There is no other way to read this:
Federal Reserve Chair Janet Yellen said U.S. labor markets are far from healthy and signaled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are “completely gone.”
Look, why would those who hire people want easy money to go away? They don’t. So if giving people good wages and employment will mean the Fed tightening, they have every incentive not to do so.
The actual way to do it is to say “this policy is not working. If it does not show progress, we will cancel it.”
If what you wanted was high wages and low actual unemployment.
Which isn’t what Yellen wants.
Bill H
Ian points out that Yellen’s policy is “If what you are doing is not working, keep doing it.” She, like her predecessors, seems to think that if a failed policy is adhered to long enough it will become a functional policy.
Ian, on the other hand, appears to be a follower of Vince Lombardi. “If what you are doing is not working, do something different.” His teams won the first two Super Bowls.
Bill H
For Yellen’s policy I meant to say “If what you are doing is not working, keep doing it until it works.”
Ian Welsh
No, I think that Yellen continues to do loose money stuff, because it is working.
It’s just not doing what she says she wants it to do, publicly.
Bob
Yeah oldest trick in the book.
– Want something
– Figure out “The Plan” on how to get it
– Tell people “The Plan” is how to get something they want
– Keep doing the plan, telling people “you haven’t got what you want yet, we’ll stick with the plan for now”
– Get what you want
coloradoblue
Considering last month’s employments figures it seems things are working perfectly for the oligarchs.
The headline was an increase in jobs of about 288,000. But looking at the underlying stats showed a decrease in full-time jobs of 500,000 and an increase in part-time jobs of just under 800,000.
Apparently this is just fine with our lords and masters.
Sandman
I’m having trouble parsing this, and wonder if your text didn’t get garbled somehow. The very first sentence, at least, appears to be missing a verb, and I’m not sure which one. And shouldn’t the last word of the second-to-final sentence actually be “unemployment”?
I suppose I should be grateful. If it weren’t for this, I likely wouldn’t have anything to contribute to the conversation.
Ian Welsh
I’m not seeing the first one
The first sentence is “there is no other way to read this:”
followed by the excerpt “we’ll keep giving you money until you raise wages and decrease unemployment, then we’ll take it away.”
Thank you for the catch on the second.
Mallam
What would you have Yellen do? Surely you’re not advocating tightening and increasing interest rates. So what would your course of action be, especially if we are to assume you’re not the only person in charge of federal reserve policy and need to convince your fellow governors? But these are hypotheticals anyway, so let’s also assume you’re dictator of monetary policy (no fiscal policy).
Trixie
Far be it for me to pile on, but THIS:
Look, why would those who hire people easy money to go away?
I mean, I know what you’re saying, but let’s just say I read that half dozen times. Tilts head.
And I can’t even figure out how to tease you about it, because like Sandman, I don’t know how to fix it. Here’s my attempt though:
Look, why would those easy money people who hire go away? To?
On request, I could also turn that into a haiku.
Phoenician in a time of Romans
And I can’t even figure out how to tease you about it, because like Sandman, I don’t know how to fix it.
Easy enough – “why would those who hire people WANT THE easy money to go away?”
And as to what to do – get that easy money into the hands of the middle-class and poor who will spend it. If companies want some, then let them get it the normal way – by making stuff and selling it.
Trixie
Easy enough – “why would those who hire people WANT THE easy money to go away?”
Sure, but where does it end? How do we know it’s not supposed to say:
Why would those RENT-SEEKING-BUBBLE-BLOWING-VAMPIRE-SQUIDS WITH THE TEMPERAMENT OF GODZILLA who PRETEND TO hire people EVER ADMIT THAT WITHOUT THE WARM LIQUIDITY BLANKIE OF easy money THEY WILL GET TOO SCARED OF PEOPLE SAYING MEAN THINGS ABOUT THEM — NOT UNLIKE HITLER’S INVASION OF POLAND OR A CIRCULAR FIRING SQUAD DIRECTED AT CAPITALISM — SUCH THAT THEY’LL WANT to go away TO CHINA AND TAKE THEIR OPS AND JOBS WITH THEM…BECAUSE, YOU KNOW, CERTAINTY.
We don’t. Words have meaning and all that. But you actually have to use them. All of them. I’m not here to guess.
get that easy money into the hands of the middle-class and poor who will spend it.
Which is difficult given current institutional rules. The Fed can only purchase financial assets which are primarily owned by the top quintile. What would be required is targeted fiscal policy. But even here, under current conditions — perverse corporate governance and incentives, slack labor markets, overleveraged households, leakages to the foreign sector, etc — those dollars tend to float straight to the top. And stay there.
The problem is distribution. Or the lack thereof.
Ian Welsh
There are a couple options. If you want long term prosperity and are willing to take some hits for a few years force banks to take actual losses and write down assets to market levels. By stopping the market support, markets will drop to actual valuations. Force banks who go insolvent to go insolvent. Break them up. Rewrite how banking is down to make it productive. This stuff goes into far more than can be dealt with in a blog post. If you’re really interested, you can read back into my FDL archives for very concrete proposals, albeit suited to the time. If you want serious, detailed proposals for today, cut me a check for high five figures (we can discuss) and I’ll get on it.
If you’re not willing to endure real pain, do some tightening on the top end and give money based on how much retail and operational lending is done. There are fine tools available to monetary policy if you want them, especially if you insist on various things being done or you won’t buy mortgages. Again, I’m not writing a multi-thousand word essay because someone asked in comments. Many of those posts were written between 2007 and 2008. My FDL archives are linked from the About page.
Overall, of course, a proper response requires both fiscal and monetary policy, supported by the executive. Obama did have a Congressional majority at one time and could have asked for Bernanke to step down. If Bernanke refused, the Presdident has the authority to remove everyone except the chairman from the board, and replace them as he chooses, for non-performance of duties, which would have been easy to do January 2009. At that point Bernanke would have been outvoted on every issue.
It’s weird to run across Panglossians, insisting we live in the best of all worlds.
And yes, in fact, I would have Yellen set strict benchmarks: “I want to see the following numbers by the following date or I end this program because it isn’t working and try something else”. In a real sense, it’s her fucking job to figure out what that or else is and if she can’t to resign so someone can be appointed who is able to do the job. Hand-wringing and saying it’s impossible to help ordinary Americans (which is in effect what she’s doing) while shoveling money to the rich shouldn’t be acceptable.
It is acceptable because it’s her actual job. For anyone who isn’t in about the top 10% and ideally in well more than the 1% to make excuses for her or Bernanke or even Congress or Obama, is as fine an example of generalized Stockholm syndrome and susceptibility to intellectual propaganda as one will ever see.
Celsius 233
Tellen yellin (sorry, I couldn’t help myself).
How timely, Raul over at Automatic Earth has an interesting expansion on this;
http://www.theautomaticearth.com/debt-rattle-jul-16-2014-market-society-money-for-your-soul/
It’s a long (but deep) read on the game today…
Gee
Perhaps, put the word “want” between people and easy in the first sentence.
(yes, thank you Gee — Ian)
Mallam
Not really making excuses, Ian, especially when you just included the executive and Congress in there and moved goal posts. I am fully aware of options to be done, with concrete options, and in fact if she really pushed those options they could be done. There’s talk of giving money to poor people through the Fed; does it have that legal authority? I’m sure if it *really wanted* it could do it, legal authority or not. When does the law matter when the rich want it, for example? Almost never.
I think the best option if we assume the present framework of the Fed would be to follow through with “follow these benchmarks or ill do something different”. What that is, in its framework, isn’t my expertise. But if she can’t get her fellow governors to sign on to whatever that is, it’s irrelevant anyway.
Ian Welsh
It’s always weird to me how it’s my job to do someone else’s job who wouldn’t listen to me who is being paid 6 or 7 figures for their supposed expertise. Since you can’t be bothered to go back and read the FDL archives, where I lay out specific policies that require only the Fed (as well as policies which require Congress and/or the President), nor are you willing to pay for my time, to say I’m moving the goal posts is rather rich.
If a policy has not worked after 5 years, and if it has been explained why it won’t work (not just by me, but my many others), it should be changed.
Yes, the Fed could give money to poor people. Yes, the ways to do that are somewhat clever, but hey, so is “unconventional monetary policy”. The Fed can do what it wants, pretty much, when it comes to the terms it loans money to people for. If it wants to lend money to households at .5% there is nothing to stop it from doing so. And it can do so through banks or Fannie or Freddie simply by saying it will only buy certain types of conforming mortgages or paper or whatever: if they don’t meet the requirements, the banks don’t get the money. Tie that to free money for shit the banks want (Unconventional ops which give easy money to rich people will be equal to the amount of paper bought in the previous quarter that was for poor and middle class people), and voila, you’re done.
I suppose you just got some basic policy for no pay. Well done.
Writing policy is easy, but pointless. I spent the first 6 years of my blogging career writing post after post on what should be done. The only (mostly bad) reason to do so is to show that there are other options which could be taken, but won’t be. Options which genuinely help large #s of ordinary people are never accepted by the elites.
ed nelson
I like your thinking Ian!
I would point to specifics on different issues, but as time is short, all I want to do is to see if… In can comment here on this site, for the moment.
It is sure pathetic what the bastards are doing with our f’n economy… money system… and etc.!!