The Fed’s narrative was never sublime. Now it’s just ridiculous. But Schadenfreude insists we laugh at the painful acrobatics of Chair Yellen
Along with millions of people around the Globe, I veer every eight weeks between finding Janet Yellen’s reports and Q&A sessions variously ludicrous, alarming and laugh-out-loud funny.
Yesterday, it seemed at times she was this ageing New York Jewish matriarch giving out the recipe for this, that and every other thing, the one commonality between all the recipes being that we never get a cake or a casserole or even some chicken soup. Ms Yellen cooks everything in the airing cupboard, and it shows. Nothing is ever ready to eat; and this raises little beyond the level of professional doubt with every episode of her high-rating culinary show Valium-Slow Cooking with Grandma Janet. Pretty much everyone is now clear that the Fed is cooking books, not food.
The ludicrous element each time is the tedious use of phrases about what careful cooks she and her sous-chefs are. “I can assure you,” she says regularly, “Every passabiliddy is taken into account, every last figure is checked, we keep an eye on everything, and nothing is left to chance”. The one chance not taken into account at all by the Fed, however, is that its entire monetary policy is a failure morphing slowly into a deranged attempt to call the refusal of a soufflé to rise “a modestly accommodative pancake”.
This where, for me, things get downright alarming. My jaw hit the coffee table (and it’s a long way from stiff upper lip to coffee table at my house) when she somehow enunciated the words, “we don’t want the economy to overheat” and nobody in the room even groaned. Had a few journalists said “Are you for real?” I would’ve felt at least a degree of relief. But the insane observation was greeted with a pin-dropping moment of silence.
Imagine Janet’s sense of panic, on getting back to the Fed kitchen after a day in the Bubble below the Reserve Building, to note that some idiot has taken the Matzos out of the airing cupboard and put them on the window-ledge in full sun.
“You are maybe some kind of mashugunna?” she yells, “I leave you for a few hours and the bread is cooking already. We do recipes here, not meals, whaddarryoo – Krusty the f**kin’ clown?”
Meanwhile, back at the Q&A, someone asks gently whether there’s any heat at all in the economy, and the Fed chair relents a little.
“Sho!” she begins with her by now trademark squawk, “Taking all things into consideration and remembering the progress that has been made in the light of unexpected events, we would probably except that, right now at this point in time, the US economy is sub-dude”.
You see, that’s our problem right there: the economy hasn’t matured into a dude just yet. It’s still, you know, an acne-splattered adolsecent. Not quite a dude, more of a dud. But with a little more time and nurture in that airing cupboard, it’ll emerge as a real peach of a dude. It’ll still be sub-prime, true….but then it’ll be in its prime again. One day.
Corners are being turned, currently at the rate of one right turn a year. Then just before the next election, we’ll be back where we started. Maybe we’ll be 25% down on the wheelcount, but “we have many tools that can be employed and chosen to address such issues” as and when they arrive in due course, the fulness of time, at the end of the day and before the cows come home, having first jumped over the moon”.
The next Yellen Kitchen is in December. Failure to bring out a cooked Thanksgiving Turkey on that occasion will put the Fed itself at the front of the queue to be the Christmas Turkey – and produce dangerously doubtful markets in the New Year.
But to my mind, another rate hike will crush the recovery of any emerging nation heavy with Dollar denominated debt.
Janet Yellen is in a hole, and it isn’t in Jackson. She’s damned whether she does or doesn’t, and it’ll be her own fault: she should have kept a more discreet counsel at the end of 2015: too bullish one year, daft cow the next. Harsh but fair.