For Pete's sake the Federal Reserve is a FRAUD! They COUNTERFEIT CAPITAL!

They give free counterfeited capital to bankrupt banks.

Wake the fu.k up!!