Steve Keen Rages “There Is No Excuse For Janet Yellen’s Complacency”

Wednesday, June 28, 2017
By Paul Martin

by Steve Keen via Forbes.com,
ZeroHedge.com
Jun 28, 2017

Janet Yellen has been reported by Reuters as saying in London yesterday that “she does not believe that there will be a run on the banking system at least as long as she lives”:

“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” Yellen said at an event in London. “Fed’s Yellen: Not another financial crisis in ‘our lifetimes’”

The only word I can use to describe this belief is “delusional”.

The only way in which her belief could be justified would be in financial crises were truly random events, caused by something outside the economy – or just by a very bad throw of the economic dice.

This is indeed the perspective of mainstream “Neoclassical” economic theory, in which Yellen was trained, and because of which she was deemed eligible – and indeed eminently suitable – to Chair the Federal Reserve.

This is the theory that led the OECD to proclaim, two months before the crisis began in August 2007, that “the current economic situation is in many ways better than what we have experienced in years”, and that they expected that “sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.” (OECD, June 2007, “Achieving Further Re-balancing”). It is the theory that led her colleague David Stockton, then the Director of the Division of Research and Statistics at the Federal Reserve, to dismiss the possibility of a recession after the crisis had begun, in December 2007—the very month that the recession is now regarded as having commenced:

Overall, our forecast could admittedly be read as still painting a pretty benign picture: despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation. (Federal Open Market Committee transcript, December 2007)

So what we are getting from her is not merely her own personal complacency, but the complacency of an approach to economics which has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can be ignored—yes that’s right, ignored—when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter