Carl Reed I think we are going from bad to worse with Janet - TopicsExpress

Carl Reed I think we are going from bad to worse with Janet Yellen at the helm of the Federal Reserve. David Stockman thinks we had a pretty good indication that she’s going to take this lunatic policy that we’ve had for years now right over the edge in a final spree of Keynesian money printing and attempted manipulation that is failing badly. She has made it publically known that she believes capitalist economies cannot operate at full employment in the absence of routine intervention. For a time it seemed that Keynesianism had been laid to rest, or at least substantially discredited by Milton Friedman and other economists from the Chicago school. After all, this was the same strategy employed by FDR during the Great Depression; a strategy which has been determined by economists to have prolonged the depression by seven years. However, Keynesianism has seen a revival of sorts since Obama was elected President. Thats why he nominated Yellen to lead the Fed. Since her nomination, liberals have been crediting her with warning about the housing crisis which lead to the Great Recession. The New York Times Editorial Board said, “…as president of the Federal Reserve Bank of San Francisco from 2004 to 2010, [Janet Yellen] sounded the warning about housing bubbles, even as others praised the boom.” Alan Blinder wrote in the Wall Street Journal that, “Yellen, was one of the first members of the FOMC (Federal Open Market Committee) … to realize that the [housing market’s troubles] could cause a major recession.” Edward Harrison, writing in the New York Times said that, “Janet Yellen was one of the only top Fed policy makers who warned about the housing bubble before the crisis.” Matthew O’Brien wrote in The Atlantic that, “[Janet Yellen] raised concerns about the housing bubble in the mid 2000’s, and highlighted the danger of a credit crunch.” Mark Gungloff, writing for the Huffington Post said that, “[Janet Yellen] warned early and often, starting at least in 2005, about the problems in housing and the looming economic catastrophe.” And, finally, a letter to President Obama urging Yellen’s nomination and signed by a third of the Senate Democrats, said “Janet Yellen displayed a ‘prescience’ and ‘identified the impending threats that both the housing bubble and the shadow banking sector posed to the entire economy.” However, not only did she not warn about the impending crisis, she dismissed the warnings of others, such as Peter Schiff. In a speech to the Fourth Annual Haas Gala, October 21, 2005, she said that, “In the U.S. as a whole, the share of residential investment in GDP is now at its highest level in decades, and this sector has been a key source of strength in the current expansion.” So, she sees the rise in housing prices as a “key source of strength,” rather than a threat. She goes on to ask rhetorically, “The question for policy is: will this source of strength reverse course and instead become a source of weakness? Put more bluntly: Is there a house-price ‘bubble’ that might deflate, and if so, what would that mean for the nation’s economy?” She goes on to identify just one data point, the ratio of house prices to rents, as a possible indicator of a bubble. She, then, dismisses that data point as an indicator of a bubble, saying, “Higher than normal ratios do not necessarily prove that there’s a house-price bubble. House prices could be high for some good fundamental reasons. For example, there have been changes in the tax laws that reduce the potential tax bite from selling one home and buying another.., innovations in the mortgage markets make funds invested in the housing market more liquid…constraints on the supply of housing in a number of markets… and low mortgage interest rates.” In other words, she lists four fundamental reasons to justify the rising housing prices as indicative of a housing bubble. She then goes on to discuss what policy makers should do if the housing market does deflate, saying, “First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble?” She goes on to say that, “My answer to these questions in the shortest possible form are ‘no,’ ‘no,’ and ‘no.’” In other words, if there is a housing bubble, which she doesn’t concede that there is, according to Yellen, it is no big deal. Yellen is not as prescient as liberals would have us believe and her Keynesian tendentiousness portends evermore monetary expansion eventually resulting in economic catastrophe. You can’t say you weren’t warned.