I ultimately supported Yellen’s nomination to the post of Chairperson of the Federal Reserve, mostly out of a distaste for what appeared to be predicted behavior of her competitor for the post. But two FOMC meetings and three rounds of $10B tapering later with no sign of altering or alternate policies to be put in place one the tapering is complete, I am starting to rethink my support. I suspect that I am likely not the only one doing so as an article appeared on Bloomberg.com today about Yellen expanding the scope of Fed “concern” about the conditions of the labor market to the “disadvantaged” that is defined as long term unemployed, those who have dropped out of the labor force entirely, and those who are working part time for economic reasons – perhaps as some kind of PR piece trying to convince or re-convince those who are gravely concerned about the sorry state of the labor markets that she does, in fact, care. But caring and paying lip service isn’t enough to meet my expectations.
Those people who have ended up on the wrong side of the ongoing tight money policy who otherwise might not be in the predicament in which they find themselves if not for the peevish fixation on microscopic levels of inflation of her colleagues as if it means something important in and of itself need a Fed chair with grit, not a shrinking violet who goes with the flow knowing it will not help them. It isn’t a pro-growth policy, and I am not sure who she believes she is kidding with the end of QE3 in sight and no monetary regime change on the agenda. We will be right back where we were in August of 2012 by the end of the 3rd quarter this year with FOMC officials playing Pollyanna, watching and waiting for the magical pickup in economic activity from the wave of the confidence fairy’s wand that never comes. Economic growth in an era of monetary policy induced pessimism doesn’t just pop up out from under rocks!
I have read portions of the FOMC minutes from 2008 and took note of Yellen’s skepticism the Committee was doing the right thing; and without a doubt she has some clue that tapering isn’t really the right thing to do without some sort of policy overhaul on the horizon. The monetary policy framework that is currently in place is irreparably broken, and will not magically fix itself. Therefore, the plight of the so called disadvantaged (a demeaning term, by the way) will also not fix itself.
Actions speak much louder than words, Ms. Yellen. It’s time to stop talking and start acting before more economic damage is inflicted and we add to their ranks instead of reducing it. There is no time to waste.