Yellen’s Disingenuous Dollar Remarks
Janet Yellen is former Fed Chair and Biden’s nominee to be Treasury Secretary. At her confirmation hearing the WSJ reports Yellen to Make Clear U.S. Doesn’t Seek Weak Dollar.
Janet Yellen is expected to affirm the U.S.’s commitment to market-determined exchange rates when she testifies on Capitol Hill Tuesday, and she will make clear the U.S. doesn’t seek a weaker dollar for competitive advantage, according to Biden transition officials familiar with her hearing preparation.
Officials responsible for briefing Ms. Yellen said she is prepared to say, “The value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy.”
“The United States doesn’t seek a weaker currency to gain competitive advantage,” she is prepared to say, according to the officials. “We should oppose attempts by other countries to do so.”
Well La Dee Frickin Da
For starters, it is Fed policy and government fiscal policy that sets the tone for the US dollar.
Yellen can make whatever swiss cheese statements she wants but how would a central bank act if it wanted to sink the dollar?
Steps to Weaken a Currency
- Cut interest rates
- Engage in massive QE balance sheet expansion
- Pledge to keep rates low indefinitely
- Pledge to ignore inflation and let it run hot to make up for alleged undershooting
- Encouraging more fiscal stimulus
The Jerome Powell Fed is five for five on doing the very things that would cause the dollar to sink and Yellen supports all of them.
Other counties are doing many of the same things and if they weren’t the dollar would be dropping faster.
Regardless, please ignore her disingenuous, cheesy statements because actions speak louder than holes.
Short Tribute to Yellen
If you can stand 30 seconds of ads, this is a funny 5 minute Saturday Night Live skit.
Musical Tribute to 4 Fed Chairs Including Yellen
If you haven’t watched my video in entirety, please do so. Thanks.
Open Letter to the Fed
In an open letter to the Fed, I asked Powell a set of questions on inflation expectations, demographics, the Phillips Curve, and the CPI, all areas in which the Fed has made repeated errors.
Hello Jerome Powell, We Have Questions
My questions, sent directly to the Fed are of course unanswered.
Hello Jerome Powell, I ask again, instead of failed bubble-blowing tactics, how about some answers?
Mish
How’s Judy Shelton’s nomination going now?
How is a tidal wave of deflation not coming? Production is depressed and will be for years, debt overhang is monumental and growing monumentally, workforce participation is terrible, the next wave of layoffs, after service jobs, is just getting started, savings rate is up = demand is down, CRE got slammed and won’t be back. Second worse pandemic wave is a very real possibility. Did I mention the Dems buckle in tomorrow and will for the next 2 years raise taxes while increasing spending and regulations? How many days until Biden bravely announces a national lockdown, any takers? … Okay I feel better.
Production is mostly down because of supply side constraints, consumers have unusually (for a recession) have had mostly more disposable income. This seems set to continue with massive fiscal stimulus. A weakening dollar is pushing up prices and the Fed wants inflation. Will all this overcome the deflationary forces you mention, who knows?
Demand is down: personal savings rate is up, and millions of jobs are permanently gone.
Remember what I said about the Biden plan really being the Yellen/ Powell plan?
More evidence today in Ms. Yellen’s remarks.
As much as the dollar is flawed, what are the alternatives? The yuan is still pegged and has capital controls, euro has potential but shared by 19 sovereigns with no joint debt market, the pound belongs to an island country that still dreams about its empire, average age in Japan is 45 so yen is not the answer either. Bitcoin is subject to whims of government regulation, gold is not practical for day to day microtransactions and way too expensive for most people.
The UK uses migration as wage control. Rather than set the price of bread, the government sets the permitted wage of the baker. You can see here, all the “going rates” are below existing market wages.
IF there is one position that the UK population as a whole support, its a reduction in the level of immigration because of existing housing shortages and generally insufficient infrastructure. Should two million Hong Kong chinese turn up, where would they live?
Good article Mish.
“Cut interest rates
Engage in massive QE balance sheet expansion
Pledge to keep rates low indefinitely
Pledge to ignore inflation and let it run hot to make up for alleged undershooting
Encouraging more fiscal stimulus”
So which one do they reverse, if they are actually concerned that is? I’d guess QE, maybe more talk of a tapering timetable.
A question, with so much stuff sourced from China, what happens if:
Would that be an inflationary acceleration beyond that of just a weakening $?
Playing with fire.
One effect would be that we would stop sourcing so much from China. But don’t worry yourself unduly.
The Chinese central bank LOVES to debase the renminbi ….and with a command economy, they can more or less do it at will. They have every reason to keep doing it. Labor costs in China are going up, and the demographic pyramid is upside down now.
You can thank the Federal Reserve for this
You buy a stock, then it goes up (of course) and then you sell! LOL ! We now live in The Marvellous Land of OZ ….the FED being the wizzard
Powell put in full effect!
Lol! Wow!
A bug in search of a windshield.
Like, how do I make money at home, you guys? I, like, watch for bubble-top indicators? And, like, when I see them? I sell, sell, sell!
So@mish given Yellen’s appointment, are you going all in on stocks?
Already loaded loaded with gold, miners, and some illiquid private equity plays
We’re doing everything possible to kill USD. Everything except negative interest rates.
I think of it more in this way…..the dollar is so strong that it takes a sledgehammer to even tweak it lower…because the world has nothing but fiat, and it’s a race to the bottom for all major currencies.
Dollar strength is partly undeserved……because of the petrodollar….and because EM’s have loans denominated in dollars that create demand for dollars offshore.
But the dollar is also strong because the US has a large population and a very robust tax base….and we have a generation coming up that will keep the tax money coming….unlike many of our financial rivals.
If you look at debt/GDP, most countries are in same boat as we are…or close enough.
Australia is a major exception….but they have other problems. 🙂
Actually if you look at real rates vs. nominal rates. We are already negative.
auwriii’ then !…..give us 3% on the 10 year and next week the $ will be at par with the fckn but ever so strong Euro….. Manipulating fckn LIARS, all of them, arm-twisting ignorami into insanely overvalued shares and 2% junk bonds…..How do you spell DISASTER ?
Crickets. Hehehe.
I’m surprised you don’t get a form letter or something……
”Dear Mike,
Thanks so much for your comments. The Federal Reserve Board appreciates the input of concerned citizens like yourself. Enclosed, you will find a brochure that explains the role of the Fed in setting monetary policy and gives examples of how we work diligently to fulfill the dual mandate bestowed on us by the US Congress.”
Sincerely,
Jerome Powell
LMFAO!
I think..and I could certainly be way off…..but I think in terms more of what the Fed DOESN’T want…it isn’t so much that they think a weak dollar is necessary to balance trade….it’s more that they are worried about a super-strong dollar that keeps trying to blow out to the upside in spite of so much effort to prevent it.
And in spite of the evidence that might seem to indicate otherwise, they are acutely aware of the bubbles they’ve blown up….and like ducks, they appear to be sitting calmly while their feet are paddling up a storm just under the surface.
Extend and pretend…..it’s worked for a long time. It won’t work forever but if there is a plan B, they’d like to hold off on it as long as possible. They see themselves as a Machiavellian, but pragmatic band of money magicians.
I’d say that the “specter” of inflation is met at the Fed by a sigh of relief…..because the bubbles are in constant need of it to keep them from collapsing in ways that might negatively impact central bankers. The were worried…….now we have the helicopter money, which makes it easier.
I’d rather see stronger dollar. It’s good for inflation and give Americans greater purchasing power. Don’t know where interest rates should be other than much highe than where they are now. George w Bush had the right idea when he selected his firt treasury secretary Paul O’Neill who focused on fiscal prudence and wasn’t a creature of the banking system but that decision was short lived and deemed inappropriate after the financial system collapsed