God I really hate to say this and am going to go ahead and blame what I'm about to write on the fact that I've just returned from a much-needed vacation and am in one hell of a wonderful mood as a result. The high that just won't quit, you might say, so let's go ahead and say that's from where my change of heart toward SF Fed President Janet Yellen is about to come.

Do not take this to mean I suddenly have a soft spot for my hometown Fedhead - as if. I do, however, appreciate what she had to say in regards to the financial crisis.

Do we need another "best of: Financial Crisis" recap? Probably not. Yellen especially loves to dwell in the dark details surrounding financial collapseBut they're going to keep recycling this same speech over and over so we might as well accept that and move on. Nod and smile, kids, just nod and smile. As they say on the Internet, don't feed the trolls (told you I wasn't suddenly in love with Janet).

Anyway. I missed most of Janet's June 30 speech to the Commonwealth Club of California when it came out because let's face it, my affinity for San Francisco Fed employees hasn't always been unicorns and rainbows (see also: FedEx - the SF Fed beancounter deported to their LA branch just after I broke up with him for being an excessively nerdy tool) and plus I really don't pay attention to anything Janet says or does.

I'll be damned if old girl didn't nearly bring a tear to my eye with this one though:

I am not going to go into detail about the alphabet soup of Fed programs created during this period. But I want to stress that these policies—in some cases improvised in very short order—did succeed in averting a full-blown meltdown. The panic of 2008 subsided. Increasingly, banks and corporations have been able to raise funds on reasonable terms. Confidence in the financial system is slowly returning.

Still, our brush with financial collapse came at great cost. As financial institutions struggled to survive, they cut back on lending. And private securitization markets seized up entirely. These are markets in which a variety of types of loans, including auto, student, credit card, Small Business Administration, jumbo mortgage, and commercial real estate loans, are packaged as securities and sold to investors. The resulting massive credit crunch caused the economy to nosedive in the final quarter of last year and the first quarter of this year. Job losses reached more than 700,000 per month and the unemployment rate skyrocketed to levels not seen since the early 1980s, reaching 9.4 percent in May. Some 6 million jobs vaporized during the recession. Each of these was once held by a real human being, who likely depended on that paycheck to pay the mortgage, buy the groceries, and put gas in the car. The loss of these jobs is an immense tragedy. We should never forget that this awful recession is a flesh-and-blood thing that robs our families, neighbors, and friends of their livelihood.

In many ways, she is absolutely right. Investor confidence is returning, though I argue that this might be a case of "new normal" madness of crowds as opposed to actual investor belief in the competence and health of financial markets. Just sayin, Janet, just sayin.

Painting the picture of the financial crisis as a three-part play, Yellen uses a too few many analogies but gets this one mostly right. And what is this about investors paralyzed by risk and the flippant use of the word "awful" in regards to unemployment? Who is this woman and what has she done with the central banker we know?

Carelessly dropping words like "painful" in reference to the expected recovery, Yellen turns Michael Panzner on us and goes into the sluggish prospects ahead:

Financial markets are in much better shape today than we ever would have dreamed six months ago. Investors have gone from disregarding risk, to being paralyzed by it, to once again being willing to take on a reasonable bit. The stock market has rallied and investor appetite for corporate bonds and other assets has rebounded, restoring access to capital for healthy companies. Even so, I am concerned that mortgage rates, which have risen of late, could place a drag on a still very sick housing market, potentially driving home prices still lower and pushing more borrowers into foreclosure. The recent run-up in oil prices may also reflect greater confidence in the global outlook. But it too is troublesome because it impedes recovery by forcing consumers and businesses to pay more for gas and energy, thereby reducing their ability to buy other goods and services.

Still, I expect the recession will end sometime later this year. That would make it the longest and probably deepest downturn since the Great Depression. Growth will come from a variety of sources. One is federal government spending resulting from the stimulus program passed by Congress earlier this year. This package provides tax cuts that leave more cash in consumers’ pockets, as well as direct government spending increases that add to payrolls and boost economic output. But it will take more than fiscal policy to really get the economy moving forward.

And wait, wait, wait, wtf is this? Yellen on Fed impotence without a funds rate to play with? OK now this is just getting weird.

I don’t like taking the wind out of the sails of our economic expansion, but a few cautionary points should be considered. I expect the pace of the recovery will be frustratingly slow. It’s often the case that growth in the first year after a recession is very rapid. That’s what happened as we came out of a very deep downturn in the early 1980s. Although I sincerely wish we would repeat that performance, I don’t think we will. In past deep recessions, the Fed was able to step on the accelerator by cutting the federal funds rate sharply, causing the economy to shoot ahead. This time, we already have our foot planted firmly on the floor. We can’t take the federal funds rate any lower than zero. I believe that the Fed’s novel programs are stimulating the flow of credit, but they simply aren’t as powerful levers as large rate cuts, so this time monetary policy alone can’t power a rapid recovery.

WHO ARE YOU AND WHAT HAVE YOU DONE WITH MY LEAST FAVORITE FEDHEAD? Could it be that I never really gave Janet enough credit?

Oh wait, there she is. Leave it to the subject of inflation to bring out the Janet we know and don't love:

I’ll put my cards on the table right away. I think the predominant risk is that inflation will be too low, not too high, over the next several years. I take 2 percent as a reasonable benchmark for the rate of inflation that is most compatible with the Fed’s dual mandate of price stability and maximum employment. This is also the figure that a majority of FOMC members cited as their long-run forecast for inflation, according to the minutes of the committee’s April meeting.

Damn you, Janet. I was really hoping you'd started on mood stabilizers and or found St. Matthew of Monetary Policy or something.

Giving the inflationistas our shout-out, Yellen at least knows why we feel the way we do about the potential for inflation (mind you, I don't know a single inflationista out there who insists that excessive inflation - we're talking 20%+ - is an immediate concern. That is just asinine in and of itself):

None of what I just said will satisfy those who worry about inflation. Indeed, if you listen to popular business news channels, you might hear a drumbeat of concern that the Fed could let inflation get too high. Those who hold this view point to the rise in Treasury yields and commodity prices this year as signs that runaway inflation is on the horizon. They muster three arguments. The first is that the Fed has pumped up the money supply and expanded its balance sheet to fund its financial rescue programs, potentially igniting inflation. The second is that the Fed runs the risk of repeating the errors of the 1970s by focusing on mistaken views of economic slack rather than rising prices. The third is that large fiscal budget deficits will create higher inflation.

Actually it's not a drumbeat, it's more like 14 car alarms blasting at once in all of our ears. Because I don't know about Janet but I am paid in US dollars, rely on the small business machine to keep the paychecks coming, and would really like to hold on to as much value as those sad little greenbacks have at the moment for as long as possible. Obviously Janet is more comfortable dealing with higher inflation than she is even considering the possibility that a bit of deflation might do us some good in markets pumped on securitized steroids.

Oh, and the remainder of the speech is pretty dead-on Janet babble (I'll save you her rebuttals for the inflationistas' entirely well-founded concerns) but she certainly had me for a minute there. I was almost ready to congratulate her for a speech well-done but then realized I may just need to catch up on sleep and/or could be delirious from the cabin pressure up here at 30,000 feet. Who can say?

Janet gets more credit from me than usual but is still pretty much totally off. You're welcome.