Then Chair Yellen presents the Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs. February 14, 2017. Photo courtesy of the Federal Reserve.
Glad Tidings: CBS News to Ms. Yellen:
What is 2023 gonna look like for the average consumer?
Janet Yellen:
“So I believe inflation will be lower. I am very hopeful that the labor market will—remain quite healthy—so that people can feel good about their finances and their personal economic situation.”
Janet Yellen seems happy enough making cheery predictions. The inflation report comes out today (Tuesday), and even if it brings Glad Tidings, warns James Freeman in the WSJ, “there is every reason for savers and consumers to be wary.”
James Freeman hopes Ms. Yellen is right, even though, as he reminds readers, recent history suggests that if she is forecasting a benign inflation environment, “the scourge will be with us for quite some time,” That is important to keep in mind, adds Mr. Freeman, even if the report on November’s consumer price index is better than expected.
Americans are praying that the current inflation is short-lived. But among the lessons of the 1970s is that if policy makers continue to oppose growth and favor unsound money, there will be false dawns before the era of monetary darkness ends. When inflation fell to 5.7% in 1976 from the brutal 11.1% of 1974, Americans were hopeful the crisis was being resolved. But annual inflation surged again into double digits by the end of the decade.
In our own time the Federal Reserve has been raising rates since the spring but has only just begun to withdraw from the financial system all the money it created during the Covid policy panic. The new Republican House may thwart Biden spending plans. But there is no indication that Team Biden wants to stop offering federal benefits to able-bodied working-age adults, which feeds demand and limits supply.
“They Will Lay You Down Low and Easy”
Don’t forget, the Treasury secretary was not just issuing a forecast that turned out to be “wildly wrong” about the highest inflation in 40 years, J. Yellen helped cause it.
The secretary’s predictions were issued in the service of pushing through a reckless spending increase long after the economy had started its rebound from the ill-conceived shutdowns and while even prominent Democratic economists were warning against the Biden binge.
March 2021 “Best of the Web” noted:
… the chairman of the U.S. Federal Reserve still isn’t worried about inflation, nor is the Treasury secretary, even as their political colleagues in Washington engage in an historic bidding war for discretionary items that are not even remotely related to the Covid crisis.
Following the recent enactment of a $1.9 trillion spending plan—a small portion of which will directly address the medical issues at hand—the Democrats who run Washington are now drafting a new package of leftist nice-to-haves without any direct connection to Covid. And this legislation could be bigger than any of the emergency bills.
More Christmas Cheer
Thank goodness Congress, Van Morrison or whomever didn’t approve of “the full Yellen agenda.”
One can only imagine how optimistic the secretary’s predictions would have been in that case—and how far from reality.
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