Keynesian Dogma – Garbage In, Garbage Out

Janet Yellen Bemoans ‘Lack of Fiscal Support’ Fed chair Janet Yellen studied under the Keynesian James Tobin, whose name is nowadays best known for being associated with a tax. It should therefore not come as a big surprise that she supports Keynesian dogma regarding government intervention in what is left of the market economy.
As Reuters reports:
‘U. S. Federal Reserve Chair Janet Yellen on Friday called on politicians across the globe to get their fiscal houses in order during good times to prop up economies during times of turmoil.
In remarks to a symposium in Paris, Yellen blamed part of the slow global economic recovery on weak government support.
She took aim at both U. S. political gridlock after the 2007-2009 financial crisis and the austere policies across Europe as the region struggles with persistently low inflation.
The crisis led major central banks to deploy unconventional tools to spur recovery. For its part, the Fed cut interest rates to zero and more than quadrupled its balance sheet to $4.4 trillion through three rounds of bond buying, eliciting howls of protest from some politicians who feared the monetary largesse would spark an unwanted inflation. It announced an end to its latest asset purchase program just last week.
While the unconventional tools helped support domestic recovery and global economic growth, more action from fiscal authorities would have strengthened the recovery, Yellen said.
‘In the United States, fiscal policy has been much less supportive relative to previous recoveries,’ she said during a panel discussion at the Bank of France. Yellen cited data that compared the large increase in U. S. government payrolls after the 2001 recession to the decline of 650,000 government jobs after 2008.
AS central banks seek to promote healthy economies, she said a sharpened focus on financial stability would play a key role. Yellen did not comment on U. S. monetary policy, specifically, but said central banks globally would need to normalize policy as economic activity and inflation return to normal. The timing and speed of policy normalization will vary across countries, Yellen added, and could lead to financial volatility.’

This post was published at Acting-Man on November 7, 2014.


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