Decoding Yellen's Message

Tyler Durden's picture

Authored by 720Global's Michael Lebowitz via,

“I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant – Alan Greenspan

On July 12, 2017 in her semiannual testimony to Congress, Janet Yellen stated the following:

“The Federal Funds rate would not have to rise all that much further to get to a neutral policy stance.”

Currently the target for the Federal Funds rate is a range of 1.00-1.25%, having been raised four times since December 2015. Despite the increase from the zero level that persisted for seven years following the “Great Financial Crisis,” it is still at microscopic levels as shown below.

Data Courtesy: St. Louis Federal Reserve (FRED)

Per Janet Yellen’s comment, the “neutral policy stance” is another way of saying that the Fed funds rate is appropriate or near appropriate given current and expected future economic conditions.

Said differently, Janet Yellen is admitting what 720Global has been saying for years – the economy has been stagnant, is stagnating and will continue to stagnate.

If we assume that Yellen is referring to a range of 1.25-1.75% as an appropriate Fed Funds rate, based on statistical analysis of data since 1955, we forecast that real GDP growth rate is likely to average somewhere between 2.00-2.50% for the foreseeable future. For perspective, the graph below plots the range of expected GDP growth vs historical secular (3-year average) GDP growth. In years past, such a slow rate of growth (highlighted in yellow) was considered nearly recessionary.

Data Courtesy: St. Louis Federal Reserve (FRED)

A similar analysis comparing Yellen’s “neutral” Fed funds rate versus inflation (CPI) yields inflation expectations of approximately 1.75%. Again, such an inflation rate is emblematic of a stagnant economy.

We are gratified that Janet Yellen is finally coming around to our perspective and only sorry that it has taken her the entirety of her tenure to do so. Unfortunately, the levels of growth to which she conceded in this testimony imply further challenges for the economy due to the large debt overhang, weak fundamentals supporting overvalued financial markets and higher risks of recession.


Today’s comments are not a revelation. The Fed is currently forecasting long term economic growth of 1.90%. Those trading on hope and momentum are translating her message as a green light to buy stocks because the Fed will remain ultra-accommodative.

While it is nice some see a silver lining in her message, one must remember that equity valuations are perched at levels that imply tremendous economic and earnings growth. If what Yellen is saying is true, equity holders are grossly overpaying for a stream of future earnings that will most certainly be disappointing.

Conversely, the message in Yellen’s testimony is bond friendly. In fact, we argue that continued stagnation and weak price growth could result in even lower yields than those we have seen over the past five years.

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hedgeless_horseman's picture


“The Federal Funds rate would not have to rise all that much further to get to a neutral policy stance.”


“Planned maintenance on the US Treasury's Heidelbergs should be done in a few weeks.”

NoDebt's picture

I was mocked when I said we should indicate how well the economy is doing as an interest rate, not as GDP growth.  For instance:  How's the economy doing?  Oh, not so great, I'd say we're at about -2% interest rate.

And now I give you this:

"Said differently, Janet Yellen is admitting what 720Global has been saying for years – the economy has been stagnant, is stagnating and will continue to stagnate."

Janet's stupid "neutral policy rate" = NoDebt's stupid rate-based economic conditions indicator

When it comes to stupid ideas, I might not be the best, but I'm ALWAYS first.

Stick with me, kids.  You'll make millions!  (And give them all right back again.)


nope-1004's picture

That's because with low interest rates, or when the price of money is debauched, the time factor is eliminated from free market efficiency.  Entrepreneurial spirit dies, as the focus turns from efficiency and ingenuity to making payments.  The human is inherently a little lazy, so removing the time component from money kills the economy.  Low interest rates kill the economy, except the grand lie is that it's good for everyone because your payments are low.  Truth is, principal cost of assets is always lower under a high interest rate regime, and the opposite effect of asset bubbles form under low interest rates.  We are being systematically enslaved and killed.  This is serious and no one wants to acknowledge the currency debauchery.

Doesn't take a PHD to figure that out.  Except the Fed doesn't care about that little tidbit, they're into controlling you and I and all the other nations of the world through money.

It's satanic at its core.  The people need to take to the streets and literally overthrow all these evil moneymen by hanging them from lamp posts.  Currently, the sytem is designed around payments and credit rating, when in fact it should be called enslavement via the slavery index.

Personally, I'm sick of it.  To you the reader, everyone else is too except you.

NotApplicable's picture

'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'

armada's picture

Decoding Yellen's Message:

"We Jewish Chairmen of the Fed want to keep the Fed in Jewish hands. No Audit to show what we stole."

MillionDollarButter's picture

Shoeshine boy gave me a hot tip this morning. "All in on XIV at 3:30.", lol.

This is it's picture

I'm so sad.. A family member just passed on.  All these don't matter anymore. 

Clock Crasher's picture

You have my empathy.  Maybe you could take the day/week off from zerohedge.

I took a few months away from daily awareness in the begning of this year.

Nothing really changes and I doubt you would miss much.

May you process your pain on good terms and come out the other side stronger.

Bryan's picture

100%.  What's really important while you are still alive?  Is it really money and politics?

This is it's picture

Silver and gold cannot stop death. We are all living for a moment of ecstasy. And then we die. What does it profit a man to gain the world but lose his soul. 

LawsofPhysics's picture

True, but it will preserve wealth and opportunies for your children.  Don't be so selfish.  PMs remain the prefered collateral, period, regardless of the "fiat du jour". No shit no one lives forever, but this doesn't mean you should willingly be a fucking idiot either. You won't beable to do good things if you don't have a purchasing power, period.

CPL's picture

Condolences.  Otherwise here's what's going to piss you off.  It never did matter.  All this stuff is just to move a que full of bodies from point A to point B without much fuss.  Gives the livestock, biological or otherwise, something to do to pass the time. 

khakuda's picture

And come Feburary, she will be making speeches for $250,000 a pop.

Great life.  Create bubbles and increase wealth disparities by keeping rates below inflation and then cash in.

Clock Crasher's picture

Ponzinomics. 0% of the time it works everytime.

Stan522's picture

The stock market is the decoder ring...... I'll wait for that.....

LawsofPhysics's picture

Regardless, only the bankers and financiers have access to free money via NIRP/ZIRP, why not give EVERY productive person/LLC THE SAME ACCESS!!!!

See the problem yet motherfucker?

"Full Faith and Credit"

Fake Trump's picture

No need to decode. All on her pussy.

CPL's picture

I decoded her verbal dump as "Please kill me and my colleagues."

Dave5150's picture

"Everything is fine, there are no American tanks in Baghdad..."

Clock Crasher's picture

1.25% Fed funds rate

1.75% Inflation

Translation: FAIL!

CPL's picture

Yup, they fail, why keep them.  They aren't housepets and no one likes them anyways.  Let's recite the mantra of change.

Die Janet, die.

Die Brainard, die.

Die Cohen, die.

Lord Ariok's picture

Ponzis work until the sheep wake up that the ones in front are being sheered and lead to the abbatiors.~Lord ArioK

Clock Crasher's picture

"Men go mad in herds yet collect their senses one at a time"

Clock Crasher's picture

Died at the age of 101 genius theorist of the Resource Based Economy mentions Debt and the Fed

Honest Sam's picture

Imagine that.  A FED chairperson being inscrutable.

You have to give them credit for one thing:  their humility.

They could, if they chose to exercise their hubris slow twitch muscles, just tell the whole world to..."Fuck the hell off and sit their assholes on a hot poker".  

But they don't.

you go girl.....

CPL's picture

You actually believed any of her nonsense?  Her apology is far too late, everyone's bowls are empty and she needs to be made as an example of.  Why?  Why not. 

<Black bag Janet and her family!>

<Break the theiving banker's hips>

<Use a sledge hammer while she's straped down>

<Dump her body in the sewer tunnels>

<Jazz Hands!>

Give_me_liberty_or's picture


Barney08's picture

Why does she continue to think we are stupid?

Vinividivinci's picture

Her drivel isn't intended for this audience.
She's talking over our heads Barney boy.
You and I are simply useless eaters.
Always refer back to Henry Kissinger, when you're unsure of your place...
in THEIR world.

JackMeOff's picture

Even balloons deflate eventually

vegas's picture

No matter how much cinnamon & spice you put on bullshit, it doesn't turn the stinking pile into chicken salad.

Vinividivinci's picture

A translation of her speech into Pig Latin might help.

Golden Showers's picture

“The Federal Funds rate would not have to rise all that much further to get to a neutral policy stance.”

“Ethay Ederalfay Undsfay ateray ouldway otnay avehay otay iseray allyay atthay uchmay urtherfay otay etgay otay ayay eutralnay olicypay ancestay.”

I was looking for a Mr. T translator. Can anyone find one? Still the translation is kind of lame... except for the isera(el)y part.

NuYawkFrankie's picture

"Anyone got a spare ice-cube?  My hemorrhoids are killing me!"

Madison&#039;s_Ghost's picture

So the Fed's target is a growth rate thats ~8% below real inflation?  That sounds um...well, stupid.

LawsofPhysics's picture

Yes, it's even dumber to believe that economic growth can continue forever and ever in a biosphere with finite resources.

bjax's picture

I could have sworn she said Buy Bitcoin !

Herdee's picture

Endless foreign wars are bankrupting America. It's the world empire-hegemony program people. You have structural problems in society. And no, everybody else in the world doesn't want to live like Americans or be run by them.

Cordeezy's picture

The old grandma's time has come.  She will be replaced next year with a new patzi that will push the same message of confusion.


Never_Put_Down's picture

Yellen's done, put Jim Grant as Chairman

c2nnib2l's picture

echhh my gold... going down again 

Ink Pusher's picture

I've just gotta love the quoted cryptic verses coming from the Greenspanosaur archives... made my day.

Rene-Paul's picture

new nope-1004, You hit the nail on the head.

I was a young, ignorant,stupid GI in Saigon in december of 1968. I could see the debauchery/ debasement of of the prohibited US dollar,the military payment certificates,aka MPC and the local Viet Namese currency,aka dong/piaster.

Time value of money, interest; What is that again?, I forgot.



Able Ape's picture

Yeah, on the first day in country they confiscated any US currency you had; I still remember walking up the the window...MPC #1, GI...

Able Ape's picture

Actually, the proven way to forecast the direction of the economy is to analyze the wrinkles around Janet's asshole.  Yeah, it's a nasty job but someone does it each month to divine the future....