Wednesday, June 15, 2016

Yellen Tells Us What We Already Know

Janet Yellen, Fed Chairman, held a press conference today without saying much of anything that was not already well known.  She admitted to some surprise that parts of the American economy were as weak as they are.  This weakness was used as an excuse to postpone changing the targeted overnight repo rate.

Much ado about nothing.

The December rate liftoff by the Fed raised the repo rate 25 basis points.  Subsequently, all other interest rates dropped substantially.  So what was the point?

Yellen seemed completely unaware that the US economy has been operating only slightly above stall speed since 2009.  Yellen seems also unaware that monetary policy is totally irrelevant to the macro economy.  So who cares, really, what the Fed does.

Stock market pundits talk incessantly about the Fed, likely because they can't think of much else to talk about.  Ditto for Brexit.  Remember how much conversation was once devoted to Y2K. 

Yellen referred to the slowdown in job growth last month as concerning.  Really?  What about the anemic job growth for the past seven years?  Has Yellen noticed that?  Is she concerned?

What is needed is less Federal Reserve action and a return to free economic markets.  The Fed is a completely unnecessary actor on an increasingly irrelevant stage.

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