by Paul-Martin Foss at Mengercenter.com
YELLEN: Good morning. I realize that everyone in this room has already read our monetary policy statement, but for the boobs out there in the general public who weren’t tipped off by us two hours in advance about what our decision was going to be, let me explain it to you even though you’re perfectly capable of reading it for yourself. In summary, we don’t have any clue what we’re doing or what’s going on in the economy. We’ll continue foolishly targeting a 2% increase in prices, and we’ll blame all sorts of external factors when that target can’t be met. Our projections about the economy are complete shots in the dark, but we’ll make a few minuscule changes to our projections from the June meeting just so that it looks like we know what we’re doing and are reacting to market conditions. So now let’s turn it over to questions.
QUESTION: This idea of uncertainty in global markets, isn’t this going to play out over many months, so that the Fed isn’t ever going to hike rates?
YELLEN: Well, global uncertainty definitely is worrisome, and some FOMC members have pushed their projections for rate hikes into next year. But in the end, we expect all of this to be transitory. I mean, it’s not like we’ve created a huge bubble in the US economy, or that China is going to see a huge correction in its markets. Who would actually believe that?
QUESTION: Is the next meeting in play with regards to a rate hike? And what kind of data would you need to see in order to hike rates?
YELLEN: As I’ve said before, a rate hike is possible at every meeting. And we haven’t told anybody before, but we’ve brought you guys in to prep you on how to react if we hike rates at a non-press conference FOMC meeting. After all, we don’t want any journalists to stray from the party line and ignore our propaganda.
QUESTION: There have been some people protesting a Fed rate hike out of a concern that there still aren’t enough jobs. What impact has that had on you?
YELLEN: Yes, I hate those annoying little s***s, but I have to pretend that every peon’s opinion is important. But let’s the cut BS: we make the decisions and we’re going to do it regardless of what anyone on the outside thinks, okay? And we still don’t think the labor market has quite reached the amorphous goal we’ve pretended to set for ourselves, so until we hit that ever-changing goal, we’re not going to hike rates.
QUESTION: Do you think you’ve gotten closer to your inflation goals, and have you complied with the Congressional subpoena regarding the September 2012 leak?
YELLEN: B****. How dare you ask me about the subpoena. Do you remember what happened to the last guy who asked a question like that? He hasn’t been seen or heard from since. So I’m going to give you the longest, wordiest answer of the afternoon, repeating myself three or four times and basically rehashing everything I’ve already said about our inflation targets. That should give the Federal Reserve police enough time to identify which car in the lot is yours and install the tracking device. And now that I’m winding up my answer, the folks upstairs should have also had enough time to permanently revoke your press pass. Next question. Oh, wait, you asked about a subpoena? Yes, we are fully complying with Congress’ request for information, just like we always have throughout our history.
QUESTION: The projections you release basically show a low-inflation environment over the next three years, coupled with an unemployment rate that sits at your view of maximum unemployment. Doesn’t that seem a little unrealistic?
YELLEN: Look, as I’ve said before, we really don’t have a clue what maximum employment looks like. And we can’t predict the future. But we have to keep up a facade of knowing what it looks like we’re doing. So we’re going to keep pulling numbers out of our a** for as long as we can and hope for the best.
QUESTION: I want to piggyback on the last guy and point out that your old targets for the unemployment rate and the inflation rate were both higher. What has changed?
YELLEN: Well, we decided that 2 sounded like a nice number. We don’t like decimals and fractions. So our target is 2%. 2, 2, 2, 2, 2. Got that? But that’s not our ceiling. We don’t really care what the ceiling is, but we want to break through that 2% ceiling. The sky’s the limit, but if we can’t break 2% then it makes us look incompetent, as though we can’t actually cause prices to rise. There hasn’t been a central bank in history that’s been incapable of causing a hyperinflationary crisis, and we don’t intend to be the first.
QUESTION: So, like, you mentioned uncertainty, and, like, uncertainty caused you not to hike rates this month. And, like, so, what are the kinds of uncertainty that cause you not to raise rates, and what kind of uncertainty can you ignore?
YELLEN: That’s a tough question. But you should trust us that we’re carefully evaluating all the data. But the most important data are the unemployment rate and the inflation rate, and everything is viewed through how it’s going to affect those rates. Or at least that’s what we want the public to believe.
QUESTION: Could you talk a little bit more about the foreign developments that you’re discussing? We’re assuming it’s China, so are you concerned about the Chinese markets? And how about US markets, what do you think about them?
YELLEN: Yes, we’ve focused on China, but we’re convinced that their central planners know what they’re doing. After all, our central planning here is working wonders, right? But we’re also looking at declining oil prices and how that’s going to affect a number of countries and what the spillover effects might be. And yes, we s*** bricks every time the Dow drops a few hundred points. That’s why we have the Plunge Protection Team, but we can’t admit that we intervene to prop up markets, so I’ll just give you a BS statement about how we’re purely focused on the US economy and not at all reacting to market turbulence. Oh, and the economic outlook is peachy keen.
QUESTION: Given global interconnectedness and low inflation rates around the world, are you concerned about not being able to escape the era of zero interest rates?
YELLEN: No, of course not. We don’t take into account the possibility or likelihood of any extreme scenarios, and I can guarantee you that when the s*** hits the fan we will be completely blindsided and unprepared.
QUESTION: If the economy improves along the lines of your projections, and you still predict low inflation, what’s the big hurry in raising rates?
YELLEN: We’re going to keep printing goo-gobs of money, and we’re hoping that will start driving prices up. We know every central bank in history that has tried to engage in monetary policy has had to deal with lags in response to monetary policy, and we don’t want to engage in a pattern of trying to fine-tune by tightening, then loosening, etc. Despite the fact that that’s what’s going to end up happening anyway, because there’s no way for 12 people to possibly plan an entire economy, we’re going to pretend that we can do things smoothly and just try to bluster our way through any difficulties.
QUESTION: One of your colleagues wanted negative interest rates. I’m more interested in the cute reporter chick sitting next to me than I am in listening to anything President Kocherlakota says, so I was completely blindsided by something this obvious. Is the Fed going to move to negative interest rates?
YELLEN: Well, we’re a little embarrassed about Kocherlakota too, so we tried to ignore him. And even though the whole world knows that we’re going to have to launch QE4 at some point in the future, we want to publicly state that we would never need any extra stimulus. But in the event that we do need some more stimulus, we would carefully evaluate all the tools in our toolbox, even something as stupid as negative interest rates.
QUESTION: Do you still expect a rate hike before the end of the year? And some people have blamed global turbulence on the possible Fed rate increase. What do you think of that?
YELLEN: I don’t want to give you my own personal opinion, but I think it’s fair to say that the Committee as a whole expects a rate hike before the end of the year. And I think global turbulence is due to concerns about the global economy, not due to anyone getting upset that the Fed might hike rates.
QUESTION: You talked about the strong dollar, do you see your policy decisions affecting the dollar?
YELLEN: Despite the fact that our policy actions are the strongest factor influencing the dollar’s value, I’m going to downplay it and redirect the focus of your question by stating that monetary policy doesn’t necessarily affect the exchange rate? See what I did there? Yes, we devalue the dollar and reduce its purchasing power, but if other countries do the same to there currencies and exchange rates stay relatively constant, then we can say that we’re not really devaluing the dollar. I love the floating fiat money regime.
QUESTION: Can you talk about the housing market? How much are you counting on the housing market for future growth?
YELLEN: We’re hoping it continues to rebound, because there’s still some weakness. But it’s a very small sector of the economy. I mean, if you got rid of the entire housing sector and nobody had a place to live, the effects would be minuscule, right? We’re really focused on boosting consumer spending. Come on people, start buying cars that you don’t need and ringing up tons of debt on your credit cards. That’s the path to prosperity.
QUESTION: There are some people who think that ultra-low interest rates have exacerbated economic inequality and mainly benefit the wealthy, what do you say about that?
YELLEN: I disagree. Sure, savers and people on fixed incomes are hurt by low interest rates. Sure, low interest rates benefit capital-intensive industries, big banks, and hedge funds. Sure, the interest paid on excess reserves is lining the pockets of Wall Street. Sure, quantitative easing has boosted stock prices. Sure, easy money allows big banks to borrow and buy up all sorts of assets that they can then try to sell or rent at exorbitant prices to the hoi polloi. Sure, the continued devaluation of the dollar drives up the cost of living, leading to price increases that hurt the poor more than the rich. But we paid some Fed economists to produce a paper showing that the Fed’s monetary policy doesn’t worsen income inequality, so that proves that we’re not doing anything harmful.
QUESTION: What role did a possible government shutdown play in your decision today? And what would you say to Congress about “shutting down” the government?
YELLEN: Thank you for that softball that allows me to deflect blame from the Fed and redirect it to Congress. Ignore the $4.5 trillion balance sheet we’re carrying, ignore the continued easy money we funnel to Wall Street, ignore the fact that we’re going to drive this country into the ground. Congress is doing really bad stuff. If they don’t increase the debt ceiling and spend trillions more dollars that they don’t have, how are we supposed to monetize that debt by funneling trillions of dollars to the primary dealers?
QUESTION: If you delay rate hikes, doesn’t that also mean that you’re going to delay reducing the size of your balance sheet?
YELLEN: Yes, we can’t start reducing the size of the balance sheet until we start to hike rates. But who are we trying to kid? Does anybody really think we’re going to reduce the size of our balance sheet down to a more “reasonable” level? Come on, people, we’re in perma-QE mode here. Turn down for what?
Source: Janet Yellen Translated From Fedspeak | Carl Menger Center for the Study of Money and Banking
