Janet Yellen [defends] Federal Reserve System ultra-easy monetary policy … Janet Yellen, President Barack Obama's nominee to lead the US Federal Reserve, offers a stout defense on Thursday of the central bank's aggressive monetary easing before a Senate panel that includes some tough Republican critics. – The Economic Times
Dominant Social Theme: The Fed has a job to do. Let's stick to discussing it.
Free-Market Analysis: What is most interesting about Janet Yellen's nomination and expected confirmation, as mentioned in the article, is that it is taking place at all.
The Internet and alternative media websites are filled with frustration over central banking policies. Free-market finance makes it clear in articles in numerous languages that what central banks do is fix the price and value of money – and price fixing never works.
Senator Rand Paul has threatened to put a hold on Yellen's nomination unless the Federal Reserve is audited. His father has written an enormously popular book expressing the sentiment that the Fed ought to be "ended."
More importantly, Fed officials' efforts at defending themselves have been fairly ineffectual. In fact, some might characterize them as downright abysmal.
We don't think the Fed's positioning is all that convincing but we see no indication that those at the top have any new ideas about how to handle criticism aimed at them and the institution.
Granted, Bernanke has tried. Central banks generally have adopted a policy called "forward guidance" that actually attempts to explain the intentions of central bank policy makers and present goals. This is supposedly an attempt to counter the criticism that central banks are not in any sense genuinely democratic or open bodies.
But forward guidance doesn't make sense on numerous levels, especially because as a concept it's quite a squirmy one …
Tell people that central banks are giving away freshly printed money to cronies, and they'll understand the idea and usually endorse it. Tell them that central banks are more open now because they've adopted a policy called forward guidance and people will likely experience a disconnect between the problem and the proposed solution.
Of course, the Fed as an institution is not used to confronting challenges to its basic authority. Its main defense is the legislative privilege it has been granted to print monopoly money.
After 100 years, this privilege has been vitiated by the Fed's abysmal performance. Every decade there are ruinous slumps and twice within about 75 years there have been financial crises involving the whole world.
Those who want to see the Fed done away with or at least restrained have begun to concentrate not on Fed competency but on Fed transparency. This is where the battle will be waged in the future.
The rebuttal is the idea is that governmental "privacy" is necessary because too much oversight can interfere with the incredibly delicate investigative operations that are keeping the West free of terrorism and financial fraud.
It's given rise to an ironic state of affairs. People have no inherent or at least recognized right to privacy anymore, not even in the United States, but governmental officials continue to classify operations and behavior as secret and top secret.
Once classified, not even journalists can report on these events because to do so would be a criminal matter. The reporter, if domestic, can be jailed until s/he reveals sources and then put on trial for attempting to disseminate a state secret.
If the reporter is overseas, s/he can still be prosecuted as an enemy of the state. Such reporters may not find themselves merely liable for judicial prosecution but may also suddenly discover they have been elevated to the status of an enemy combatant.
For all the above reasons, it will take an act of Congress to fully reveal the Fed's intricate and unholy financial arrangements around the world. Ben Bernanke et al. are obviously fearful of such exposure and continually emphasize the Fed's independence and the necessity to keep some transactions private.
They fear a full revelation of the mercantilism they practice. Yet surely this will NOT be examined, or at least not now. Not a bit. Here's the programmatic positioning of Yellen's testimony:
"I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," Yellen, the Fed's current vice chair, will tell the panel, according to prepared remarks released late on Wednesday.
… Her words bolstered expectations the central bank would push on with its bond-buying stimulus into next year and move cautiously when it seeks to temper its support for the economy. President Barack Obama nominated Yellen last month to replace Fed chief Ben Bernanke when his term expires on Jan. 31.
Despite criticism, she is expected to win confirmation without drama, although it is not yet clear when lawmakers will debate and vote on the merits of her selection. Obama's Democrats control 55 of the Senate's 100 seats, which means the 67-year-old former economics professor need only win backing from five Republicans to reach the 60-vote threshold necessary to overcome Senate procedural hurdles.
US growth picked up in the third quarter, but is expected to struggle in the final three months of the year after consumer and business confidence was dented by a bitter partisan budget battle in Washington.
As a result, the Fed has maintained a controversial bond buying program, while holding interest rates near zero, and Yellen's remarks bolstered views she would preserve policy continuity with Bernanke.
Calling the US unemployment rate of 7.3 per cent in October too high, she noted the economy and labor markets were performing "far short" of their potential, while inflation was under the Fed's 2 per cent goal and expected to stay there for some time.
The reality of Fed power and its incredible corruption is not to come up at any time in this process. Unless Rand Paul does manage to put a hold on Yellen's nomination and then performs another filibuster, this one aimed at informing people about the reality of the Fed, the arguments over Yellen's nomination will be restricted to the theoretical.
Central banks have been defined incorrectly in the literature of business schools and financial journals. Bankers are portrayed as technocratic scientists adjusting the flow of money to create the best possible outcome.
In reality, central banking money printing is a scourge that fools people into thinking they are wealthy when they are not and tricks business people into expanding beyond what they and their enterprises can support.
Yellen's confirmation will be based on a discussion of whether or not the Fed's efforts ought to be aimed at controlling inflation or encouraging employment or both. There will be no fundamental examination of the flawed reality of monetary policy worldwide, or even how we got to this point.
During her confirmation process, Yellen will give a spirited defense not only of money printing but of her own moral probity and will be clear that she views her life as one sanctified by public service. Whether she has devoted her life to a ruinous enterprise will not be discussed.
Certainly the larger game will not be revealed. But hidden behind the policy discussions and concern over employment is the surety that Yellen will start her term by continuing to print vast gouts of money.
This money will find its way into the stock market just as intended, continuing to create mountainous stock market averages and then eventually an equity mania. People will begin to believe that the rules of risk have been suspended and that like central banks themselves they can virtually coin money.
It will be a mistake for many of them, but it will happen nonetheless, as the powers-that-be set up a last blow-off, a final Wall Street party …
They've selected Janet Yellen as their hostess.