Janet Yellen: deflation will not be tolerated - July 22, 2009 (3min.)

[LargoWinch]

Before you watch the video, a little background about the speaker:

Janet L. Yellen took office on June 14, 2004, as president and chief executive officer of the Twelfth District Federal Reserve Bank, at San Francisco. In 2009, she serves as a voting member of the Federal Open Market Committee.

"...we could find ourselves in a spiral...the vigorous policies actions by central banks...has sent a clear message that deflation won't be tolerated". - Yellen


Runtime: 3min.

That begs the question: what deflation? Well if they think we have deflation, count on me to hold on to my crispy dollars...maybe for several years - until it is very safe i.e. Dow 14,000 to invest again. :rolleyes: <---- (me being sarcastic)

Dr. Janet Yellen, President of the Federal Reserve Bank of San Francisco, argues the most likely outcome of the recession is deflation, not inflation. She explains that decreased spending and lowered prices could "turn into outright deflation" if left unchecked.

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Amid the deepest recession of the postwar era, the Federal Reserve faces one of the gravest challenges of its 96-year history.

Janet Yellen, President and CEO of the Federal Reserve Bank of San Francisco, assesses the state of the economy while explaining the thinking and the actions behind some of the Fed's precedent-shattering initiatives to rescue a financial system in crisis and help jump-start economic growth. - Commonwealth Club

Janet L. Yellen took office on June 14, 2004, as president and chief executive officer of the Twelfth District Federal Reserve Bank, at San Francisco. In 2009, she serves as a voting member of the Federal Open Market Committee.

Dr. Yellen is professor emeritus at the University of California at Berkeley where she was the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics and has been a faculty member since 1980.

[D-Mack]

Re: Janet Yellen: deflation will not be tolerated - July 22, 2009 (3min.)

Yellen is considered by many on Wall Street to be an Inflation Dove (as concerned with unemployment as inflation) and as such is less likely to advocate Federal Reserve interest rate hikes, as compared, for example, to William Poole (St. Louis Fed President) an Inflation Hawk (see definitions under Inflation
http://en.wikipedia.org/wiki/Janet_Yellen

What Does Dove Mean?
An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that inflation and its negative effects will have a minimal impact on society. This term is derived from the docile and placid nature of the bird of the same name, and is the opposite of the term "hawk".


Investopedia explains Dove
Doves prefer low interest rates as a means of encouraging growth within the economy because this tends to increase demand for consumer borrowing and spur consumer spending. As a result, doves believe the negative effects of low interest rates are negligible in the larger scheme of things. However, if interest rates are kept low for an indefinite period of time, inflation could rise considerably.
http://www.investopedia.com/terms/d/dove.asp

Could be true

[vinoveri]

Re: Janet Yellen: deflation will not be tolerated - July 22, 2009 (3min.)

As Volcker pointed out, even at 2% cpi, the purchasing power of savings/earnings is halved over a generation (and I would say reduced to 20-30% over a working career).

This is the fundamental injustice an inequity of the system; outright theft.

People don't perceive it b/c when CPI is truly 2%, they are like frogs being boiled slowly.

[Rajiv]

Re: Janet Yellen: deflation will not be tolerated - July 22, 2009 (3min.)

This is the fundamental injustice an inequity of the system; outright theft.

People don't perceive it b/c when CPI is truly 2%, they are like frogs being boiled slowly.

See my responses in the thread "The Face of Raising Unemployment"

[ThePythonicCow]

Re: Janet Yellen: deflation will not be tolerated - July 22, 2009 (3min.)

[CENTER]"...we could find ourselves in a spiral...the vigorous policies actions by central banks...has sent a clear message that deflation won't be tolerated". - Yellen

This is more evidence that the Fed, in my view, is talking up Treasuries.

They are telling us they will keep rates low, keep printing money, and are confident they can reverse course "later on" (meaning they can confidentally continue on the current course for a while longer.)

For now, it's "All Aboard the Treasury Train!"



I'm just a little worried however about that train's destination. What happens "later on" when Treasury rates rise too much?