Skip to comments.Silliness, Outright Lies, and Some Refreshingly Accurate Reporting
Posted on 07/18/2014 6:07:22 PM PDT by Kaslin
Yellen Yap Silliness
The spotlight on Fed Chair Janet Yellen is rather amusing given she is more disingenuous than former Chair Ben Bernanke. Some of the headlines are downright silly. For example, Bloomberg reports Dollar Rises to Highest in 3 Weeks on Yellen Comments.
The dollar reached the strongest in a month versus the euro as wholesale prices in the U.S. rose more than forecast and the Fed saw modest to moderate growth in June. New Zealands dollar slumped the most in seven weeks after inflation accelerated slower than expected and a gauge of dairy prices dropped to its lowest since 2012. South Koreas won slid to the weakest since April.
Yellen testified before the House Financial Services Committee today that shes not seeing alarming warning signals in markets.
My general assessment at this point is that threats to financial stability are at a moderate level and not a very high level, she said. While some asset values may be on the high side and there may be some pockets where we see valuations becoming stretched, in general price equity ratios and other measures are not outside of historical norms.
US Dollar Weekly Chart
click on chart for sharper image
Questions of the Day
Yellen Yap Lies
Let's move from silliness to outright lies, and an excellent post by Yves Smith on Naked Capitalism that discusses the lies (whoppers).
In response to the New Yorker article The Hand on the Lever regarding "How Janet Yellen is redefining the Federal Reserve", by Nicholas Lemann, Smith accurately assesses the setup in her coverage Yellen Tells Whoppers to the New Yorker
A Nicholas Lemann profile of Janet Yellen in the New Yorker, based on interviews with her, is creating quite a stir, and for many of the wrong reasons. The article verges on fawning, but even after you scrape off the treacle, its not hard to see how aggressively and consistently the Fed chair hits her big talking point, thats shes on the side of the little guy.
In fact, as well discuss, Yellens record before and at the Fed shows shes either aligned herself with banking/elite interests or played two-handed economist to sit out important policy fights. Even if she actually harbors concern for ordinary citizens, shes never been willing to risk an ounce of career capital on it.
The article is also generously larded with standard defenses of the Fed, that it lacked the power to do much of anything about dodgy mortgage lending in the runup to the crisis. In fact, the Fed was so firmly in denial that even in 2007, Fed officials were convinced that banks were victimized by subprime borrowers, which is hardly a pro-intervention stance.
And why did the Fed take so little interest? The real reason was that prior to the crisis, if borrowers bought more costly housing than they could afford, the losses fell mainly on them. There was enough of an equity cushion on average that the banks came out at worst only mildly dented.
In other words, readers are supposed to take Yellens claims at face value, when the Feds policy of saving banks by goosing asset prices and convincing itself that ordinary people would benefit because the wealth effect would lead to more consumption. The result has been widening income and wealth disparity and corporate profits at record levels as a percent of GDP, meaning workers are getting less than theyve ever gotten.
At the Fed, Yellen is given more credit than she deserves for sounding some mild concern about rising housing prices. Shes also been cited as the best forecaster on the FOMC, but given how the FOMC failed to see the crisis coming, her success is tantamount to declaring her the winner of a height competition among peanuts.
In other words, Yellen was in the center to center-right of the Democratic party technocratic elite of the 1990s and never departed from conventional thinking. Shes now trying to rewrite her record by making pious statements and getting her interlocutors to focus on what she presents as her character in the hope that they wont bother looking at her actions.
Yellens contention that shes really out to help little people would be far more credible if she acknowledged her past anti-middle class policy positions and claimed that shed made a Pauline conversion. But her institutional and political loyalties preclude that.
The Fed is the number one cause of widening income and wealth disparity and corporate profits at record levels, as I have pointed out on numerous occasions.
It is very refreshing to be on the same side of the debate as Yves Smith, possibly because her article did not go into solutions. I advocate free market solutions while Yves tends to advocate more intervention.
Regardless, Yves did an outstanding job bashing the disingenuous nature of Yellen. Her article merits a read in entirety.