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Janet Yellen: The Wrong Choice

Posted by Larry Doyle on October 9, 2013 9:03 AM |

President Obama is widely expected to announce this afternoon that he is nominating Fed governor Janet Yellen as the next chairman of the Federal Reserve, the most powerful institution in the world.

I am sure Yellen’s nomination will receive the standard praiseworthy platitudes from a wide array of sycophants deeply embedded in the system.

For those pleasantly hoodwinked by the charades masquerading as our current central bank policy, a Yellen-led Federal Reserve should look just divine. Meanwhile those watching closely would call her style of central banking little more than smoke and mirrors.

The WSJ is more deferential and asserts this morning:

As the Fed’s vice chairwoman since 2010, Ms. Yellen, 67 years old, has been at the forefront of pushing the Fed to use new and risky policies to nurse the crisis-damaged economy back to health. These policies include buying trillions of dollars of bonds to hold down long-term rates in hopes of lowering unemployment, a program known as quantitative easing, or QE.

New and risky policies? In hopes of lowering unemployment?

Remember, hope is certainly an important virtue but when it comes to finance and central bank policy . . . hope is a lousy hedge.

Creating bubbles via QE may be nice for those with excess reserves buying cheap assets (i.e. Wall Street banks and the like), but let’s be honest. How has QE really helped the Fed in its stated mandates of lowering unemployment and generating stable prices?

Many a lapdog will point to the current unemployment rate of 7.2% and say QE is working. Similarly, they will point to an inflation rate of less than 2 percent and say we need even more QE. For those who look beyond USA Today to get their news, they know that a labor participation rate at 35 year lows is far more indicative of the current health of our labor market.

And in regard to inflation, remember “garbage in, garbage out.” While Uncle Sam goes abut fudging the inputs to calculate inflation, for those paying ever higher prices for a wide array of goods and services, inflation continues to undermine quality of life. Who gets this? The American Institute for Economic Research provides the following pictorial that paints the proverbial ten thousand dollars . . . er, words.

And Janet Yellen wants more of the same QE on steroids to rescue us from this morass?

Whatever happened to sound central bank policy in which a currency is defended and rigorous regulatory oversight of banking practices is delivered? I guess that approach remains dead and buried in the midst of the central bank cesspool filled by Alan Greenspan and further filled by Ben Bernanke.

Seriously folks, bring an extra set of waders and navigate accordingly.

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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