Yellen is an incompetent ideologue. I studied applied economics in university, and the first code I wrote for a real application were inflation simulations. When she and the Fed made the claim a few years ago that "inflation was transitory" I ended up calling several of my smartest classmates. It was a nice excuse to reconnect, and universally all of us were asking what she was smoking.
It wasn't just us. Larry Summers was prominently and publicly stating that the inflation was definitely not transitory. But the banks believed her, and continued in 2021 to buy these securities as if interest rates were going to be going low again in the near future.
> But the banks believed her, and continued in 2021 to buy these securities as if interest rates were going to be going low again in the near future.
The banks most certainly didn't believe her. The banks rightfully took it as a signal that the US gov would step in to cut losses if banks continued to loan. The Fed wanted banks to continue to loan so they didn't grind the overall economy to a halt instantly and send us into stagflation.
But everyone knew it would happen. The Fed knew they were playing a losing strategy. And they still know it. But they refuse to play the strategy that would win the inflation game because it would bankrupt the country.
The only way out now is through severe tax hikes + gov spending cuts OR war with China in the hope to reset debt at its conclusion. The political elite seem to be signaling the latter.
Have you considered the hypothesis that she is competent and was lying and/or bullshitting?
Hypothetically, if I ran a government that was engaged in geopolitical competition, I wouldn't want people to tell the truth to my detriment when alternatives could be gotten away with.
It's too depressing for me to take that hypothesis.
It's far easier for me to believe that Yellen is a deeply intelligent and talented economist who lacked the ability to protect her cognitive processes from optimism bias. People think that when you say incompetent you are saying they aren't intelligent enough for the job. I think she was temperamentally unfit. I want people in the Federal reserve that don't care at all if they get invited to cocktail parties or get job offers. I want them to be people who don't mind being hated by everyone.
I want Paul fucking Volcker level of tolerance to everybody hating you.
All that being said, the thing that undermines my desire to not believe your theory is that she made the terrible mistake of going straight to work for the Biden administration from the Fed. Even if this was done for noble reasons it just makes the Federal Reserve look partisan which is a really bad place for it to be.
> Yellen is an incompetent ideologue. I studied applied economics in university, and the first code I wrote for a real application were inflation simulations.
Damn if only the US government could find someone with credentials as strong as yours
That's the point. I don't think I'm qualified for the job, and yet it was obvious inflation wasn't transitory. The fundamental drivers with money supply and in particular, velocity, pointed this out clearly. A quick look at travel statistics in summer 2021 made it clear that a majority of the public was returning to pre-pandemic spending habits. She clearly isn't qualified, and simply failed upward into working for the administration. You don't have to look hard, far, or even outside of Democratic affiliated economists to find those who were far more accurate than the Fed, including the aforementioned Larry Summers, or Steven Rattner.
Your welcome to be critical of my statement, but where's your criticism of the people being paid high salaries in positions of power who utterly failed to react in a timely manner (when many many economists with tons of credentials were telling them to) and have now forced us into a worse situation?
I think your statement is dumb. Inflation was exacerbated by a large war in 2022 that sparked an energy crisis. Failing to acknowledge that is just naive.
You don't win any points for saying X is inevitable when X is occurs for reasons completely outside your expected scope. That's just luck.
Those were definitely drivers for the inflationary spiral in consumer goods, but we've had massive inflation for a long time; ever since QE started. It's just that the inflation has been relatively hidden in speculative assets (homes, equities, crypto).
The parent is correct in their assessments of the market and the transitory inflation. TBT and TTT were no brainers at the start of the transitory dialogue because everyone knew it wasn't.
You're on point here. Your analysis will be wasted on the dunning-kruger comment you're replying to.
Apparently Larry Summers, probably the greatest living former treasury secretary and architect of the only balanced budget in my lifetime, was "lucky".
It's absolutely not luck and you are betraying an ideological point of view. It's obvious you never studied economics and you're just sitting here parroting partisan talking points. Anyone with common sense is aware of the Ukraine invasion being inflationary on European energy supplies, and knock down effects on things such as grains and fertilizers and other commodities. But those of us with a background who understand the dynamics of inflation knew this in 2021 long before Putin invaded. It's simple math:
Inflation is a product of money supply and monetary velocity. Money supply was already grossly inflated and monetary velocity was quickly gaining steam as the vaccine was rolled out.
You should ask yourself if you have any idea what you're talking about before adopting a negative tone in the future. Frankly it personifies Dunning Kruger arrogance to attribute a simple mathematical prediction shared widely by experts to luck. Projecting your utter lack of expertise on this topic on to everyone else is ridiculous.
Ok, and I think you're "betraying an ideological point of view" when you agree there was a major inflationary force so large that "anyone with common sense" is aware of it, but fail to do the elementary math that if you had inflation X with a major inflationary event; then in the absence of the major inflationary event, inflation would almost certainly have been a lot lower. Imo, to the point of being negligible.
The price of energy is a fundamental input to the global economy. When the price of energy goes up, the price of everything goes up as a supply shock. I don't think you're a dumbass for thinking otherwise. I do think you're a dumbass for asserting whatever this mess of a post is.
Citing "a simple mathematical prediction shared widely by experts to luck" is pretty dumb as well. Economists are hardly a uniform entity. Do you truly believe I could not find an equal army of qualified experts with differing mathematical predictions?
Circling back to you think you're more qualified than Yellen, mr kroog. Look out. Bachelor of Science in economics over here. this guy wrote code!
It wasn't just us. Larry Summers was prominently and publicly stating that the inflation was definitely not transitory. But the banks believed her, and continued in 2021 to buy these securities as if interest rates were going to be going low again in the near future.