The nation’s pre-eminent central planners just held their annual gathering at an exclusive resort just outside Jackson Hole, Wyoming and discussed how to interfere even more deeply in markets. In a speech entitled ‘The Federal Reserve’s Monetary Policy Toolkit: Past, Present and Future,’ Fed chair Janet Yellen outlined why zero interest rate policy (ZIRP), purchases of toxic mortgage securities, and monetization of Treasury debt just aren’t adequate. Officials must add negative interest rates (NIRP) and purchases of even more sketchy assets to their ‘toolkit.’
Yellen has spent more than a year floating the idea of negative rates, so it is no surprise she is hustling the ludicrous policy once again. In fact, very little of what she said Friday is new. It was the usual mess of contradictions.
She started with a familiar trope about the economy being close to escape velocity. The Fed chair said she expects to wind down stimulus soon. She then followed by admitting the Fed is currently in a lousy position for handling the next crisis or downturn. Given interest rates are already near zero, officials would need to push them into negative territory. And they should consider buying other types of assets.
We also know from prior statements that Yellen views ‘helicopter money’ is a legitimate tool, an extreme measure which entails printing money and dropping it directly into the hands of consumers.
This post was published at GoldSeek on 30 August 2016.
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