by Mises Institute
Janet Yellen was forced to wave a white flag this week, admitting what was long obvious — the Federal Reserve overestimated the strength of the global economy and will not be able to go through with its planned four rate hikes in 2016. As David Stockman noted in his take down of the FOMC announcement, “Listening to even a small portion of Simple Janet’s incoherent babble makes very clear that the nation’s central bank is well and truly impaled on its own petard.” Meanwhile, Ryan McMaken notes that diminishing foreign government holdings of US debt creates another issue for the Fed, possibly requiring the central bank to resume monetarizing public debt.
In the Fed’s desperation to hold off the pain that will come from the eventual popping of our current easy-money fueled bubbles, will Yellen start listening to the advice of her predecessor Ben Bernanke and embrace the absurdity of negative interest rates? We are already seeing the consequences of such policy play out in Switzerland and Germany and Japan.