Saturday, September 15, 2018

Yellen Calls for More Money Printing During Next Economic Downturn

By Robert Wenzel

On Friday in Washington D.C., former Federal Reserve Chair Janet Yellen steeped to the lectern at the Fall 2018 conference of the Brookings Papers on Economic Activity to deliver a speech aimed at current Fed monetray policymakers.

The gist of her speech was that she believes the Federal Reserve's monetary policy group, the
FOMC,  "should seriously consider pursuing a lower-for-longer or makeup strategy for setting short rates when the zero lower bound binds and should articulate its intention to do so before the next zero lower bound episode."

In other words, her "lower-for-longer" policy initiative would direct the Fed to keep interest rates low for longer by having the Fed print even more aggressively once the next Fed-created downturn occurs than was done by the Fed after the 2008 financial crisis when Ben Bernanke was Fed chairman and Yellen was vice-chair.

“By keeping interest rates unusually low after the zero lower bound no longer binds, the lower-for-longer approach promises, in effect, to allow the economy to boom following a zero lower bound episode,” Yellen said. “This strategy enables the Fed to provide substantial additional accommodation during zero lower bound episodes.”

It should be pointed out that it is not like the Fed money printing after the 2008 crisis didn't cause almost an immediate capital sector boom.

S&P 500 Stock Market Index (from the 2008 financial crisis to the present)

All this said, Yellen's call for more money printing when the next crisis hits is based on the view that the next recession will result in interest rates at the zero-bound, when there is no certainty that will occur.

Indeed, in the EPJ Daily Alert, I am warning that a stagflation type downturn might be in the cards during the next bust phase of the Fed-created boom-bust cycle.

It is simply stunning to observe the narrow thinking of Yellen in this speech. First, her focus on the last crisis as the expected template for the next crisis. And secondly, her failure to understand how the Fed money printing manipulations following the last crisis did almost immediately start the economy on its next Fed-created boom.

Robert Wenzel is Editor & Publisher of


  1. When The U.S. Stock Market Crashes

    This is why I believe the Fed will be forced to revert to monetary insanity on steroids following the stock market crash to come: in order to pump stocks even higher and keep bond yields down. Otherwise the entire U.S. Ponzi scheme collapses. In order to do this, they will have to sacrifice the dollar.

    If there was any doubt that the Fed plans to do this, it was erased recently. The FOMC minutes in August led with the Fed’s plans to address the next crisis. During his Jackson Hole address two days later, Fed Chair Powell said he would do “whatever it takes” in such an event. If that weren’t enough, Hank Paulson, Ben Bernanke, and Tim Geithner wrote an Op-Ed in the New York Times this week that basically called for emergency powers to bail out every financial institution should such a crisis occur. It’s obvious that they plan to ride to the rescue yet again. Why else would they so frequently—and all of a sudden—talk about plans to address a crisis?

    Not to mention the fact that over the past several months, almost every member of the Fed has been at pains to say each and every aspect of Trump’s policies could lead to another financial crisis. Why are they all repeatedly saying this, unless they expect such a crisis soon and are preparing to blame Trump in order to divert it from the true culprits: themselves. If you didn’t already know, the Fed apparently never makes mistakes. Never. They cover their tracks well.

    To cover up this:

    Ten Years After the Crash, We’ve Learned Nothing By Matt Taibbi

    Myth #3: The bailouts were about saving capitalism

    The deal those bankers cooked up was to save the banks from capitalism.

    Losers must be allowed to lose. It’s the first and most important regulatory mechanism in a market economy.

    But by 2008, the banks had simply grown too big and interconnected to allow normal market processes to take place.

    These firms almost certainly would have died without help. In 2011, the Financial Crisis Inquiry Commission released a report quoting then-Fed chief Ben Bernanke as saying this about that fateful week in September 2008:

    Again, the legend is that the banks at the Fed that weekend were the healthy ones, saving us from the contagion of AIG and Lehman. This legend has been reinforced by constant propaganda about the banks being “forced” to accept bailouts like the TARP.

    It’s a lie. Paulson and the other regulators repeatedly intervened to prevent the natural demises of these firms.

    Or the deal made on September 19th, 2008, when two companies that were not commercial banks, Goldman Sachs and Morgan Stanley, were given emergency commercial bank charters on a Sunday night, allowing the two plummeting giants access to lifesaving Fed cash the next morning.

    The public to this day has no understanding of the scale of the intervention.

    The Special Inspector General of the TARP put the gross government outlay at $4.6 trillion, with over $16 trillion in guarantees. The Levy Institute at Bard College did probably the most extensive study, and put the number at $29 trillion.

    But history is written by the victors, and the banks that blew up the economy are somehow still winning the narrative. Persistent propaganda about what happened 10 years ago not only continues to warp news coverage, but contributed to a wide array of political consequences, including the election of Donald Trump.

    This colorful language – dominoes, a confidence game, an “iceberg,” a “storm” – artfully disguised reality.

    The captain of the Titanic ignored one day’s worth of iceberg warnings and went down in history as an all-time schmuck for it. History commends him only for the honorable act of going down with his ship.

    The titans of Wall Street ignored at least four years of warnings, escaped richer than ever, and in the end were lauded as heroes by the likes of Sorkin.

  2. "This is why I believe the Fed will be forced to revert to monetary insanity on steroids following the stock market crash to come: in order to pump stocks even higher and keep bond yields down. Otherwise the entire U.S. Ponzi scheme collapses."

    Yes, I think monetary inflation is inevitable, but I think stock market crashes of the magnitude of 1929 and the years following can be avoided. The BOJ already owns a portion of Japanese equities, and the Swiss central bank is a sizeable holder of Facebook. Who knows what the Fed owns and isn't disclosing. Moreover, Blackrock, Vanguard, Charles Schwab, UBS, etc. have trillions under management, including ownership of all the banks. The banks in turn are the owners of the NY Fed, so we should see that the current financial order is nothing more than a government/corporate cartel of debt/credit financialism.

    A ponzi scheme doesn't have to collapse if it's a government-supported ponzi. The USD ponzi is backed by government coercion. The USD dollar won't be sacrificed; it's the unit of account for the entire system. It's the locus of financial control.

    The logical outcome of the financial system created in 1913, (with significant modifications during FDR's regime, and the "adjustments" of 1944, 1972, 1987, and 2008-9), is that the guardian-controllers of "money" will eventually end up owning most physical assets everywhere. The 2008 financial crisis and all its fraudulent hypothecation exposed their Great Game of asset capture. It was a pivotal moment in our current financial order.

  3. Q: What's Janet Yellen?
    A: She's yellin' "Print More! Print More!"