Janet Yellen Responds As A Central Banker Would

Let’s try to untangle the web of Fed-speak going on here.  “Reality” for our purposes is defined as my opinion, obviously.

Yellen Defends Seven Years of Low Interest Rates in Letter to Nader

Fed-Speak:

Warning that “an overly aggressive increase in rates would at most benefit savers only temporarily,” she argued in the letter released Monday in Washington that the Fed’s seven-year era of zero rates had sheltered American savers from dramatic declines in the value of their homes and retirement accounts.

Reality:

It was a thing called deflation, which is a natural corrective to man-made, currency-compromising monetary policy that leverages the ‘value’ inherent in official ‘money’ in service to asset appreciation. Periodically, this ‘money’ becomes valued as liquidity as the monetized economy deleverages from the official Fed-sponsored inflation (in this case, Alan Greenspan’s commercial credit bubble).In other words, the “value of their homes”was a false economic signal to begin with. So what she is saying is that the Fed’s seven-year era of zero rates have been a tool employed to forestall, you guessed it… reality.

Fed-Speak:

“Many of these savers undoubtedly would have lost their jobs or pensions (or faced increased burdens from supporting unemployed children and grandchildren),” if the Fed had not acted with such force, she wrote.

Reality:

Yes indeed, they would have. That would have been due to the fallout from from the last time the Fed acted to delay an economic deleveraging. So what you are saying Ms. Yellen, is that you have employed a different flavor (government vs. commercial credit) of the same solution that was in actuality, the cause of the problem to begin with. See? The consumer is now hopped up on government credit instead of mortgage products on this cycle. From FloatingPath…