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Yellen sticks to game plan at Jackson Hole

  • Debate at the Fed is "naturally shifting" to when the central bank should begin to hike interest rates, says Janet Yellen in her speech at Jackson Hole, as the economy is getting closer to full employment and stable inflation.
  • Nineteen labor market indicators tracked by the Fed suggest the decline in the headline unemployment rate overstates improvement in the labor market, she says. On the other hand, rate hikes could come sooner than expected should progress in employment pick up and/or inflation moves up at a speedier pace.
  • "The Committee will be closely monitoring incoming information on the labor market and inflation in determining the appropriate stance of monetary policy."
Comments (33)
  • T-time
    , contributor
    Comments (464) | Send Message
     
    Did she actually say these things or is this a recording from last time? Like a broken record!
    22 Aug 2014, 10:08 AM Reply Like
  • Left Banker
    , contributor
    Comments (2282) | Send Message
     
    t time:

     

    Why would you expect anything other than more of the same? Did you seriously think she was going to go to Jackson Hole and present a whole new outlook? This is so obviously Fed policy today that it's hard to believe anyone hasn't gotten the message yet.
    22 Aug 2014, 10:14 AM Reply Like
  • RM13
    , contributor
    Comments (910) | Send Message
     
    It's actually easy to predict - market showing weakness, look dovish; market stable, replay of last speech. Rinse and repeat to make BO look rosy.
    22 Aug 2014, 10:35 AM Reply Like
  • SEL333
    , contributor
    Comments (35) | Send Message
     
    I find all this hand wringing about whether rates go up in the first quarter or second quarter 2015 tiresome. I predict rates will go up before they go down. Invest accordingly.
    22 Aug 2014, 10:17 AM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (336) | Send Message
     
    Awesome :) Since Fed rate is effectively zero now, I'm confident you are right!
    22 Aug 2014, 11:32 AM Reply Like
  • steven russo
    , contributor
    Comments (192) | Send Message
     
    You are wrong Sir. We will see a 1 handle on the 10 year before we see 3%. I predict we double dip and touch the 2012-13 lows on the 10 year. It's unlikely that rates went that low just to catapault back up to "normal". We will double dip and retest the lows. Mark my word.
    22 Aug 2014, 04:09 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1145) | Send Message
     
    This is all just smoke and mirrors. The real reason for ZIRP is that the Federal government cannot afford the impact on the deficit should interest rates normalize. Aside from default or a massive tax increase, this condition is here to stay, and so is ZIRP.
    22 Aug 2014, 10:17 AM Reply Like
  • RM13
    , contributor
    Comments (910) | Send Message
     
    No it's not. US government can easily pay for increasing interest payments. Look at the math. It's frankly the tepid pace of economic and real estate recovery.
    22 Aug 2014, 10:37 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1145) | Send Message
     
    RM - Perhaps you can help me with the math?
    22 Aug 2014, 11:54 AM Reply Like
  • steven russo
    , contributor
    Comments (192) | Send Message
     
    As a rule of thumb the government can only have interest rates that are lower than GDP growth.
    22 Aug 2014, 04:10 PM Reply Like
  • Morrison Marketing
    , contributor
    Comments (107) | Send Message
     
    What RM13 means is that they can simply shift from tax to print.

     

    A true example of a rising interest rate will instantly bankrupt the Government, but they can print as long as they want and keep this bubble that most of these rich investors on SA live in going.

     

    Its getting closer and closer to ending, you guys have had ample warnings, yet this time is different, the people are awakening, but more importantly foreign investors are also.

     

    But hey, jobs are improving, gold is a horrible investment and inflation is 2%!
    24 Aug 2014, 11:33 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    There is NO REASON to raise rates and for Yellen to say we are near full employment is beyond laughable. The true unemployment rate is still double digits and there is no inflation.

     

    Other than those who have made bets (not investments) on rates rising why would any sane person want to raise rates? Raising rates slows economic activity, this economy does not need the brakes put on.
    22 Aug 2014, 10:29 AM Reply Like
  • RS055
    , contributor
    Comments (3160) | Send Message
     
    It is usually helpful to ask if the Fed's zero rate policy has produced any great distortions in the economy. Unproductive and unsustainable projects that are being funded simply because rates are low.
    I have one candidate. It might surprise you. Shale. I believe that the huge shale oil growth in the past 5 years has been mostly driven by stupid low junk bond yields. Shale wells have steep decline curves 50%+ - ie. the assets have a very short useful life ( 2-3 years) and there is a need to keep on doing CAPX simply to keep production flat. It all works when you can finance the CAPX at extremely low rates in the junk bond market.
    Now - this has created an illusion that we will soon be energy independent. And as a result, we have taken our eye off the ball in securing offshore resources and domestic alternatives and energy conservation.
    When the junk bond market reverts to normal - this whole thing could come to a grinding halt. And the cost to our nation could be very large - worse than the dot-com bubble or the real estate bust.
    22 Aug 2014, 12:04 PM Reply Like
  • RS055
    , contributor
    Comments (3160) | Send Message
     
    There are other distortions too. including cheap financing for the govt.
    basically ZIRP does have very high risks. Its like a crutch - if you use it for too many years, your leg muscles atrophy to the point where it becomes harder and harder to ever get back to normal. its OK if you plan to never get off crutches!
    So , if ZIRP can go on forever, then I suppose its OK. On the other hand if you think ZIRP will have to end some day, the the longer you have lived under ZIRP the more risks there will be that have built up under the surface and you have a very ugly situation when ZIRP ends.
    22 Aug 2014, 12:10 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    Shale oil growth is being funded by $100 oil and sustained by new drilling tech. it is real and the only reason we are not in economic chaos.

     

    The only person that has taken an off the ball is that Nero in the WH. Why hasn't he done a public/private partnership with Tesla et al to build out a huge recharging infrastructure along the interstate system so range anxiety would disappear. Not to mention tax credits for natgas for OTR trucks.

     

    Nope alternative energy is blasting forward thanks to smart people and wealthy forward thinking VC's that wouldn't exist if obummer had his way. Nero has also put clean coal projects on hold during his reign. NOTHING to do with interest rates and if a smart pro business person is elected in 2 years things will get much better and then a few years down the line we can think about raising rates if 5 million new jobs have been added.
    22 Aug 2014, 12:51 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    That is only happening because of Nero and his enabler harry.
    22 Aug 2014, 12:53 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1670) | Send Message
     
    Well thank our lucky stars for ZIRP then because it and fracking are about the only things that has kept this country above water. By the way there are other companies who have benefited from cheap access to capital: mREITs, BDCs, Private Equity Firms, almost any capital intensive industry.

     

    The main direct risk of cheap capital is inflation. With the high number of long term unemployed and the forced early semi-retirement of many, inflation has been held down. The main indirect risk is it has acted as a crutch for our system for too long. This has allowed dysfunctional systems to go on longer than they would were the extraneous support not there.
    22 Aug 2014, 01:11 PM Reply Like
  • RS055
    , contributor
    Comments (3160) | Send Message
     
    "The main direct risk of cheap capital is inflation"
    I would humbly disagree. The primary risk is the buildup of unsustainable businesses , which make the system fragile and prone to breaking unpredictably.
    22 Aug 2014, 01:28 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11495) | Send Message
     
    Agreed the main risk of cheap capital to the select few is a distorted economy and those few people who will use it for nothing other than their own enrichment at the cost to the economy that will sit in a dark hole until it ends. In fact, they want it so much they will gladly crash the economy in order to resume the free dole outs.

     

    As is, the US is damned if you do damned if you don't until you get rid of Fannie, Freddie, TBTF banks, government insider beggar companies, and last GM and AIG. Sadly we already ate the poison that is cheap money and its destroying everything positive about a free market already because it destroys capitalism. In the meantime, since TBTF banks get free liquidity and the Federal Reserve plays games with their own bond issues, those that hold capital will get ripped off on lower than low interest rates (which is a copy of socialist China that uses low interest rates on money to keep its population from reaping the rewards of their work and punishing those that save or are rich).

     

    If we keep this path we are doomed with or without inflation.
    23 Aug 2014, 10:49 PM Reply Like
  • mrdirt
    , contributor
    Comments (625) | Send Message
     
    Middle of the road. CYA mentality, if Economy Rebounds or flounders she can say she was right. When "Nineteen labor market indicators tracked by the Fed suggest the decline in the headline unemployment rate overstates improvement in the labor market" DUH, just look at the LPR, Job Openings high, hiring is different story, the quality of jobs is not where it was before 2008. Now OBAMA CONSIDERING GRANTING 800K GUEST-WORKER VISAS AS 90% BELIEVE AMERICAN WORKERS SHOULD BE FAVORED. What could possibly go wrong http://bit.ly/1ohRXY5
    22 Aug 2014, 10:29 AM Reply Like
  • vinchainsaw
    , contributor
    Comments (224) | Send Message
     
    If there was a major shift in policy, we'd hear about it long before JY said it in a speech at Jackson Hole.
    22 Aug 2014, 10:44 AM Reply Like
  • RS055
    , contributor
    Comments (3160) | Send Message
     
    All this breathless anticipation of when rates will go up is missing a much much bigger issue.
    Folks need to focus on HOW the Fed intends to "raise rates". i hope everyone knows by now that the plan is for the Fed to simply print up more money and hand it to the banks and call it Interest On Reserves?
    Will the banks increase the interest they pay depositors? Why should they? Its a free country. They'll simply say "thank you" to the Fed and pocket the money.
    Will this "rate increase" do anything to cool off the economy or inflation? Why would it? Look - the Fed simply hands banks more money - why is that going to cool off inflation?
    22 Aug 2014, 10:51 AM Reply Like
  • T-time
    , contributor
    Comments (464) | Send Message
     
    All good points - but as they always say: why let facts get in the way of a good story?
    22 Aug 2014, 11:15 AM Reply Like
  • zagman
    , contributor
    Comments (44) | Send Message
     
    Food for Thought: When the world is about to destroy itself interest rates, inflation and all don't matter.
    22 Aug 2014, 12:21 PM Reply Like
  • philli66
    , contributor
    Comments (33) | Send Message
     
    I think Janet Yellen is led by the spirit guide Mojombo. That's what is being said by Professor Waldo Wigglesworth. Is must be true.
    22 Aug 2014, 02:40 PM Reply Like
  • psychological-dividends
    , contributor
    Comments (811) | Send Message
     
    I just love SeekingAlpha. Any idiot can get a keyboard and an online connection, and then their opinion is immediately important.

     

    I'm actually pretty happy with Janet Yellen; she was my college professor and I'm very happy she wasnt more dove-ish than she is.
    22 Aug 2014, 03:43 PM Reply Like
  • Tobias Schmitz
    , contributor
    Comments (478) | Send Message
     
    @psychological dividends

     

    It's called freedom of speech. And with regards to the reputation of Janet Yellen: Alan Greenspan looked a lot more competent pre 2008 than post 2008. (even though he chairman of the FED only till 2006. )
    So let's wait with judgements till we see how it all plays out. To fight a recession which was caused by easy money with easy money seems "counterintuitive" to say the least.
    22 Aug 2014, 04:11 PM Reply Like
  • JPEN
    , contributor
    Comments (56) | Send Message
     
    it's in the governments best interest to keep rates low as long as possible. The government serves itself, not the people. If you don't believe that you're a fool.
    If Yellen can use the excuse that labor markets are in distress, then she will. The Fed uses whatever data it needs to support its and the governments agenda.
    Lower rates means lower interest payments which equals more revenue to build bigger armies and control the world.
    Just my two cents....
    Have a nice weekend!!!
    22 Aug 2014, 10:47 PM Reply Like
  • walterbyrd
    , contributor
    Comments (274) | Send Message
     
    > Lower rates means lower interest payments which equals more revenue to build bigger armies and control the world.

     

    Are you pondering what I'm pondering?
    23 Aug 2014, 03:20 AM Reply Like
  • machiavelli
    , contributor
    Comments (584) | Send Message
     
    Blah blah blah Yellen blah blah blah Obama blah blah blah debt blah blah blah Keynes blah blah blah socialism blah blah blah... have you guys still not made any gains this year?
    23 Aug 2014, 07:43 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2451) | Send Message
     
    To borrowing words from Physicist Wolfgang Pauli, I dare say that our Fed Policy is not only 'utterly wrong', but 'not even wrong'.
    24 Aug 2014, 02:00 PM Reply Like
  • Ohrama
    , contributor
    Comments (529) | Send Message
     
    It appears good part of the new jobs are in areas like manicure, pedicure (and of course our TSA) etc. Whenever I go outside, I notice most of the strip malls (I am in Cincinnati) are empty, manicure places (run perhaps by newly immigrated minorities trying to make a life for themselves) and Indian groceries have taken half of that space (I wonder if they were told to have the place rent free if they would keep the lights on) but there are few customers at any given time. Perhaps Obama health care has given them some incentive to start such businesses. It won't take much of time for these kind of services to crash and these folks seem to have invested a lot (in furnitures, equipment) without much research.
    24 Aug 2014, 06:05 PM Reply Like
  • RS055
    , contributor
    Comments (3160) | Send Message
     
    This country has always progressed because of people who come in from abroad , and absorb the surface of things and love it. They generally are not the cynical, pessimistic insider politically savvy class. No the wide eyed optimists taking foolish risks - like those Indian grocery stores in abandoned strip malls - thats what has always pushed this country forward.
    Fortunately, there are always waves of new, wild eyed optimists who keep arriving and laugh about all the cynical worries that people in large houses , cars and a wide variety of food and drink seem to have. Then they make utterly foolish investments betting on the future - that only a fool or an immigrant would do.
    Japan/germany would love to have this problem.
    24 Aug 2014, 06:30 PM Reply Like
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