Bonds, Currencies, Stocks

Janet Yellen’s Press Conference Translated From ‘Fedspeak’ Into English


By Paul-Martin Foss

Yellen - Flickr - DonkeyHoteyAs we occasionally like to do, we have translated Fed Chairman Yellen’s most recent FOMC press conference from FedSpeak into English. If you don’t want to read through the raw transcript, or don’t want to be put to sleep by watching the video replay, the translation below will give you everything you need to know.

YELLEN: Good afternoon. Today we decided to keep our accommodative monetary policy intact. We really have no idea what we’re doing, and markets have decided that they don’t want rates to rise too far above zero. And when they get angry, we get scared. So we’re just going to hold off and do nothing. As usual, we have come up with a bunch of projections for economic growth and the unemployment rate that have no correlation to reality and will be proven to be inaccurate, but not before we majorly screw up the economy, so the joke’s on you guys. We’ll continue to parrot the party line that job growth is great and ignore the fact that most of that growth comes among old people, part-time workers, and service industry jobs like waiting tables. But hey, a nation of waiters is still a great nation, am I right?

Inflation is still lower than we want it to be even though we’ve pumped a ton of money into the system. Of course, that’s because we’ve jiggered the figures to be low on purpose because that gives us an excuse to shovel more money to Wall Street. So just keep looking at these pretty dot plots and ignore how rich my buddy Jamie Dimon is getting. Don’t these dots here look like a fat dreidel? And hey, this dot plot looks like a bishops’s mitre. How fun!

Of course we do have a sinking feeling that things aren’t quite as rosy outside the US. But that’s because we’re not in charge over there. Rest assured, when China collapses and Japan and Europe fall into depression we’ll put on our most important-looking faces and act like we’re doing something other than peeing our pants. We’ll do substantive things and speak substantive words and you’ll know that they’re substantive because we’re doing and saying them. Substantive, that’s us. Oh yeah, and we won’t be raising rates again this year because Wall Street told us it’s not nice, so just forget about that “normalization” thing we’ve mentioned in the past.

But you Potemkin journalists didn’t come hear to hear to me talk, you came to hear yourselves talk, so let’s get on to the questions.

QUESTION: Both inflation and jobs seem to be up, which would indicate that the Fed should raise rates, but it hasn’t. Doesn’t this mean that you are liars, saying you’ll raise rates when certain conditions apply and then not raising them? And if the economy right now isn’t in good enough shape to raise rates, when will you raise them?

YELLEN: Well, you bring up some good points. And let me just state that we never promise to do anything. We use the most weaselly, non-descript, obfuscatory language we can so that no matter what we do we can always point to something we said to make it seem that we’re doing what we said we’d do. Remember, we’re flying by the seats of our pants here, so we don’t want to commit to any one policy path. We might very well wake up tomorrow and say, “Holy crap, I was so wasted during that FOMC meeting, I meant to vote to lower rates. I shouldn’t have drunk that handle of tequila.” That type of thing.

Conditions will change, they’ll ebb and flow. And right now we really need to walk back our previous statements that we’re going to raise rates a lot this year. So now I’ll tell you that our rate rises will only be gradual. And at the next press conference I’ll tell you that we might have one rate rise, maybe, if Jupiter is in Scorpio and Venus is in Aquarius. We might also have to consult the Farmer’s Almanac and maybe a psychic or two. If only Nancy Reagan hadn’t kicked the bucket, I could really use the number for her astrologer.

QUESTION: I’d like to ask a question about inflation. Is the Fed thinking about overshooting its 2% inflation target?

YELLEN: So let me make clear that our objective is 2%, and we’re hoping to move back to 2%. And what I mean by that is that when we release another tsunami of easing onto Wall Street and don’t soak it up by paying interest on excess reserves such that inflation shoots up to 5% per month, we’ll disclaim any responsibility. Because, you know, this isn’t a science. Sometimes we undershoot, sometimes we overshoot, and sometimes we really overshoot and cause hyperinflation and destroy the economy. We act like we’re in control, but we really have no control over anything. No big deal, that’s just what happens.

QUESTION: So you say that inflation has picked up, yet your projections are for weakened economic growth. Doesn’t this mean that the economy is weakening? So how do you justify any rate hikes at all?

YELLEN: So look, like I’ve said before, this is all just guesswork. Take our numbers with a grain of salt. We want figures to get to a certain level and if they get there, great. If they don’t, who cares. We’ll do what we do regardless of what happens. Right now we’re just trying to talk a good game to keep people from crapping their pants about the huge recession coming next year.

QUESTION: Could you be more specific about the risks from overseas that worry you? Are you worried about China, emerging markets, Europe?

YELLEN: Well, pretty much everybody is tanking. China is going down the tubes, Japan is in recession, and Europe is fading. Canada and Mexico have had the wind taken out of their sails by falling oil prices, which has affected us as well. So that’s why we’re staying put today. We’re just too scared to do anything at all.

QUESTION: You’ve mentioned that every meeting is a live meeting with respect to a rate hike. Do you see yourself getting any new information between now and April that would make you comfortable raising rates at that meeting?

YELLEN: Yes, every meeting is a live meeting, I’ve beat that into your brains for months. But in all likelihood there won’t be a rate hike at the next meeting. Sure we’ll have some new data, but we’ll be too scared to hike rates without a press conference to explain ourselves.

QUESTION: Lower oil prices were expected to lead to more consumer spending, but that doesn’t seem to have happened. And if oil prices go back up, what impact would that have on inflation?

YELLEN: So, we really have no idea what impact oil prices have on consumer spending. Sure, we can come up with some fancy surveys and run some models, but at the end of the day we’re just as clueless as you are. We really would love for people to use the money they’re not spending on gas to do useful, productive things, like taking on extra credit card debt, going out to eat so that the 43 million waiters in this country stay fully employed, using their Benjamins to light their blunts after doing lines of coke off a hooker’s derriere, or even just flushing money down the toilet. If oil prices rise, we don’t expect it to have much effect on inflation figures. Oil is so volatile right now that it could do anything, but we don’t expect it to change much. Which of course means that it will probably do something completely unexpected and catch us off guard.

QUESTION: You seem to have said today that not much has changed. Your FOMC statement didn’t mention anything about balance, which is what was mentioned when you raised rates. Is that the language we need to look for, and if so, what would it take to get back to balance?

YELLEN: So let me say that risks to our outlook have diminished. But there are other risks that are still there and might increase. So risks are diminishing and increasing. But we don’t want to say whether overall risks are balanced, or increasing, or decreasing. They’re risks. And they’re there. And they’re risky. Some are going up and some are going down. But we’re hoping that China, Japan, and Europe will get their acts together and stimulate their economies. Deep down we know that their efforts won’t be successful, but we have to put on a good show for you guys and get you hoping that things aren’t going to be as bad as they actually will be.

QUESTION: Wage growth has been pretty disappointing in the jobs reports. Why do you think that is, and how important is sustained wage growth to your inflation outlook?

YELLEN: I don’t know why we’re not seeing wage growth. It’s not like we haven’t flooded the country with dollars. I mean sure, employers are facing rising health care costs and rising wage costs due to minimum wage increases around the country. And we’re certainly doing our best to raise the cost of goods and services to stratospheric levels. So that’s why nobody with half a brain would want to run a business in this lousy economic environment. But until you can quantify that in precisely mathematical data we’re going to continue sticking our heads in the sand and pretending stagnant wage growth isn’t a problem.

QUESTION: The US economy is the number one concern to voters right now. Despite the data showing low unemployment and good job gains, voters feel like the economy is in bad shape. Why is that? And does that negative sentiment factor into your economic outlook and monetary policy decisions?

YELLEN: So let me start with the second question. We have our surveys of consumer sentiment and they show that everything is rosy, so that’s that as far as we’re concerned. The labor market really is doing just great. Sure, young people may not be finding good paying jobs, but they can work as waiters for decades until they move up to restaurant manager, right? Yes, there is some widening inequality, Yes, the less-skilled and -educated are finding it harder to find decent jobs, but don’t blame that on us. Blame it on something amorphous like globalization. Just ignore the fact that we’re trying to give free money to Wall Street and making it more expensive for blue collar Americans to buy food, clothes, cars, and houses. Everything will be just fine.

QUESTION: Because of ties between the US and world financial markets, it seems to be more difficult for the Fed to pursue monetary policies that diverge from those of other central banks. Do you agree with that? And secondly, does it undermine the Fed’s standing as a nonpartisan institution when one of its governors contributes to a national political campaign?

YELLEN: Yes, monetary policy actions in one country will have spillover effects in other countries. But that doesn’t constrain us at all. Look, if Europe and Japan do something that we really don’t like, we can always threaten to do something like withdraw our nuclear umbrella. They know on which side their bread is buttered. Besides, we all went to the same schools, studied under the same professors, and believe the same foolish Keynesianism, so there really won’t be too much difference between our monetary policies. A few basis points here and there maybe, but we’re planning to send our economies to hell together.

As for the political contributions, the Fed is a completely nonpartisan and independent institution. We do whatever the President tells us to do, no matter which party he belongs to, and we ignore Congress completely, no matter which party is in power. Besides, there really is only one party, with a Republican wing and a Democrat wing. There isn’t much difference between them on major issues, and when it comes to the Fed both wings of the party want to see us pumping money into the financial system with no end in sight.

QUESTION: The new policy projections seem to indicate more slack in the labor market. You talked about lack of wage growth as one possible reason, are there others?

YELLEN: Yes, wage growth is one reason. We also have millions of people who are still employed part-time even though they want full-time work, so maybe that was another reason, but I really can’t say what my colleagues were thinking when they made those projections.

QUESTION: We’ve heard a lot about the Supreme Court nominee, but what about the Fed? There are still two vacancies on the Board of Governors and no one has been nominated to be Vice Chairman for Supervision? What effect does that have on the Fed?

YELLEN: Well, Congress intended for the Federal Reserve Board to have seven members, which would make it much easier for me to keep the Reserve Bank presidents in line at FOMC meetings. I’d like to see the Senate move forward on the nominations so that we could get up to full staffing. As for the new position, you’d really have to ask the White House why they aren’t nominating anyone yet. Assuming the President isn’t on the golf course right now. Priorities, you know.

QUESTION: The President expressed concern about cynicism concerning reform of the financial sector. Do you share concern about attitudes that not enough has been done or that changes made have been ineffective in reforming the banking system?

YELLEN: So, I feel a great deal has been done. We’ve been working on this for years and have made great progress. Sure, we haven’t changed any of the fundamentals, such as the fact that we have a highly-leveraged fractional reserve banking system that is banking (no pun intended) on a taxpayer bailout if things hit the fan. But what are small things like that compared to the paltry amounts of additional capital we’re requiring banks to hold and the hundreds of new rules and regulations we’ve written. Remember, all we have to do is bamboozle people into thinking we’re doing something and they’ll keep thinking that the banking system is safe and will keep depositing their money.

QUESTION: The unemployment rate forecasts for 2017 and 2018 were down, with projections to inflation being unchanged. There seems to be a growing debate about the relationship between lower unemployment and higher inflation. What is your view on the Phillips curve?

YELLEN: So, like most government economists I am an unabashed Keynesian. I never questioned anything I was taught in school and just regurgitated what my professors told me. If I hadn’t, I never would have become a professor, a Fed President, or Fed Chairman. I have never had any concern with discovering the truth, especially not once I got my PhD, so I believe in the Phillips curve even if it is completely bogus. In fact, it factors strongly into my decision-making process and that of my colleagues. Surely you don’t expect the 12 people picked to run the country’s economy to hold beliefs that actually make sense, do you?

QUESTION: I work in television so I’m going to ask this question in a dramatic manner, as though we’re actually on live TV right now. Has there been any discussion among the FOMC about further stimulus? How about negative rates, have you evaluated how they’re working in other countries and would the Fed consider negative rates?

YELLEN: We’re not actively discussing negative rates. So far the results in other countries are mixed, in our opinion. And we’re still one or two rate drops away from being able even to consider negative rates, so that’s not even on our radar screen right now. And I’m tired, so I’m going to duck your question on stimulus.

Thank you all for being so obeisant and not asking me any questions about the Bangladeshi central bank heist and the nincompoops at the New York Fed who transferred $100 million to a bunch of crooks and nearly let $1 billion out. It was a complete fluke and can’t happen again. Disregard the fact that I’ve pulled all my money out of my bank accounts and parked it under my mattress. Our banking system is completely safe. Thank you again and I look forward to the next round of softball questions in June.

The statements, views, and opinions expressed in this article are solely those of the author and do not necessarily represent those of EMerging Equity.

Courtesy of the Carl Menger Center for the Study of Money and Banking


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