See no inflation. Hear no inflation. Speak no inflation. Ever since creating one-quarter of all U.S. dollars ever printed in a year, the monetarists had been confident that inflation would not rear its ugly head and that everything was manageable under the thumb of the smartest men and women in the Eccles Building and the White House. However, now that the annual U.S. consumer and producer inflation rates have topped 4%, it has been several stages of grief for the policymakers. The position has evolved from shock and denial to anger and depression to, based on Treasury Secretary Janet Yellen’s latest remarks, acceptance. What is next? Perhaps wheelbarrows of money to purchase a loaf of bread.
Yellen: Inflation, Higher Interest Rates are a ‘Plus’
Speaking in an interview with Bloomberg News on June 6 following a Group of Seven (G7) meeting in London, Yellen insisted that President Joe Biden should press ahead with his multi-trillion-dollar spending schemes even if they initiate higher inflation and interest rates, suggesting that it would be a “plus” for the United States.
“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” she said. The only reason interests rates would rise is to combat inflation. Yellen added that it would not be “a bad thing” if inflation and rates were to normalize after being too low for too long.
Still, the former Federal Reserve chair believes that any “spurt” in prices stemming from the president’s astronomical stimulus and relief packages would dissipate next year. Why? According to Yellen, “they’re meant as investments to address long-standing needs of our economy.”
In the end, Yellen is confident that the champions of monetary policy inside the Eccles Building – either under the helm of Chair Jerome Powell or his successor – can handle inflation if it ticks higher.
As expected, her remarks wounded the financial markets, leading to modest losses in the benchmark indexes. For now, it is a paper cut. But should inflation spike and the U.S. central bank taper its ultra-aggressive and unprecedented quantitative easing measures, it could metastasize into hemorrhaging.
A Worthless Penny for Yellen’s Thoughts?
It has been challenging to gauge what Yellen truly thinks about inflation since it has been months of flip-flops, mirroring the commentary emanating from the lips of Powell.
In March, Yellen spoke to a Wall Street Journal CEO Council, explaining that she did not anticipate inflation as a problem for the U.S. economy. “I don’t think there’s going to be an inflationary problem. But if there is the Fed will be counted on to address them,” Yellen asserted, adding that she was not recommending or rejecting a rate hike.
She later downplayed inflation fears that the Biden administration’s $1.9 trillion relief legislation would pave the path to rising inflation, calling these concerns “misplaced.” In an interview with MSNBC, Yellen argued that there had been no signs of inflation before the coronavirus pandemic, even when the unemployment rate was at 3.5%.
May 27, 2021, might have been the date to mark on the calendar when her opinion changed. Yellen testified to a House Appropriations subcommittee virtual hearing that she thinks higher inflation will persist heading into 2022. “My judgment right now is the recent inflation we’ve seen will be temporary, it’s not something that’s endemic,” Yellen stated. “I expect it to last, however, for several more months, and to see high annual rates of inflation through the end of this year.”
At this rate, Yellen could change her mind a few more times before midterm election season begins.
The Expert Class Keeps Getting It Wrong
If the coronavirus pandemic taught the American people any lesson, it was that the expert class continues to get it wrong. The unbridled faith in these experts has metastasized into cult-like thinking, with never-ending pleas to believe, respect, and honor those residing within the corridors of power. Despite their putrid track record, whether during a global public health crisis or an economic collapse, the public routinely turns to the expert class out of fear or uncertainty. It is understandable. But, to quote eminent conservative thinker William F. Buckley, “I would rather be governed by the first 2000 people in the Manhattan phone book.” The population’s chances of surviving whatever catastrophes are unfolding before their eyes would possess the same odds whether or not they listen to the Swamp creatures who may or may not tell the truth or even know what they are doing during a fiasco.
Read more from Andrew Moran.