Deconstructing Fed Chair Janet Yellen on Unemployment and the Unemployed

Gerald Epstein, of the Political Economy Research Institute (PERI), interviewed by Jessica Desvarieux of the Real News Network:

Lambert here: I have to say that Epstein’s comments seem a little mild to me. The seventy-five cent word hysteresis escaped from the labs at NEBR into the mainstream discourse at about the time its operational definition did, when having been disemployed became a pretext for employment discrimination, meaning that if you don’t already have a job you can’t get hired. Whoa, how very meta! Anyhow, I would have liked to see some table pounding and shouting about pseudo-scientific constructs like the “Natural Rate of Unemployment” — what’s “natural” about it? — or a heartfelt plea for a well-funded study to find out how the permanently disemployed actually eat, and find shelter, and stay alive — System D? — or even a dim recognition that regulating the economy by throwing people out of work is just as barbaric and inhumane as the medieval remedy of bloodletting. None of that here, though, sadly; an early indicator that nothing much will come from the Fed on disemployment, and how could it? Aggregate demand isn’t in their remit. So to the interview. These portions caught my eye.

* * *

DESVARIEUX: So, Gerry, last week, Janet Yellen, Fed chair, she had a conference and gave a speech at Jackson Hole, Wyoming. First of all, let us know what is the significance of this conference.

EPSTEIN: … This year was a little different in several respects. Typically in the past the Federal Reserve has been inviting a lot of investment bankers and financial market economists to come and get inside information and hobnob with the glitterati, and it’s become a real kind of club-building exercise for the in crowd versus the out crowd. This year’s a little different. Janet Yellen and the Fed people didn’t invite so many investment bankers. Instead, they invited a bunch of labor economists, which was a big change.

Readers will correct me if I’m wrong, but in terms of club-building, it’s my impression that labor economists are pretty low on the academic totem pole; this is like inviting a bunch of engineers to a conference on string theory (“Say, prof, you’re trying to push it!”). That said, it would have been more than a “little different” had the Fed invited some actual union representatives to the table, like those whacky Germans do.

DESVARIEUX: And what did she actually say?

EPSTEIN: Well, the topic of the conference was about the job market and what’s going on, why is unemployment still so high, what does it mean for monetary policy.

Profits are up. Wages are flat. The rich are richer than ever. What’s not to like? Nobody gives consideration to the great unmentionable: Disemployment is where it is because that’s the preferred policy option of elites by default. Given that the Fed is only getting round to bringing in second-tier academics and talking about it six years after Lehman Brothers, it’s certainly the most obvious assumption that things like shoveling trillions to the banks are “have-to-haves,” and things like millions of people out of work are “nice-to-haves,” handled only when the important stuff is out of the way. (I know, I know, the eternal question: Are they stupid, or evil?) And did we really have to wait for a change in Fed leadership to get a change in agenda? My Kremlinology says no; if the issue was important to elites, Bernanke would have given it attention. Back to the interview.

EPSTEIN: And this is important in a number of respects. First of all, the Federal Reserve has a dual mandate. One of the objectives is supposed to be price stability. The other objective is supposed to be maximum employment. Now, central bankers at that Fed typically have kind of ignored the employment mandate and they haven’t paid all that much attention to it.

But Janet Yellen has made this a big focus of her objectives. And so I think it’s significant that they devoted the entire conference to a discussion of what’s going on in the labor market. That’s very positive, and that’s something that I think central bankers in other parts of the world should pay attention to rather than just focusing entirely on price stability and low inflation.

Words are wind, leaving aside the amazing throwaway that they don’t know “what’s going on in the labor market.” How can they not know? That is, only policy outcomes matter. “Attention,” “focus,” “discussion,” (and dashboards) don’t matter. Yellen could “focus” on disemployment, decide that 6% was the “new normal” “natural” rate of unemployment, and move the discussion along to other, more interesting topics. And why would that be surprising?

DESVARIEUX: But, Gerry, if you had to be critical, would you say that she left out certain things? What didn’t she say, essentially?

EPSTEIN: Well, so I just told you what I thought the good news was, but there’s some bad news in what happened at this conference and in particular Janet Yellen was talking about. …

[I]n talking about the state of the unemployment, she gave very mixed signals. She was saying that, well, maybe we have all these structural factors in the economy that explain why unemployment is so high, and perhaps there’s not all that much more that monetary policy can do on its own to reduce unemployment.

Why accept/assume/concede that monetary policy has done anything to reduce unemployment? Readers will correct me, and Yves will probably whack me with her shooting stick for talking about finance on a weekday, but my understanding is that at the end of the day all the Fed is doing, and all it can do, is manipulate interest rates, that right now they are keeping them low, and that the only real effect of that policy is to suck money into the U.S. stock market, because that’s the only place where there’s even a promise of a return (unless you want to play the ponies with private equity or hedge funds). There is a presumed, cargo cultish effect that when interest rates are low, businesses will borrow money and invest it, and some of that investment will “trickle down” to people who need jobs; that is, the the “loanable funds” fallacy. I somehow got some Silicon Vally founders on my Twitter feed, and whatever drives those guys, how much it costs to borrow money is way down on the list, like at number one million.

EPSTEIN: Now, to some extent there’s some truth to what she said. That is, there have been a lot of factors going on in the U.S. and the global economy in the last 15 or 20 years that has undermined the employment and wage picture for American workers. But instead of talking about a variety of tools and a variety of things that the central bank could do to try to address the employment problem, she basically said, well, it’s very complicated and we’re not sure where the picture’s taking us.

But I’m not sure the Epstein’s posited “variety of tools” is there for the Fed, short of taking a whack at the aggregate demand problem by sending every American a huge honkin’ check in the mail, instead of just banksters, and I don’t know if the Fed even has the power to do that. So it could be that “It’s complicated” — that would be Janet Yellen’s relationship with the economy on her Facebook page — is really Yellen’s way of saying “Sorry! Can’t do a thing.” And correctly.

DESVARIEUX: What could they do, Gerry?

EPSTEIN: Well, when the financial crisis hit, the central bank, the Federal Reserve, created about ten to 15 new tools of policy to try to bail out the banks.

I’d call them forms of obfuscation, not “tools.” In fact, there was only one tool: What James Galbraith, IIRC, called the largest upward transfer of wealth in world history.

EPSTEIN:And while it’s a very good thing that they devoted this conference and a lot of research to trying to figure out what’s going on with the labor market, they need to do a lot more research and devote a lot more attention into what other kinds of tools the central bank can use to generate more and better employment.

Hmmm. “A lot more research” sounds like an academic program, not a policy option. The uncharitable might go so far as to call it temporizing.

So, for example, my colleagues here at PERI, Bob Pollin and others, have talked about loan guarantees, asset-based reserve requirements, various kinds of credit lines, and so forth for institutions that are trying to generate more and better jobs to create infrastructure, make the green transition to a fossil [fuel] free economy, and so forth. The Federal Reserve isn’t even talking about these kinds of expanded tools of monetary policy to deal with unemployment. They should do that just as they developed a whole bunch of new tools to deal with the financial crisis. So those are some examples, I think, of what Janet Yellen should have been talking about before going flyfishing at Jackson Hole.

Hmmm. Again, to my simple mind, “loan guarantees,” “reserve requirements,” and “credit lines” all seem like complicated variations on the loanable funds fallacy, to me. (They also assume that people would regard the banks as good faith actors, as opposed to randomly thrashing uber-predators that you should run a mile to avoid. But I digress.) Couldn’t we keep it simple, and ask the Fed to throw up their collective hands, admit they don’t have the “tools” to do anything about today’s unemployement, and ask Janet Yellen to make a speech saying “Only fiscal policy can help, so we need plenty of deficit spending”? (#MintTheCoin is probably a bridge too far for Yellen and Epstein, both.) And while we’re at it, does it seem a little weird to you that we’d be asking the Fed to assist in the transition to a green economy instead of, say, an elected branch of government?

UPDATE I should add that I don’t want to be too snarkly about labor economists; there are many of “the econ” far more snark-worthy than they! We do but jest, poison in jest….

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


      1. OpenThePodBayDoorsHAL

        People take a lot of time trying to impute some kind of connection between Fed-think and reality. But when the Fed talks about “the natural rate of interest declining”…I mean how delusional can you get? It’s like the butcher with his thumb on the scale telling you that “the natural weight of hamburger is going down”. Twice in the last month we went > 48 hours without a *single* bid for Japanese 10-year gov’t bonds, other than the issuer themselves. Stocks go up every day in utterly one-sided trade. There are no more markets and the Fed certainly knows it. Parsing what they may say about employment is like analyzing the formulae of the priests in Galileo’s day…proving that the Earth is the center of the universe.

      2. Hugo Stiglitz

        Excellent snark indeed. But did you have to insult “randomly thrashing uber-predators that you should run a mile to avoid” by comparing them to banks? That was just cruel.

  1. ambrit

    “..asking the Fed to assist in the transition to a green economy instead of, say, an elected branch of government?”
    Perhaps this is so because the Fed is the only governmental actor being seen to be doing anything “positive” at all. (We can argue about the positive part, but they are doing something that they claim is positive. Positive for banks, it surely is. As for the rest of us…)
    In this war of perceptions, the Fed is winning. (I almost typed ‘delusions’ but thought better of it. That would be an oxymoron on so many levels.)
    The other takeaway from this for me is how quickly the bureaucratic imperative subsumes those who engage with it. This is the Janet Yellen we all had so much hope for scant months ago.
    When the talking heads start nattering about “new tools” for the Fed, or the Executive, I have to laugh and ask; “Haven’t any of these Nimrods dusted off some of the policy reports from the FDR years?” Thay faced an equally daunting challenge and muddled through. That history alone should give anyone with two brain cells to rub together enough evidence to shorten the search for a way out of todays mess by years.
    This bunch aren’t just trying to reinvent the wheel. They’re trying to figure out why a square doesn’t work as a wheel. All their pet theories say that wheels should be square. It didn’t work. Now they’re looking for ‘modified squares’ to try the experiment again. If you tell them that they are part of a big circle jerk, they still don’t get it.
    Heaven help us!

    1. diptherio

      I think you’ve got it. Everyone knows Congress is good-for-nada when it comes to actually doing things in a timely manner, so they turn to the “independent” Fed to save us. The unspoken line of thought goes like this: Well, if our democratic institutions have failed us, maybe the unaccountable institutions will come to the rescue.

      It’s ridiculous in the extreme, from my point of view. But the fact is (and I’m not judging here, just saying) that Epstein and others at PERI are comfortably employed and, one assumes, middle class. Hell, they might even have a decent retirement package, working at PERI and all. In other words, they themselves are not the ones who are personally feeling the pain from our continuing un/underemployment disaster. Like I said, this isn’t to judge, but to point out a fact of human psychology: problems that do not immediately effect an individual often seem less urgent to said individual than to those who are directly effected.

      If this weren’t the case, we’d have a real hard time functioning at all, what with all the terrible news from all over the world we are continually bombarded with. But the down side is that it’s real easy, if you happen to be a little bit insulated, to not feel the same sense of urgency in addressing problems as those who are directly effected. Hence, it’s easy to recommend “more study” when the problem doesn’t have anything to do with books or reports but with food, shelter and self-respect. Easy too, to think that you are actually helping people by recommending “study” to address material problems.

      “More study,” of course, also has the great benefit of being a respectable thing to recommend–one needn’t worry about getting kicked out of the Very Serious People club. Recommending provision of food for the hungry, housing for the homeless and jobs providing these things to the unemployed, would be considered radical and “unrealistic.”

      1. cnchal

        Hell, they might even have a decent retirement package, working at PERI and all.

        Where does one find these pension returns to provide for a decent retirement package?

        The stock market yard. Where all the money is getting fattened up from extra grain in the feeding trough, just in time for the slaughterhouse.

    2. diptherio

      In defense of modified squares

      We know that wheels are supposed to be round, we’re not stupid. But the math was way too hard when we tried to model a wheel using a circle, so we made a few simplifying assumptions and discovered that you could model a wheel with a square just as well as with a circle. Some protested, but we pointed out that all science is simplification on some level and that anyway, what mattered was the results of the model, not the assumptions.

      In fact, it wasn’t our simplified square wheel model that turned out to be the problem–it was that we had assumed roads to have this profile /\/\/\/\/\/\ instead of this one ______________ . If roads were constructed in the former manner, our square wheel model would have worked just as well in reality as it does in theory. That is why we are now encouraging the construction of /\/\/\/\ roads in the future. We are sure that everyone will see the great wisdom in this.

      ~The Economists

      1. ambrit

        We’ve just come back from several hours of driving and haven’t seen any work progressing on the /\/\/\/\ road pattern yet. I realize that the South isn’t exactly a paragon of forward thinking, but at least some pilot projects should be running. It is Federal funds in the main. The problem, as we saw it, or, to be more accurate, did not see it, was that the deadlock at the State level has slowed the DOT projects transiting the pipeline to a trickle. Phyl suggested that we get the Pentagon to start using the New Improved wheels on Hummvees and 4X6s. That would start the ball, er, rolling.

  2. John

    “….medieval remedy of bloodletting”
    Actually, that already happens and occurs regularly. Just ask the folks of Ferguson.

    What seems soooo remarkable to me is the USA just had their own version of a summer uprising known as Ferguson and yet we still get mystic talk from economists feeling good about themselves.

    Unpacking the situation in Ferguson epitomized the dire straights the US is in. It had race, inequality, unaccountable militarized police force, injustice system, unemployment, white flight, predatory lenders, white oligarch run media, clueless feds, redlining, clueless congress, etc… all wrapped into one Midwest suburb fireball that exploded.

    Any solid action plans from the Feds to improve the climate? Not a chance. We still have “signals” — kinda like in Roman times when forts alerted neighboring forts with smoke signals to situations on the ground. Visual queues are so important.

  3. Jim Haygood

    ‘Couldn’t we keep it simple, and ask the Fed to throw up their collective hands, admit they don’t have the “tools” to do anything about today’s unemployment.’

    It would be a good start, that’s for sure.

    Even better would be to ditch the dual mandate. Make the Fed (if we can’t just abolish it outright) responsible only for price stability, while turning over economic manipulation to the political process.

  4. beene

    Come on people, the Federal Reserve has given us the most extractive money system known to man, plus protecting the value of the dollar which was worth 100 pennies on the dollar when the Federal Reserve took control, now worth 2 cents on the dollar.

  5. roadrider

    Well as someone who has been out of work 3 times in the past ten years including the past 13 months and is now probably among the permanently disemployed in the Obama/Democratic neoliberal dystopia I have to say that this post confirms all my worst fears. There seems to be no hope that the clueless, incompetent “elites” who are steering the ship even understand the currents, winds or the stars by which they purport to be navigating.

  6. Ed

    Peak oil translates to no economic growth. When economies grow, new cheap sources of energy are not available to top into, so energy prices rise, choking off economic growth, after which energy prices fall due to lack of demand. Climate change probably mean economic growth is dangerous anyway.

    Technology allows machines to do the work that human workers used to do. More workers maybe hired initially to implement the new tech, but the overall trend is to reduce the need for human workers. This does not mean that capital is then redeployed to create new areas of the economy with new jobs because to do that you need economic growth. Which you can’t have. But you need less labor for the same amount of production.

    I have no idea what this has to do with the Fed, but no lowering the costs of borrowing will at best enable businesses to borrow to implement labor saving technology.

    For those without jobs, which are coming close to making up a majority of adults in the US, the policy options are to kill them (that is what Stalin did), make work or make workfare, or welfare (or some sort of guaranteed income). My bet is that make work will be tried first, since its best suited to existing institutions.

    1. Lambert Strether Post author

      Do we have any economic historians in the house? Because:

      “enable businesses to borrow to implement labor saving technology” is an interesting point.

      I wonder if the “loanable funds theory” actually worked in the, er, antebellum south?

    2. MyLessThanPrimeBeef

      Everyone should have health care, in order to live, working or unemployed.

      Everyone should be able to have a decent life, working or unemployed. That means, the ability to live with dignity should be disconnected from employment.

      Then we perhaps can liberate ourselves from ‘the economy must grow’ tyranny.

      1. Auburn Parks

        The economy must grow as long as the population grows and as long as the third world countries continue to progress to modernity.

        But just because the economy (the number of transactions) grows, doesn’t mean real resource use must be unsustainable.

  7. Petey

    “Couldn’t we keep it simple, and ask the Fed to throw up their collective hands, admit they don’t have the “tools” to do anything about today’s unemployement, and ask Janet Yellen to make a speech saying “Only fiscal policy can help, so we need plenty of deficit spending”?

    FWIW, Ben Bernanke said something similar in every single one of his post-Lehman Congressional testimonies, as well as in other contexts. He explicitly requested fiscal help every time he was in front of Congress. And, of course, this did nothing to affect policymakers.

    I tend to agree that the Fed can’t really push on the string to accomplish much in a ZLB environment, but it can do damage by raising rates to slay non-existent inflation dragons. And give Yellen her due in saying that she wants to see wage increases before she’s interested in raising rates.

    In short, SNAFU. But the problem is the Obama administration’s disgraceful performance during the progressive 111th Congress in not using reconciliation to enact meaningful stimulus with 50 votes in the Senate, the Obama administration’s disgraceful performance during the non-progressive 112th Congress in agreeing to be blackmailed into sequestration, and the psychotic mindset of the GOP.

    The Fed may not be able to do very much, other than not causing further damage, but Bernanke and Yellen have performed acceptably given how little power they have to do good in a ZLB environment. (One could certainly argue that a higher inflation target would be helpful, and perhaps the only really helpful thing the Fed can do, but I wonder if either Fed chair would have been able to get the votes for such a measure, not to mention whether or not they could have actually produced higher inflation, which is easier said than done in the current environment.)

    1. MRW

      @Petey, you wrote:

      He explicitly requested fiscal help every time he was in front of Congress. And, of course, this did nothing to affect policymakers.

      Yes, he did. I remember hearing him say that. Here’s the problem, Petey. The people elected to Congress don’t know what the hell “fiscal policy” is. In fact, I don’t know two people in my circle of friends–admittedly small circle–who know what fiscal policy means. Really. so the American people don’t know that’s their job.

      Why can’t these Fed Chairmen talk plain English? Marriner Eccles and Beardsley Ruml could. Why can’t these Fed Chairmen say flat out: “It’s your constitutional duty to create jobs by spending. It’s your constitutional duty to create the jobs that will fix this economy by passing spending bills. Where else are they going to come from? Businesses can’t do it because businesses will only hire or spend when they see sales. Creating meaningful spending bills is called fiscal policy and it’s your job, your constitutional duty, to do this to get America back to work. Only Congress can appropriate these funds.”

      And then when the bitching and moaning about the deficit comes up, they can educate these congressional ignoramuses about the deficit and stimulus.

      1. bh2

        “It’s your constitutional duty to create jobs by spending. It’s your constitutional duty to create the jobs that will fix this economy by passing spending bills.”

        This has been unsaid because it is untrue. Duties levied on government by the US Constitution do not include creating jobs by way of spending bills or any other means.

    2. Whine Country

      Times like this I try to keep focus on coping and that means finding humor in what you can. Do you think that Bernanke might have really been on to something when he talked about the helicopter idea? Somehow I don’t see how he was talking about getting money to banks. Who heeds a helicopter to do that? I thought he meant he was going to drop it down for all of us to spend (here’s your aggregate demand folks!) Anyone remember the movie “The Magic Christian”. How could one forget that ending? Hey, There’s Something In The Air. I thought that Helicopter Ben had something like that in mind. Unfortunately, when Helicopter Ben was finally corrupted by the DC crowd, he morphed into Electronic Transfer Ben and us poor folks were not able to hook up to the trough.

    3. Yves Smith

      Those speeches before Congress are set pieces where Congresscritters try to get good soundbites for their constituents. Only once in a while do you have someone like Elizabeth Warren use the time well to surface issues that matter. So everyone knows that these are ritualized affairs with little real meaning.

      If Bernanke had been serious about deficit spending, he would have made one of those speeches that he gives periodically largely about the need for deficit spending. That would have gotten play in the financial media, meaning the conservative business crowd, which was the group you needed to bring aboard or at least neutralize.

      The fact that he didn’t go broader with this message (and NO Fed presidents did either) meant the Fed never pushed it and Congress understood that. A few limp-wristed remarks at Congressional sessions were merely to deflect Congresscritters from their pet issues and to have plausible deniability later.

      1. MRW


        Marriner Eccles did. From the LA Times, 2009:

        On March 6, 1935, the head of the Federal Reserve, Marriner Eccles, issued a stern warning to Roosevelt: Given the “totally inadequate” amount of money that the administration was prepared to spend to jump-start the economy, there was no reason “to expect any substantial improvement.”

        Eccles, a self-described “child of the Republican Party,” then sounded a prophetic note: “If we spend some every year, but not sufficient to give the required stimulus to private expenditures, we can build up a large debt and still not be out of the Depression.” Thus, Eccles suggested, “the safest policy is the boldest policy.”
        Eccles entered the national spotlight in early 1933, when he testified before the Senate Finance Committee as a private citizen. There, he deemed it “incomprehensible” that Americans continued to suffer from an economic collapse that the federal government could surely end.

        Beardsley Ruml gave a speech in 1946 called Taxes For Revenue Are Obsolete. He gave this talk before the American Bankers Association. The original publication in American Affairs is here.

    4. Lambert Strether Post author

      “[T]he Obama administration’s disgraceful performance during the progressive 111th Congress in not using [1] reconciliation to enact meaningful stimulus with 50 votes in the Senate”

      Or [2] abolish the filibuster entirely.

      In 2009, the Dems had two ways to “perform,” and everybody inside the beltway knew what they were; all the technical details had been thoroughly thrashed out, in public and on the pages of WaPo, during the “nuclear option” fight between Reid and Frist in 2005 (see the link at [2]).

      So they didn’t, not because performing was impossible, but because they didn’t want to, showing that they’re not electorally responsive (which we always knew, but now there’s an authoritative study).

      1. jonboinAR

        The lack of cojones to abolish the filibuster is where that “progressive” Senate (if they ever were who they were made out to be, at all) you-know-what’d-it completely. It should have been obvious that the Re-thugs were going to show up ready to rumble. The Demo-chicken-shirts, spiritually following BHO, caved most cravenly. The rest, sadly, despairingly, horribly, is, as they say, history.

      2. Auburn Parks

        It is still my firmly held belief that the Dems didn’t do away with the filibuster because they wanted an excuse for why they weren’t passing more progressive policy. There really are only a few real progressives in Congress and none of them were in the leadership or white house. These are neo-liberal stooges to the core.

        Me: Why didn’t you pass a public option or medicare for all?
        Dems: because the mean old republicans wouldn’t let us. Send us money.

        When in reality its: 3 out of the top 5 political donor industries are in health care and dropping health care spending from 18% to 12% of GDP is the equivalent of $1 trillion a year in health care spending. Nobody is giving up that large a pool of money without a fight.

    5. Fiver

      The Fed paid lip service to ‘the need for fiscal spending’ already knowing neither Obama nor Congress was the least bit interested in taking on the responsibility required to keep Bernanke’s paws off the ‘unconventional policy’ printing lever that has yielded immense banking/financial gifting of many trillions along with the generalized explosion of asset prices we see all around us.

      The Greenspan/Bernanke/Yellen Fed’s last three times at bat (1995-1996) (1999-2003) and (2009-2014) add up to a whole generation of malinvestment, missed opportunities, speculative madness, and the ruinous financialization of corporate incentives of all kinds, leading to another whole array of bad choices often lethal to the corporation because short-termism rules the boardroom.

      These serial bubbles serve only to transfer wealth up the ladder while wreaking havoc on ordinary working people at ever-greater cost. Once the system was clearly stabilized, by late spring 2009, Bernanke should’ve sat on his hands, and refused to do anything that stupid ever again. But he did, and it’s even more stupid than his prior efforts. He should count himself lucky to not be in jail for criminal conspiracy to defraud the US Government, criminal negligence, and other serious charges.

  8. GlassHammer

    Do I have enough consumer demand to warrant expanding my labor power and the means of production?
    If yes: Then I expand outwards.
    If no: Thanks for the cheap money and cheap bonds but I have enough capacity to handle my customers demand.

    Why is it such a struggle to conceive of our current problems in this manner?
    And why is it so hard for us to grasp the connection between consumer income and consumer demand?

    1. Auburn Parks

      Because once you acknowledge that the problem and can really be that simple (cutting FICA or mailing checks), then the entire republican narrative of the last 34 years goes out the window.

      “Govt is not the solution, its the problem.”

      Except of course to a demand shortage induced recession and malaise.

  9. MRW

    Lambert, this was a great post. I agree with MikeNY at the top. Loved the snark and the accuracy. And your linked sources. If you and Joe are going to do your radio and TV spots like this in your current Kickstarter [oops, Indiegogo] project, then maybe people will listen. I much prefer this style of writing from you. Makes it easy and fun to read.

  10. steelhead23

    Lambert, When I read your post I couldn’t stop thinking of Marx’s maxims about unemployment.
    “The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour-army; during the periods of over-production and paroxysm, it holds its pretensions in check. Relative surplus population is therefore the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient to the activity of exploitation and to the domination of capital [12].”

    “It follows therefore that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. The law, finally, that always equilibrates the relative surplus population, or industrial reserve army, to the extent and energy of accumulation, this law rivets the labourer to capital more firmly than the wedges of Vulcan did Prometheus to the rock. It establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital [16].

    It took these quotes from Ismael Hossein-Zadeh’s fine article Keynes is Dead; Long Live Marx! in Counterpunch. I am not championing communism as we know it, merely pointing out that Karl Marx was an excellent student of Capitalism and 150 years ago, exposed its warts for all to see – and was remarkably prescient. It is sad that I seldom see his name here.

  11. susan the other

    Great comments Lambert. Why do we send Janet to solve public, political problems? I’ll cut her a little slack and say that it is because we have a totally dysfunctional form of government. Congress is a thousand times more ineffective than the Fed. So things are pretty bad.

  12. DHFabian

    It’s impossible to rebuild the middle class without addressing poverty. Consider: We looked at the policies and programs that were in place from FDR to Reagan, which took the US to its height of wealth and productivity, and chose to reverse course, doing the opposite. We deregulated corporations, and redistributed trillions of dollars upward, to the top. We know that few things are as dangerous to a government as a large enough chunk of the population that has nothing left to lose, no consequences to fear. Normally, when people royally screw up, they retrace their steps to see what went wrong, and then they fix it. I would suggest that the US do the same.

  13. Woody in Florida

    Wow…great post Lambert. Forces the reader to see the clear signals from the Fed that they either hoped that employment would magically start back up while they saved the bankster and Wall Street, or that they never really cared. Stupid or Evil? Even at my age (50), I still find it hard to get my head around the idea of someone being that cavalier with peoples lives, but maybe we just need to admit that there are more sociopaths (I believe that to be the term) among our elites than among the general population. I will not give them the benefit of considering them stupid/ignorant of the suffering around the world because of their actions.

    1. Auburn Parks

      Gresham’s dynamic. The sociopaths succeed and then they self select until the ranks of the elite are festering with immoral sociopaths. Especially the business elite, when it comes to making money, morality goes out the window. T

      1. cnchal

        The words money and morality, side by side. Don’t see that much anymore.

        The business elite teach there is no morality to money by telling us, that it is just so. I have heard people like Kevin O Leary flat out repeat over and over “there is no morality to money”. That not one similarly rich person has ever bucked O Leary confirms it. Yep there is no morality to money, it’s obviously unanimous among the rich, consent by silence.

        The sociopaths succeed and then they self select until the ranks of the elite are festering with immoral sociopaths.

        Words. What they mean depends on who’s talking.

        Sociopaths. Is a narcissist a sociopath?

  14. cnchal

    Hmmmm. Focus. What an interesting word.

    When you hear Yellen say ” focus people, focus” what does she really mean.

    It means fuck off cos ur stupid.

    Are they stupid, or evil? A surprising question that answers itself when one substitutes and for or.

    How can they not know? See line above. Willful ignorance could be another reason, or simply no one ever at the Fed has any first hand experience with unemployment. Yellen talking to three poor people, two of them with criminal records doesn’t count. Or, it is because they have been telling everyone else to focus.

  15. JMarco

    Hey! From a real pessimist:

    Janet and Fed bankers want Americans to think that they care about them. They are smart enough to know that they cannot create jobs or increase wages for Americans. They just want to be liked. Just like Pres. Obama, they will talk about the need for more jobs and better wages but that is as far as they will go….just talk.

    Soon Americans will elect Republicans to Pres. office and give them full control of Congress and Senate. Then Republicans will institute their brand of trickle down wealth by reducing federal income tax rates for individuals and corporations, eliminate estate tax, They will offset all these reductions to taxes with less Gov. spending in programs like Medicaid, Soc. Sec benefits and Medicare. Oh.. and the deficits that these policy will create will be designated as off budget just like when Pres. Bush called Gov. spending on Iraq war off budget spending.

    And why would Americans let the Republicans do this? Because most Americans prefer to live everyday being told that “Any American can do whatever they want… Anyone can be rich or get ahead if they work hard enough… Americans prefer an ideal world rather than the world they live in. Republicans are good at convincing Americans that ideal world is just around the corner. Gov. needs to let go of regulations so corp. America can expand and create new jobs. Americans have already forgot that when Pres. Bush left office the country was in deep recession and financial mess.

    If you don’t think Americans will accept and believe that these tax cuts will make their life better, just look at Europe where millions of people have accepted Euro policies that have resulted in 4 yrs of high unemployment and sputtering economies as best course for prosperity.

  16. JasonSimms

    In reality, asking for help from the Fed is a necessity right now, since there is hardly anything we can expect Congress or some other entity to do about it. Even if they have an effective action plan that can help control the situation, it will be of little or no value if not executed on time.

    And as far as Epstein and other officials at PERI are concerned, they are getting paid a great deal regardless of whether or not they are serious about unemployment and issues related to it. This is how it has been for a long, long time now and I am sure ti will continue to be like this for so many years to come.

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