Janet Yellen Wants You to Take the New Normal or Else
Today, my arch nemesis and holy leader of the Federal Reserve System Janet Yellen spoke at her alma mater SF Fed, the very same place I picketed years back.
I could predict what she said before I even read her prepared remarks but let's look at it anyway, shall we?
As you know, last week the Federal Open Market Committee (FOMC) changed its forward guidance pertaining to the federal funds rate. With continued improvement in economic conditions, an increase in the target range for that rate may well be warranted later this year. Of course, the timing of the first increase in the federal funds rate and its subsequent path will be determined by the Committee in light of incoming data on labor market conditions, inflation, and other aspects of the current expansion.
Short version: shit is still fucked. Don't worry about it, we got this.
In my remarks today I will discuss some factors that will likely guide our decisions as we adjust the stance of monetary policy over time. I will also discuss why most of my colleagues and I believe the return of the federal funds rate to a more normal level is likely to be gradual.
Short version: we're pussies and want to see inflation run hotter before we do anything. Obviously we know if the Fed pulls out at this point, the whole house of cards collapses upon itself. Stop trippin.
Before turning to these questions, however, let me first review where the economy is now and where it's likely headed--a necessary backdrop for understanding why, after more than six years of maintaining a near-zero federal funds rate and accumulating a large portfolio of longer-term securities, the Committee is now giving serious consideration to beginning to reduce later this year some of the extraordinary monetary policy accommodation currently in place.
Short version: you armchair critics are dipshits and don't even understand why we've been giving away free money for six fucking years.
Although the recovery of the labor market from the deep recession following the financial crisis was frustratingly slow for quite a long time, progress has been more rapid of late. The unemployment rate has fallen markedly over the past few years and now stands at 5.5 percent, down from 10 percent at its peak.
Read: she likes that those who have dropped out of the workforce due to frustration or lack of opportunity or suicide don't factor in to their magic numbers. LOL.
In assessing the actual strength of the labor market and the broader economy, we must bear in mind that these very welcome improvements have been achieved in the context of extraordinary monetary accommodation. While the overall level of real activity now appears to be much closer to its potential than it was a year or two ago, the economy in an "underlying" sense remains quite weak by historical standards, for the simple reason that the increases in hiring and output that have been achieved thus far have required exceptionally low levels of short- and longer-term interest rates, reflecting a highly accommodative stance of monetary policy. Interest rates have been, and remain, very low, and if underlying conditions had truly returned to normal, the economy should be booming.
And yet the economy isn't doing that, maybe because you people have artificially held it up for how long now? Oh right, six years. Duh, Janet, duh.
I couldn't get any further into her speech. I tried but fuck, I can only take so much of this shit.