July 23, 2014

Yellen’s Testimony

By In Blogs, C.Jay Engel

Originally Posted at TRL Journal

Recently, Fed Chairman Janet Yellen (good thing the feminist grammar police don’t scour my site looking for deviations from Acceptable Terminology –Yellen, of course is a woman) gave her testimony to the Senate Banking Committee and the House Financial Services Committee.  Paul-Martin Foss writes:

But even at hearings as important as these, the questions themselves were largely uninspiring, many revolving around the same theme of “Madame Chairman, don’t you agree that if the Federal Reserve and/or the federal government don’t do what I or my political party want to do that the country will be ruined?” And because many of the questions didn’t specifically revolve around monetary policy, most of the answers didn’t either.

Largely uninspiring indeed.  It is a difficult task to decide whether this reality of ludicrously lame questions stems from a lack of knowledge about economics or from the fact that they don’t want to make Yellen look bad. Because this would make themselves look bad.  And being political hacks seeking to please their central banking masters, they understand that they would soon find themselves without a job.

Please the boss, get rewarded.

Such is the theory behind the idea of the “representative” in Congress. It’s a nice theory. Problem: the congressmen don’t “represent” their jurisdictional constituents. Rather, they represent a whole collection of cronies, lobbyists, senior politicians, and well-connected elitists.

Please the boss, get rewarded. Question: who is the boss?

The boss in the present instance is whoever wants them to asks approved questions so as to not make Yellen look bad.  There is a reason these congressmen and senators were placed on the committees.  They are either stupid or lapdogs.

Hilariously, these two options aren’t mutually exclusive. It’s best to play safe and say that they are both.

Foss also reports:

Chairman Yellen reiterated her preference in using macroprudential policies rather than monetary policy to combat bubbles, something which we at the Carl Menger Center find utterly bizarre. Chairman Yellen realizes that economic bubbles are brought about through the Fed’s loose monetary policy, yet even in response to a direct question asking whether it wouldn’t be better to avoid the policies that create bubbles in the first place, she disagreed and remained stubborn in her belief that the proper regulatory and supervisory policies will take care of any bubbles that may form and pop.

Believing that regulation and supervision will take care of bubbles is incredibly misguided. Let’s say you left your hose on for a week and it was pouring forth water into your grass lawn.  It was flooding it, wiping out the dirt and structure of the lawn itself.  One might suggest that such profound dilemmas can be solved by turning off the spigot, but here comes Janet Yellen to stubbornly insist that Congress (that problem-solving machine) needs to pile sticks in front of the hose opening so that the lawn can be given a break.

Brilliant.

Written by C.Jay Engel

Editor and creator of The Reformed Libertarian. Living in Northern California with his wife, he writes on everything from politics to theology and from culture to economic theory. You can send an email to reformedlibertarian@gmail.com