There is a common adage that “book learning” is not the same as “street smarts.” In the case of economics PhDs like Janet Yellen, we could adapt this to say that “theory” is not the same as “reality.”
Janet Yellen is a career academic. This is not necessarily a bad thing. Career academics play a critical role in terms of both research and teaching future generations of leaders.
However, unlike most career academics, Janet Yellen is in charge of the US economy. In this light, one has to ask aloud, “why would you put someone with absolutely zero experience in creating jobs, growing a business, lending money, hiring, firing, etc. in charge of the US economy.”
Has Yellen ever had to personally decide whether or not to expand a business? Has Yellen ever had to develop a marketing campaign to increase sales? Has she ever had to concern herself with employment benefits for her staff?
Let’s take the other component of the Fed’s work, the financial markets, into consideration. Has Yellen ever managed a portfolio of any significant size? Has she ever guided a trading team? Has she ever even run a bank? Has she ever had to unwind a bankrupt institution?
The answer to all of these is no. And yet, we’re supposed to entrust her to guide the economy. This would be like asking someone who has never even run a 5K but has read a lot of books on running to win the New York marathon.
We do not mean to pick on Yellen in particular. Indeed, she is not unique in her total lack of qualifications for the job of Fed Chair.
Bernanke was another career academic with next to no real world experience. We’ve since discovered that ALL of his theories on economics misguided. Indeed it is difficult to find a single economic metric that has improved since 2008 other than household net worth which has largely been driven by gains in the stock market.
1) The labor participation rate is virtually the same.
2) Median incomes have fallen.
3) Real unemployment (not the phony official number) is only marginally better.
4) Costs of living are significantly higher.
And yet, Bernanke spent over $4 trillion trying to prove his misguided theories. It was the single most expensive academic study ever performed. Unfortunately it punished billions of people (the Fed’s inflationary policies lead to record food prices which incited starvation and civil unrest globally).
Not once during the five year period between 2008 and 2013 when he retired, did Bernanke change course. Any normal person would have reconsidered their positions after $1 trillion or $2 trillion didn’t do the trick. The Arab spring, record high food prices, food stamp usage and the like would also have given most folks pause. Not Bernanke. And apparently not Yellen either (she was the Fed’s second in command for most of Bernanke’s tenure).
We all know how this will work out: another, even larger crisis is looming on the horizon. And this time around, the Fed has already used up virtually all of its ammo. When and how it will hit, no one knows. But the fact that a mere 10% drop in stock prices from RECORD HIGHS was enough to induce panic around the globe should tell you all you need to know about the fragility of the financial system.
Be warned…
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Phoenix Capital Research