Does Janet Yellen really believe higher interest rates would be beneficial?
“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen told Bloomberg News after returning from a G-7 meeting in Brussels.
This might have been true a few years ago when the national debt was only $10-15 trillion. Approaching $30 trillion, however, it’s not as clear cut. The next comment was the really ironic one.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade.”
It was Yellen, of course, who with her colleagues at the Fed and former/future Fed chairs, deliberately drove interest rates to historic lows. At no point did they “fight” low interest rates. Why would she say such a thing?
- With inflation on the rise, it is becoming more and more expensive to pin interest rates at an absurdly low level.
- The Fed has painted itself into a corner, having practically exhausted the lower/longer meme and the obvious bubbles it has blown.
- If they can back it up with stock manipulation, shifting the narrative to higher interest rates being good could actually reassure investors – the central banker equivalent of “I meant to fall flat on my face.”
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