But anyone who looks past the rosy rhetoric can see that the economy is currently in one of its weakest periods in years. No one wants to look at that possibility squarely in the mouth.Ģ015 was supposed to be the year in which all the strands came together to create a real recovery, an environment in which rate hikes would be a certainty. But such a straightforward understanding should have led us to conclude that the economy is stalling. The more audacious it becomes, the more we applaud.ĭespite the removal of a single word (that prompted the Wall Street Journal to headline its lead story that rate hikes were put into play), there were far more indications, contained in the Fed statement, or spoken by Yellen herself at the subsequent press conference, that should lead us to conclude that increases are far less likely now than they were before the statement was issued. The act should have grown stale years ago, but we have come to crave the pantomime. Sound tough, set benchmarks, and then back away when crunch time seems nigh. This is a game that they have been playing for the better part of six years. If the removal of the word 'patient' did not move the Fed closer to raising interest rates for the first time in nine years, then why remove it at all? Why take a step forward if you are also taking a step back? It makes sense only if you believe, as I do, that the Fed is far more concerned with maintaining the illusion that rate increases are possible, when it knows that they are extremely unlikely. While this may be the way to win friends and influence people on Wall Street, it's no way to finally put the economy back on the path to a sustainable recovery. Stocks, bonds, gold, foreign currencies, all went up when Yellen took to the podium.
Never has the financial world enjoyed a lie so thoroughly.īy simultaneously claiming to be both aggressive and defensive, and to be moving forward even while standing still, Yellen positioned the Fed as being all things to all people, thereby igniting a rally in all asset classes at the same time. Janet Yellen channels Billy Flynn (of old Razzle Dazzle fame)? Last week the Fed Chairwoman treated us to a master class of rhetorical misdirection which produced some memorable examples of doublespeak, including the soon to be classic "Just because we removed the word 'patient' does not mean we're going to be 'impatient."' But perhaps more surprising than her new heights of verbal dexterity was the market's euphoria at being so blatantly manipulated.
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