Janet Yellen or Rock-a-Doodle?

This is what markets are about nowadays? Waiting for pronouncements from the monetary politburo?
ANN SAPHIR. Ann Saphir with Reuters. Just to piggyback on the global considerations, as you say, the U.S. economy has been growing, are you worried that given the global interconnecting this, the low inflation globally, all of the other concerns that you just spoke about that you may never escape from this zero or lower bound situation.

CHAIR YELLEN. So, I would be very-- I would be very surprised if that’s the case. That is not the way I see the outlook or the way the committee sees the outlook. Can I completely rule it out? I can’t completely rule it out. But really that’s an extreme downside risk that in no way is near the center of my outlook.

WILLFARNABY: Hey Rock-a-Doodle, given the situation globally do you believe that if you do not crow we will never be able to see the sun shining again?

ROCK-A-DOODLE: So, I would be very-- very surprised if that’s the case. That is not the way I see the outlook or the way the committee sees the outlook. Can I completely rule it out? I can’t completely rule it out. But really that’s an extreme downside risk that in no way is near the center of my outlook.

I had no idea Janet Yellen was such a lightweight. If I was a fan of central banking I would be very concerned at this point in time. I would be surprised if they didn’t start screening her questions ahead of time and running her through the answers, because this is embarrassing. Does Yellen really think that rates can stay this low forever? Does she think that she can keep them that low permanently?

Of course even if Yellen scaled Mt. Sinai and warbled hosannas, while the financial press corps worshipped a Golden ( or paper mâché) Calf, rates would eventually go up.

Even if she deliberated over data within the walls of the monetary politburo aka the Ministry of Sound Money, and issued edicts through a tube to Winston Smith , who diligently informed citizens that rates have always been zero, are zero now, and will always be zero, rates would eventually go up.

Rock-a-Doodle bought into his own hype. People were gassing him and it ultimately led to his downfall because he thought he had powers that were actually impossible for man( or chicken) to wield. He lacked the scientific knowledge necessary to see that his worldview was flawed.

Janet Yellen buys into her hype. People are gassing her and will ultimately lead to our downfall because she apparently thinks she has powers that are actually impossible for man (or woman) to wield. She lacks the scientific knowledge necessary to see that her worldview is flawed.

I’m clearly missing something here. To paraphrase:

Saphir: “Are you worried about interest rates staying at or near 0% forever because the global economy sucks?”

Yellen: “That’s extremely unlikely… so unlikely I’m not even considering it.”

WillFarnaby: “How could Janet Yellen be so stupid as to think interest rates could stay low forever?!”

That last one seems like a non-sequitur. Or is your objection that she added the qualifier “can’t completely rule it out?” Because that’s just basic ass-covering boilerplate; never say never, because what if a comet hits the earth, etc. From her answer, she’s clearly not considering the possibility in any realistic scenario.

Or maybe you meant something else?

He believes in gold standard so that says what you need to know.

What if inflation never crests above 1.5% for the next 20 years?

The only answer should be that it is physically impossible for rates to stay this low forever, and that that scenario is akin to asking if there is a possibility the sun does not come up tomorrow. Yellen is clearly delusional because she dismissed this scenario with a much lower degree of confidence. She indeed could “rule it out” if she understood economics as a science of the possibilities in a world of scarcity. She says she can’t rule it out, similar to how the Rock-a-Doodle character couldn’t rule out the prospect of the sun not coming up in a children’s movie.

So if we enter a sustained deflationary spiral (a la Japan’s Lost Decade), it is your assertion that interest rates would still necessarily have to rise?

What market forces would dictate a rise in interest rates even as the buying power of the dollar rises?

That would probably be a sign of a stagnant economy.

The Fed has considerable real power over interest rates – not absolute, perhaps, but real and considerable. Yellen is saying only that she won’t rule out a decision to use that power to raise them.

I never saw Rock-a-Doodle, but according to this, in that story the sun really does stop rising when Chanticleer leaves off crowing it up every morning. It is the Grand Duke of Owls (who likes the darkness) who lies when he says the sun comes up on its own.

No she is saying she won’t rule out the possibility of “never” getting out of zero rates.

That was a CHILDREN’S movie???

But, but . . . GLENN CAMPBELL!!!

Also, it’s kinda weird to come to the SDMB and talk about economics using physics terms. There are no physical limitations on rates that are set by fiat. You can talk about things being fiscally unsustainable, but physically impossible? Get with the program.

Also also, I’m sure you’ve noticed that markets are sensitive to unspoken subtext when it comes to what the Fed Chairman says out loud (I understand that they’ve been observed to make up their own, on occasion). If she comes right out says “YES! Interest rates are definitely going to be raised again someday!” you KNOW that SOMEBODY is going to jump the gun and start a rush for the doors to get into bonds ahead of the crowd.

So Yellen basically opts to be polite and not call the question stupid, and the goldbugs guffaw at how incompetent she is.

Meanwhile, Ron Paul has TV ads hocking some website that sells some financial advice to prepare for the ECONOMIC DISASTER that’s coming any day now, and nobody stops to question whether the Austrian school is the last refuge of scam artists.

Is it your assertion that Japan will “never” escape zero rates?

It may have been sloppy diction, but you are much more forgiving to Yellen, who is apparently an actual economist.

Everyone already knows rates will rise someday, just as everyone knows the sun will rise tomorrow. If anything the markets should be worried Yellen doesn’t know this.

I know that’s where this comparison falls apart.

Mrs Yellen is very well respected in the banking circles, our person who thinks gold standards are good aside, there is no one in the international financial circles who does not think she masters very well the monetary policy even if they may not agree with her. what a strange op.

The worlds most prosperous capitalist economy was built in the late 19th century on a gold standard, so I fail to flinch under your derogatory slur.

Of course Yellen is respected right now. The banks are pleased that she is continuing the policies of Bernanke and enriching them through cheap money. They also probably respect her for ducking subpoenas, too.

Yeah, well, practically every country was using it then. There are very good reasons why they no longer do.

it is sometimes amusing to see low quality illogical thinking about the economics, more often it is sad.

She’s also a policymaker, and a closely-watched figure whose words, for better or for worse, carry the weight of economic indicators, merely by virtue of coming out of her mouth.

Nobody except possibly you believes she doesn’t know it. And I suspect you may only be pretending to believe it.

Again, Japan has had very low rates since about 1996. By the standards of TV reporting and allowing for hyperbole, that’s the equivalent of “Never escape”. It certainly exceeds the tenure of any Fed Chair.

Not to mention the consistent yammering about hyperinflation or currency collapse which never seems to materialize. Instead, they say the numbers are wrong, and point to a the website of a guy who won’t publish his methodology.

Modern conservatives have always had difficulty with the concept of manners. It’s what the PC thing is about after all.