Monday, March 15, 2021

Janet Yellen Shrugs: Says Climb in Price Inflation Will Be No Big Deal

Janet Yellen

In a remarkable interview Sunday morning on ABC's "This Week," Treasury Secretary Janet Yellen said she didn't think price inflation posed a significant risk.

This lack of concern comes despite the fact that the money supply ballooned by $4 trillion last year (a 26% annualized increase) and is set to see another explosion as the Federal Reserve monetizes most, if not all, of the $1.9 trillion spending package that President Biden just signed.

"Policymaking is about identifying and addressing risks, and the most significant risk we face is a workforce that's scarred by a long period of unemployment," Yellen said.  "Is there a risk of inflation? I think there's a small risk. And I think it's manageable," she added.

In other words, she is using the discredited Phillips curve and Keynesian aggregate spending theory, neither of which is sound, to justify the current mad government spending and money printing, but further, she is applying the policy prescriptions in line with an economy that has been damaged by a lockdown rather than a business cycle downturn. The theories, as bad as they are, say nothing about lockdown economics.

She is either a very shallow thinker and doesn't understand the difference or is a master con artist supporting mad policy.

Bottom line: The Treasury and the Federal Reserve are both going to get caught flatfooted when the price inflation hits.

"To get a sustained high inflation like we had in the 1970s, I absolutely don't expect that. We've had very well anchored inflation expectations, and a Federal Reserve that's learned about how to manage inflation. So, I don't think it's a significant risk and if it materializes, we'll certainly monitor for it, but we have tools to address it," she added.

She has no idea how unprepared the Fed is for the price inflation that is about to hit.

Price inflation at an annualized rate of 3% is in the bag, the Fed will ignore this. When price inflation hits 5%, as it likely will, the Fed will start getting concerned but will not act as decisively as required, which would require raising short-term rates to 7% to successfully battle the inflation.

Thus, within 18 months, the possibility that inflation hits 10% can not be ruled out and, if it does develop, it will reveal just how reckless of a policy adviser the Treasury Secretary is right now by downplaying the potential developing inflation.

-RW

5 comments:

  1. "She is either a very shallow thinker and doesn't understand the difference or is a master con artist supporting mad policy."
    Definitely the latter.

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    1. I think she is both. With all those lucrative speaking fees the banksters made sure she'd play along.

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  2. She expects that price inflation will be prevented by people like myself taking out cost to maintain the numerical shelf price. Then the fed and govt can rake off the rewards from our creativity and effort.

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  3. "I absolutely don't expect that" is NOT the same thing as, "That's not possible."

    "We've had very well anchored inflation expectations," is NOT the same thing as, "Our inflation expectations are anchored in reality."

    "I don't think it's a significant risk and if it materializes, we'll certainly monitor for it, but we have tools to address it" is incredibly blase and dismissive considering the absolutely corrosive effect inflation has.

    All in all, incredibly damning quotes.

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  4. Of course you wouldnt think so you mindless idiocrat! You dont even have a clue about the inflation that is already here after the fact. How you spot more??

    You cant reason with stupid

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