Everything’s Great

So much for that call. I thought there was no way Yellen would put her fingers in her ears, close her eyes, and shout “nah nah nah – I can’t hear you” to the speculative fervour that has gripped markets. Well, there is no way to couch it. I was wrong.

In her last press conference, Yellen focused on all the positives. Stocks are elevated, but economists have no way of determining if they are too elevated. Bitcoin is going nuts, but it’s not a problem because it plays a very small role in the payments system. The yield curve is within its historic range and the recent flattening does not signal a policy error. Trump’s tax package will help growth, but will not result in too much by any means. Inflation is slightly below target, but there is little chance it will shoot up to become a problem in the coming years. In short, everything is great, and there is no need to alter course with higher rates.

Her whole press conference can best be summed up with her observation, “there’s less to lose sleep about now than in a long time.”

Timestamp a ticket. That quote might be one for the ages.

And the most confusing part of her position? It’s not intellectually consistent. The only reporter with the guts to confront Yellen during her last press conference was New York Times’ Binyamin Appelbaum.

“I’m struggling to reconcile the pieces of the economic outlook that you have just described today. You have said that we are basically at full employment. You have said that you are expecting the tax package to deliver a significant stimulus, and it will be on the demand side. You expect growth to be faster. You expect unemployment to be lower. And yet somehow inflation is going to remain at 2% for the foreseeable future. Could you describe what has changed about your economic assessment in that everything has changed except inflation?

Yeah, Binyamin, I am struggling too. Good for you for holding Yellen’s feet to the fire.