Watching Janet Yellin's testimony over the last two days was pretty frightening. It's pretty obvious to me that she really doesn't know WTF she's doing...
The Federal Reserve's decision to raise interest rates last December after talking about it incessantly for five years and returning to so-called "normal" policy, now looks like it may have been a huge mistake if we are going into recession. She told Congress this week she was "studying" ways to "be prepared" in the event that the current sell-off in world stock markets continues, on going concerns about financial sector stress, and slowing economic growth all translate into a recession or another financial crisis. But then she said the policy tool of negative interest rates, now being used by some foreign central banks offers no guarantee that it will help the U.S. economy.
Given market concern about slowing Chinese economic growth, falling commodity and stock prices, Yellen did admit that U.S. financial conditions are now much worse than the Fed expected when it enacted an almost symbolic quarter point interest rate hike just two months ago. The Fed's perceived miscalculation about the length of the oil price slump, the strength of the U.S. dollar, and the impact of weakening Chinese economic growth have led markets to doubt that inflation will return to the Fed's 2.0 percent target.
So there you have it. Sounds like they need a good technician at the Fed...if so maybe they would have seen months ago that the Chinese economy is going to slow down. How could it not? Talk about bubbles. Maybe Janet should Google "ghost cities." And Oil? Ever hear of something called "fracking"? And how about "supply and demand"? If she Googles those as well maybe she can get a clue as to what's going on in the world because she doesn't seem to have one now. This could get ugly. Don't forget...one of the main causes of the Great Depression was the deflation caused by increased productivity on farms. This lead to a glut of agricultural commodities on the markets and this drove prices down. And now we have increased productivity in the oil markets ( i.e.. fracking ) driving down oil prices around the world.