What I think is an interesting take on Janet Yellen

[Hayabusa Rider]

Seems to be a good analysis.

I'm not sure who would be the right choice, but looking at this argument I wonder if she's far from being the best of possibilities.

 

[Anarchist420]

she's basically ben bernanke on steroids. the only fed chairman that wouldnt totally suck is one that froze the federal funds rate at 10% for their entire chairship, didnt do quantitative easing or anything like that, and froze the discount rate at 100% as long as they were chair (taking away the Fed's position as lender of last resort so that the banks could fail).

unfortunately, that will never happen because the Fed is supposed to be inflationary (and it is inflationary)... i'll never understand the greenbackers as of whom probably make up more than 1/2 of the anti-fed people.

 

[Moonbeam]

I would love to find a one handed economist.

 

[Gonad the Barbarian]

There's a reason QE is the second choice for economic stimulus, but with the lack of government doing anything to help the economy it's all we're left with.

 

[LegendKiller]

I stopped reading after the author said the only thing that happened during the GD is a crash of the stock market. That kind of stupidity doesn't deserve my readership.

 

[rudder]

she's basically ben bernanke on steroids.

Not sure about that analysis.... but she will continue QE without question as long as obama and his wall street cronies instruct her to continue.

 

[shady28]

Seems to be a good analysis.

I'm not sure who would be the right choice, but looking at this argument I wonder if she's far from being the best of possibilities.

This is the part of that article most concerning. If she is so smart, she should know better than this :

" Yellen is on record claiming that the PE multiple based on assumptions about next year's earnings can be used to show that the market is not overpriced. "



Analysts are always upgrading stocks that have already risen, and downgrading stocks that have already fallen. The outlook at a top - and it must be this way - is always the best. At a bottom, it is always the worst. And the sheeple follow by buying at tops, and selling at bottoms.

Yellen doesn't seem to have any special insight that a run of the mill analyst wouldn't have. That's dangerous.


Alan Greenspan OTOH always had great insight.

Some quotes from Greenspan :

"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense... that gold and economic freedom are inseparable."

"History has not dealt kindly with the aftermath of protracted periods of low risk premiums."

"Whatever you tax, you get less of."

"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said."

 

[Spungo]

Peter Schiff's analysis of Janet Yellen (40 minutes, he goes over her forecasting record)
Summary:
-She (and other Keynesians like Bernanke) did not see a housing bubble.
-She downplayed the concerns of people who thought there was a bubble.
-She even pointed to data suggesting there was a bubble then used that data to conclude that there was no bubble.
-She said that she would have negative interest rates if she had her way. That means you borrow $100 and only pay back $95, which would invariably lead to misallocation of capital in the form of highly speculative investments, leading to a massive bubble, followed by another legendary market crash.

Then there's always the data showing that Keynesian economics simply doesn't work:
http://www.cyniconomics.com/2013/11/16/bad-news-for-keynesians-data-shows-the-austerians-are-right/
The countries that went with austerity (spending cuts and deflation) are recovering much faster than the countries that took the Keynesian route of trying to spend and inflate their way out of debt, because that worked so well for Zimbabwe and the Weimar Republic.

The general consensus is that Yellen will likely continue QE, and possibly increase QE. Some things you can expect in the future:
-Continued 1970's style inflation.
-A growing disconnect between the economy and the stock market.
-Stagnant economic growth because inflation kills consumer spending. I can't order a new car if half of my income goes to shit like $6 gas and $3 loaves of bread.

 

[Incorruptible]

There's a reason QE is the second choice for economic stimulus, but with the lack of government doing anything to help the economy it's all we're left with.

The government can't fix the economy and the government is responsible for the recession. Cut spending to help fix the economy.

 

[Dari]

A couple of years ago I had a prominent economist at Columbia basically lie to me about what the Feds were doing (Joseph Stiglitz wouldn't return my calls). I asked him why the Feds didn't just let the prices adjust naturally to the new reality. His answer was that, they were, albeit more slowly. It's very clear to anyone that this is not the case. All QE does is try to keep prices the same (pumping money into the economy to maintain prices). We repeatedly chided the Japanese for doing this in the 1990s and then, once it happened here, we did the exact same thing. So, yeah, Yellen is the perfect candidate for this type of economy. Luckily for Obama and others, as Japan, Europe and America have shown, inflation will not be rising anytime soon despite massive massive money printing. The main question for everyone, though, is why...

 

[Spungo]

Luckily for Obama and others, as Japan, Europe and America have shown, inflation will not be rising anytime soon despite massive massive money printing. The main question for everyone, though, is why...

It's because most of the money printing is to prevent deflation. That's the official stated goal of QE.

I'll use an example to show how this works. Suppose you run an investment company similar to Lehman Brothers. You borrow $10M to buy a bunch of properties that are worth $10M when you bought them. The important thing to note is that we have a fractional reserve and fiat banking system. You're not borrowing someone else's money. Most of that money is "new" money, created from nothing. This creation of money is how housing prices across the country can all go up at the same time, causing asset price inflation. There's nothing wrong with this type of banking system. The old gold standard had some severe limitations, and it prevented the economy from growing. Now suppose the market crashes and your company is drowning in $10M of debt. Your company can't pay that money back, so your company declares bankruptcy. In doing so, that $10M you owe is destroyed. Ashes to ashes, dust to dust, money created with a stroke of a pen can also be destroyed with a stroke of a pen. This deflation should be welcomed with open arms because asset prices should be a reflection of the economy. When everyone has a great job and is making lots of money, things like real estate should become more expensive. When the economy is complete shit and the average American is making slightly more than minimum wage, asset prices should fall to keep things balanced. It's just basic common sense. If you go to a place like Mexico where people have no money, you would expect things like housing to be extremely cheap. Deflation of asset prices is how people can maintain their standard of living when their wages fall.

The Bernanke and Janet Yellen say "fuck common sense and fuck America" as they try their best to destroy what remains of our middle class. With high unemployment and millions of Americans working shit jobs, the honorable thing to do would be to allow deflation to happen. You lost your $100k job and now you only make $20k, so it's only fair that housing and food prices drop substantially. Bernanke says this is bad, so he's running the printing presses 24/7 to cancel out the deflation caused by widespread bankruptcy. Simply put, he's trying to keep rent and food prices the same while America's median income goes way down. This 100% guarantees a prolonged recession because it prevents people from having disposable income. Entire family budgets go into covering the basics like rent and food, leaving no money for economic growth.

 

[Gonad the Barbarian]

Alan Greenspan OTOH always had great insight.

Oh yeah, clearly.

 

[Ventanni]

It's because most of the money printing is to prevent deflation. That's the official stated goal of QE.

I'll use an example to show how this works. Suppose you run an investment company similar to Lehman Brothers. You borrow $10M to buy a bunch of properties that are worth $10M when you bought them. The important thing to note is that we have a fractional reserve and fiat banking system. You're not borrowing someone else's money. Most of that money is "new" money, created from nothing. This creation of money is how housing prices across the country can all go up at the same time, causing asset price inflation. There's nothing wrong with this type of banking system. The old gold standard had some severe limitations, and it prevented the economy from growing. Now suppose the market crashes and your company is drowning in $10M of debt. Your company can't pay that money back, so your company declares bankruptcy. In doing so, that $10M you owe is destroyed. Ashes to ashes, dust to dust, money created with a stroke of a pen can also be destroyed with a stroke of a pen. This deflation should be welcomed with open arms because asset prices should be a reflection of the economy. When everyone has a great job and is making lots of money, things like real estate should become more expensive. When the economy is complete shit and the average American is making slightly more than minimum wage, asset prices should fall to keep things balanced. It's just basic common sense. If you go to a place like Mexico where people have no money, you would expect things like housing to be extremely cheap. Deflation of asset prices is how people can maintain their standard of living when their wages fall.

The Bernanke and Janet Yellen say "fuck common sense and fuck America" as they try their best to destroy what remains of our middle class. With high unemployment and millions of Americans working shit jobs, the honorable thing to do would be to allow deflation to happen. You lost your $100k job and now you only make $20k, so it's only fair that housing and food prices drop substantially. Bernanke says this is bad, so he's running the printing presses 24/7 to cancel out the deflation caused by widespread bankruptcy. Simply put, he's trying to keep rent and food prices the same while America's median income goes way down. This 100% guarantees a prolonged recession because it prevents people from having disposable income. Entire family budgets go into covering the basics like rent and food, leaving no money for economic growth.

Geez, if that's true, I guess my question is why would a country go to such great lengths to do this? Isn't it when the working class prospers that everybody prospers?

 

[Dari]

It's because most of the money printing is to prevent deflation. That's the official stated goal of QE.

I'll use an example to show how this works. Suppose you run an investment company similar to Lehman Brothers. You borrow $10M to buy a bunch of properties that are worth $10M when you bought them. The important thing to note is that we have a fractional reserve and fiat banking system. You're not borrowing someone else's money. Most of that money is "new" money, created from nothing. This creation of money is how housing prices across the country can all go up at the same time, causing asset price inflation. There's nothing wrong with this type of banking system. The old gold standard had some severe limitations, and it prevented the economy from growing. Now suppose the market crashes and your company is drowning in $10M of debt. Your company can't pay that money back, so your company declares bankruptcy. In doing so, that $10M you owe is destroyed. Ashes to ashes, dust to dust, money created with a stroke of a pen can also be destroyed with a stroke of a pen. This deflation should be welcomed with open arms because asset prices should be a reflection of the economy. When everyone has a great job and is making lots of money, things like real estate should become more expensive. When the economy is complete shit and the average American is making slightly more than minimum wage, asset prices should fall to keep things balanced. It's just basic common sense. If you go to a place like Mexico where people have no money, you would expect things like housing to be extremely cheap. Deflation of asset prices is how people can maintain their standard of living when their wages fall.

The Bernanke and Janet Yellen say "fuck common sense and fuck America" as they try their best to destroy what remains of our middle class. With high unemployment and millions of Americans working shit jobs, the honorable thing to do would be to allow deflation to happen. You lost your $100k job and now you only make $20k, so it's only fair that housing and food prices drop substantially. Bernanke says this is bad, so he's running the printing presses 24/7 to cancel out the deflation caused by widespread bankruptcy. Simply put, he's trying to keep rent and food prices the same while America's median income goes way down. This 100% guarantees a prolonged recession because it prevents people from having disposable income. Entire family budgets go into covering the basics like rent and food, leaving no money for economic growth.

It's not so easy to downgrade as it is to upgrade. I think it's called asymmetric price transmission (rocket-feather effect). So, yeah, I understand but at least call a spade a spade. An adjustment IS deflation but it's something that needs to happen eventually. However, this is a lot of money that's been pumped into economies over the past couple of years and. at the very least, inflation should've cropped up somewhere by now. I know not to trust Chinese numbers but even their economy was growing at like 9% before the crisis and THEY pumped the equivalent of an extra 20% of their GDP into their economy and that isn't creating any sort of crisis over there. Something weird is happening.

 

[Dari]

Geez, if that's true, I guess my question is why would a country go to such great lengths to do this? Isn't it when the working class prospers that everybody prospers?

Services (the bulk of our economy) is local whereas most goods can easily be traded around the world. So, prices will not always react as expected.

 

[Spungo]

Geez, if that's true, I guess my question is why would a country go to such great lengths to do this? Isn't it when the working class prospers that everybody prospers?

In general, no. The interests of the upper class are often against the interests of the middle class. If I'm running a factory, every dollar that I don't need to pay in wages is another dollar that goes in my pocket. An extra dollar that I can charge for rent is another dollar in my pocket. QE is essentially a giant transfer of wealth from the lower and middle class to the upper class. Suppose I own an apartment building an you are my tenant. If you think I'm ripping you off because I'm charging 2006 rates of rent even though wages have dropped off a cliff, you should be able to buy your own property that is fairly priced for the current market conditions. QE stops you from doing this because QE keeps asset prices unreasonably high. There's no way you can buy a $200,000 condo with your $10/h job, so you're my bitch until wages go up or asset prices go down.

Don't think for a second that this is accidental. Bernanke has a PhD in economics from MIT, so he's fully aware of what his policies are doing. The direct result of Bernanke's money printing is a widening gap between rich and poor. Can you guess which side Bernanke represents?

 

[Moonbeam]

Whenever I see a thread involving finance and the economy I always look to see if LegendKiller posts. I have persuaded myself, for reasons I really don't understand, that he actually knows something. I am pushed into this further by the fact that LunarRay who also in my opinion knows things, doesn't post. Anyway, all I can say is that I suspect there are serious flaws in the opinions expressed by the link but don't know enough, myself, to figure out what they are.

 

[CPA]

Peter Schiff's analysis of Janet Yellen (40 minutes, he goes over her forecasting record)
Summary:
-She (and other Keynesians like Bernanke) did not see a housing bubble.
-She downplayed the concerns of people who thought there was a bubble.
-She even pointed to data suggesting there was a bubble then used that data to conclude that there was no bubble.
-She said that she would have negative interest rates if she had her way. That means you borrow $100 and only pay back $95, which would invariably lead to misallocation of capital in the form of highly speculative investments, leading to a massive bubble, followed by another legendary market crash.

Then there's always the data showing that Keynesian economics simply doesn't work:
http://www.cyniconomics.com/2013/11/16/bad-news-for-keynesians-data-shows-the-austerians-are-right/
The countries that went with austerity (spending cuts and deflation) are recovering much faster than the countries that took the Keynesian route of trying to spend and inflate their way out of debt, because that worked so well for Zimbabwe and the Weimar Republic.

The general consensus is that Yellen will likely continue QE, and possibly increase QE. Some things you can expect in the future:
-Continued 1970's style inflation.
-A growing disconnect between the economy and the stock market.
-Stagnant economic growth because inflation kills consumer spending. I can't order a new car if half of my income goes to shit like $6 gas and $3 loaves of bread.

Uh oh, the resident Keynesiests and anti-austerity posters are not going to like this one bit. Prepare yourself.

 

[Gonad the Barbarian]

Uh oh, the resident Keynesiests and anti-austerity posters are not going to like this one bit. Prepare yourself.

Aslund's Baltic Island austerity wonder was debunked months ago.

http://www.theatlantic.com/business...-latvia-is-no-austerity-success-story/266774/
And blaming Europe's sluggish recovery on too much Keynesian is just advertising ignorance. But by all means, continue.

 

[hal2kilo]

Oh yeah, clearly.

Nope, no housing bubble out there.

That Greenspan?

 

[Spungo]

Aslund's Baltic Island austerity wonder was debunked months ago.

http://www.theatlantic.com/business...-latvia-is-no-austerity-success-story/266774/
And blaming Europe's sluggish recovery on too much Keynesian is just advertising ignorance. But by all means, continue.

Print happy America has seen steady, rising unemployment since 2009. Printing money clearly isn't helping:

(labor participation is used instead of unemployment because the US government stops counting when people can't find a job after a certain number of days)


What about other countries?
http://www.humanevents.com/2013/04/30/the-global-guru-dont-ignore-europes-1-austerity-success-story/
"After all, the two icons of European economic austerity — Estonia and Ireland — were two of the fastest-growing economies in Europe last year. The contrast with Greece is particularly stark.

Ireland’s economy will expand for the third consecutive year, even as the Greek economy has contracted for six straight years. The International Monetary Fund (IMF) predicts the Irish economy will grow by 1.1% this year and 2.2% in 2014, even as it becomes the first country to exit its bailout program since the onset of the crisis in Europe."


Your article says Latvia is neck deep in trouble. What do their number say? Labor participation hit its lowest point in 2010 and has been recovering ever since:

 

[Gonad the Barbarian]

It's not hard to hit decent employment numbers when you have everyone else fleeing the country like so:

http://www.forbes.com/sites/markado...-story-if-by-success-story-you-mean-disaster/

And Ireland's success is mostly attributable to an accounting irregularity:
http://www.nytimes.com/2013/06/22/business/economy/irelands-turnaround-may-not-be-so-rosy.html

Trying to hold up Greece's non-recovery as some something other than a failure of austerity is ridiculous. And being stuck on the Euro and its inability to do any currency devaluation is directly compounding its problems.
http://www.theguardian.com/business...estimated-damage-austerity-would-do-to-greece

I think the ultimate goal of austerity types is to punish the "immorality" of fiat money and borrowing and achieve 100% employment through everyone being reduced to a landlord, a tenant farmer or just dying the hell off. It is absolutely absurd if not outright sadistic to argue you can alleviate a deficit of economic activity (ie: a recession) by intentionally prolonging and compounding it.

Even the IMF walked back its "austerity for all your ills" stupidity:
http://www.washingtonpost.com/blogs...s-much-worse-for-the-economy-than-we-thought/

 

[fskimospy]

Peter Schiff's analysis of Janet Yellen (40 minutes, he goes over her forecasting record)
Summary:
-She (and other Keynesians like Bernanke) did not see a housing bubble.
-She downplayed the concerns of people who thought there was a bubble.
-She even pointed to data suggesting there was a bubble then used that data to conclude that there was no bubble.
-She said that she would have negative interest rates if she had her way. That means you borrow $100 and only pay back $95, which would invariably lead to misallocation of capital in the form of highly speculative investments, leading to a massive bubble, followed by another legendary market crash.

The same Peter Schiff that has made wrong prediction after wrong prediction after the financial crisis? Hyperinflation? Wrong. Price of gold? Wrong. Treasury prices? Wrong. Decoupling from China? Wrong.

I could go on and on.

Let's compare that to the record of Janet Yellen who has made right prediction after right prediction after the financial crisis:

http://graphics.wsj.com/fed-predictions/#c[]=Janet+Yellen&c[]=Charles+Plosser&d=0

Then there's always the data showing that Keynesian economics simply doesn't work:
http://www.cyniconomics.com/2013/11/16/bad-news-for-keynesians-data-shows-the-austerians-are-right/
The countries that went with austerity (spending cuts and deflation) are recovering much faster than the countries that took the Keynesian route of trying to spend and inflate their way out of debt, because that worked so well for Zimbabwe and the Weimar Republic.

This has already been debunked by other posters. The most accurate measure of economic recovery is how quickly a country grows to surpass its pre-crisis GDP. Needless to say, Latvia was a disaster. This has been covered in other threads. It's easy to raise your labor force participation rate when huge swaths of your population flee the country due to your economic policies.

If you would like to get into a comparison of economies based on their budget deficits post crash we can do that. In the end it basically validates Keynesian economics in its entirety.

The general consensus is that Yellen will likely continue QE, and possibly increase QE. Some things you can expect in the future:
-Continued 1970's style inflation.
-A growing disconnect between the economy and the stock market.
-Stagnant economic growth because inflation kills consumer spending. I can't order a new car if half of my income goes to shit like $6 gas and $3 loaves of bread.

We covered this in other threads already. There has been no 1970's style inflation as inflation has been very low as evidenced by multiple independent analyses.

I'm happy you mentioned gas prices though as today's average according to gasbuddy.com is only very slightly higher than the average gas price in 2007. Assuming 1970's type inflation (averaging 7.6% over the decade) we should be looking at gas somewhere around $4.50 to $5.00 a gallon. Today it averages somewhere around $3.15. ie: inflation for gas has been almost zero. (and please do not attempt to use the mid-crisis gas plunge as a basis for gas inflation, you know as well as I do how dishonest that is)

If you only want to look at the QE periods, you can see that the average price of gas has actually declined over the last two years despite massive and ongoing QE efforts.

 

[fskimospy]

It's not hard to hit decent employment numbers when you have everyone else fleeing the country like so:

http://www.forbes.com/sites/markado...-story-if-by-success-story-you-mean-disaster/

And Ireland's success is mostly attributable to an accounting irregularity:
http://www.nytimes.com/2013/06/22/business/economy/irelands-turnaround-may-not-be-so-rosy.html

Trying to hold up Greece's non-recovery as some something other than a failure of austerity is ridiculous. And being stuck on the Euro and its inability to do any currency devaluation is directly compounding its problems.
http://www.theguardian.com/business...estimated-damage-austerity-would-do-to-greece

I think the ultimate goal of austerity types is to punish the "immorality" of fiat money and borrowing and achieve 100% employment through everyone being reduced to a landlord, a tenant farmer or just dying the hell off. It is absolutely absurd if not outright sadistic to argue you can alleviate a deficit of economic activity (ie: a recession) by intentionally prolonging and compounding it.

Even the IMF walked back its "austerity for all your ills" stupidity:
http://www.washingtonpost.com/blogs...s-much-worse-for-the-economy-than-we-thought/

It would be nice if people would stop holding the Baltic states up as something to emulate. Latvia in particular has been an utter catastrophe. It never ceases to amaze me that despite the decisive demonstration of the failure of austerity over the last five years that some people continue to cling to it.

Why is economic misery preferable to being wrong?

 

[Moonbeam]

Why is economic misery preferable to being wrong?

Anything is preferable to being wrong to the ego, because being wrong brings up the hidden feeling of being the worst in the world. It is why we can't face anything.