Janet Yellen reaffirms commitment to QE tapering despite poor labor market

The tapering of the $85 billion quantitative easing is here to stay?

Speaking to lawmakers on the House Financial Services Committee on Tuesday, new Federal Reserve Chair Janet Yellen reaffirmed her commitment to her predecessor’s, Ben Bernanke, monetary policy strategy, including the tapering of the bond-buying initiative.

Yellen confirmed that she would not make any sudden abrupt changes to United States monetary policy and to continue winding down the monthly stimulus, though she did note that the U.S. labor market recovery is still “far from complete.”

The new Fed head stated that she still supports Bernanke’s approach, which she helped build when she was the central bank’s vice-chair. Under Bernanke’s two terms, the central bank grew its balance sheet to more than $4 trillion and it is expected to hit $6 trillion in the next few years. Under Yellen, the Fed will now purchase $65 billion in Treasuries and mortgage bonds each month in an attempt to maintain low borrowing costs across the national economy and to encourage investment and hiring in the private sector.

Despite the influx of negative economic data, Yellen alluded Monday of the uptake in business and consumer spending. She also recognized the Fed’s regulatory responsibilities. “The work of making the financial system more robust has not yet been completed,” said Yellen.

Due to the paucity of intensive job growth and the crisis occurring in the emerging markets, Yellen confirmed that the Fed is watching the market volatility quite closely. Many argue that this hit to the market could hinder future plans for the Fed.

“Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook,” she added. “We will, of course, continue to monitor the situation.”

Fed critics argue that the Fed will likely increase QE in the future because the U.S. stock market and parts of the global economy rely on the monthly injection of stimulus. Peter Schiff, president of Euro Pacific Capital, has mentioned this numerous times since the summer, when it was believed the Fed would begin to taper.

“What is Janet Yellen going to do to try to revive the economy? There’s only one thing she can do, and that’s print even more money,” explained Schiff.

In the end, whatever the case may be regarding QE, it can be agreed upon that it has been a “complete failure.”

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Comments

  1. There is no connection between Q E and GDP. FRN’s issued on computers provide financing for consumption by its recipients in whatever they wish like Wars, off budget expenditures , Monetization. But they do not create any economic activity, which usually precedes earning an income with which to consume. When you eliminate the economic activity you just wind up with inflation , a tax upon against the lowest wage earners. And the wealthy buying gold to protect themselves from a collapse of the dollar.

    Att the time of a collapse The dollar will have completed being dethroned as the world’s de facto currency. Foreign investors and central banks no longer have any use for dollars. They have sent them back to the United States whence they came. Trillions of them have returned to our shores like a huge flock of homing pigeons that fills the sky from horizon to horizon. They are buying our refrigerators, automobiles, computers, airplanes, cargo ships, armored tanks, office buildings, factories, real estate—pushing prices to levels that would have seemed impossible a year ago. A single postage stamp costs as many dollars as once would have purchased a new TV set.
    Most stores have stopped accepting checks and credit cards. Workers are paid daily with bundles of paper money. People rush to the stores to purchase groceries before prices rise even further. Commerce is paralyzed.

  2. Bank loans and mortgages are unobtainable. Savings accounts have been destroyed, including the cash values of insurance policies. Factories are shutting down. Businesses are closing their doors. Barter is commonplace. Old silver coins come out of private hoards and a hundred-dollar bill is exchanged for one silver dime.
    Following the crash of 1929, the supply of paper money was limited because it was backed by silver, and the amount of silver itself was limited. Those who had money were able to buy up the assets of those who did not. Since prices were falling, the longer they held on to their dollars, the more they could buy. Now, things are exactly the opposite. There is nothing to back the money supply except politics. There is no limit to the amount of currency that can be created. It is just a question of printing and delivering it. Money is abundant, and prices are rising. Those who have money are spending it as soon as possible to prevent further loss of purchasing power. In the 1930s, everyone wanted dollars. Now, everyone wants to get rid of them.
    The Emergency Banking Regulation No. 1, originally issued in 1961, empowered the Secretary of the Treasury—without consent of Congress—to seize anyone’s bank account, savings account, or safe-deposit box. It also gave him the power to fix rents, prices, salaries, and hourly wages, and to impose rationing. This was to be done “in the event of attack on the United States.” That phrase now has been changed to read: “in the event of national emergency.” The Federal Emergency Management Agency (FEMA) has been expanded to administer the directives of the Treasury. FEMA also has the power to detain and forcibly relocate any citizen “in the event of a national emergency.”

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