San Fran Fed's Janet Yellen Shares Some Misinformation On The Fed's "Credbility" And Other Topics

Warning: Watch the below video without prior ingestion of Xanax, lithium and/or horse tranquilizers at your own risk.

Grandma Janet sounds like an insane and/or senile bureaucrat who does not want to admit that she was one of the select cabal of monetary druids whose mistakes essentially destroyed the financial world a year ago... and their reaction to this destruction has made sure that the US economic system is now promptly heading either toward hyperdeflation or hyperinflation (likely both).

Nonetheless, some interesting quotes:

  • On negative fund rates:

"[QE] is stimulating the flow of credit, but [it is] simply not as powerful levers as large rate cuts."

In other words, if Bernanke could charge savers 10% for keeping money in the bank, he would be first in line to do so. Can't have those pesky forward looking, prudent consumers spoil it for all those tens of millions who are deadbeat squatters in houses they will never get evicted from, as else Wells Fargo and BofA would have to mark their mortgage books down to fair value.

  • On deflation:

"If the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation. Or still, it is conceivable that were inflation to intensify, we could find ourselves in a devastating spiral in which prices fall at an ever faster pace, and economic activity sinks more and more."

  • On the (presumably flawed) concerns about hyperinflation:

"i) The Fed has pumped up the money supply and expanded its balance sheet to fund its rescue programs, potentially igniting inglation; ii) the Fed runs the risk of repeating the errors of the 1970s by focusing on mistaken view of economic slack, rather than rising prices; iii) huge fiscal budget deficits will create higher inflation.

  • A little more on Hyperinflation:

"Nowadays hyperinflation only happens in 3rd world countries"

Maybe Ms. Yellen needs to go to community college and take some remedial history. Nonetheless, she does touch upon the US "economic reality" exemption that Mr. Ben Dover discussed previously.

  • On Fed Credibility (it is now certain that she is an alien for using those two words in the same sentence):

"Evidently the credibility that the Fed and other central banks have built over the past few decades in bringing inflation down has spilled over into a belief that we won't let inflation get too low either."

  • On Securitization:

"Securitization is one of the great financial innovations of the last generation, it greatly expanded the market for these loans and reduced their cost. I think there is no question that securitzation of certain types of loans like subprime contributed to the crisis we had, but we have to be careful not to throw out the baby with the bath water." And this is why the US is doomed: "Securitization markets will continue to play a major role in our financial system." Remember: debt is wealth. And thus, the implication, Infinitely securitized debt is infinite wealth.

  • And, For The Win:

"The Fed's analytical prowess is top notch, and our forecasting record is second to none. The FOMC is committed to price stability  and has a solid track record in achieving it."

No, she really did say that. Hey Janet, how about we confirm this statement. Oh yeah, the Fed prohibits anyone from actually knowing what on earth goes on there, and just how it is you guys confirm your forecasts with reality: did you guys actually predict this unprecedented crash? Would have been great to warn the rest of us mere mortals.

The entire one hour plus clip can be found here courtesy of FORA TV, and the first 10 minutes are on the clip below.