Yellen is Yellin' For More Free Stuff

Mish

Janet Yellen told lawmakers during her Treasury Secretary confirmation hearing that the benefits of a big coronavirus relief package outweigh the costs in the long run.

Need to Act Big

Yellen seeks a Sweeping Stimulus Package in Face of GOP Skepticism at her confirmation hearing.

“We need to make sure that people aren’t going hungry in America, that they can put food on the table, that they’re not losing their homes and ending up out on the street because of evictions,” Ms. Yellen said. “We really need to address those forms of suffering, and I think we shouldn't compromise on it.”  

If she is confirmed by the Senate as expected, Ms. Yellen will become the administration’s top economic-policy spokesperson responsible for selling President-elect Joe Biden’s $1.9 trillion proposal, which includes another round of stimulus payments, extended jobless benefits, grants for small businesses and a nationwide vaccination program. After that, Ms. Yellen said, long-term investments will be needed in areas such as infrastructure and workforce training to help make the U.S. economy more competitive and productive. 

Delayed or inadequate support, she warned, could lead to a more-protracted economic recovery and cause long-term economic damage in the form of permanent job losses and business closures that could weigh on growth for years to come.  

“It’s really critically important to provide this relief now,” she told lawmakers on the Senate Finance Committee, which will vote on her nomination.

Republican Skepticism 

  • “The only organizing principle that I can discern is it seems to spend as much money as possible, seemingly for the sake of spending it,” Sen. Pat Toomey (R., Pa.) said of Biden's latest plan.
  • Finance Committee Chairman Chuck Grassley of Iowa noted a “laundry list of liberal structural economic reforms” in Mr. Biden’s relief package including a $15 minimum wage.

What About the Debt?

Ms. Yellen acknowledged the government’s mounting debt load, which stands at $21.6 trillion—or roughly 100% of a year’s economic output. But she urged lawmakers to put those concerns aside for now. Interest rates are at historic lows and expected to remain there for some time, making borrowing more affordable, she said.

Put Aside Concerns For Now?

No, not for now, for ever. 

Borrowing is "affordable" because rates are low. So rack it up. And we have to the tune of $27 trillion in national debt.

Indeed, we have racked up so much debt that it is impossible for the fed to normalize rates. And the fact that the Fed cannot hike rates makes it all affordable. 

Got that? 

I hope so because that is precisely how they think.

Swiss Cheese Thinking 

In case you missed it, please see Janet Yellen's Swiss Cheese Statements on the US Dollar

Mish

Comments (64)
No. 1-22
njbr
njbr

Because covid is the economy...

Here it is...South Africa reports more than 4,300 suspected cases of COVID-19 reinfection

We are in for a much longer haul....

PecuniaNonOlet
PecuniaNonOlet

I asked this question months ago, "what is the plan for 2021?" and I will now add, "what is the plan for 2022 and 2023?"

If the plan is to open up businesses like pre-covid because the "economic pain" is just too much, we will overwhelm hospitals and their workers with sick.

If the plan is to close up like has been done then the economic pain will continue.

Either way, we will grind ourselves to a tiny nub. There was an assumption that the vaccines would end all our problems but it doesnt appear to be the case, especially if there are re-infections happening.

God help us all.

Eddie_T
Eddie_T

It’s too early to expect the vaccine to be making much difference. I think we are past the holiday spike now....new cases beginning to fall here. Maybe...

If the vaccine effect starts to show up in the numbers, we could look much better in a few months. But we aren’t there yet......I don’t think the vaccine effect can be seen yet.

Roughly one in twenty Texans has been vaccinated.....needs to be more like one in two. Almost 1.5 million does given, mostly round one.

I’m glad to to see the money fire hose being applied. It is called for at this time, imho.

My investor hat says it’s time to raise cash and look for a few deals.....but I’m not anxious to make changes. I hate change at my age......hate dealing with paperwork and loans and selling and buying. I could just stay in hunker down mode.....but I think it takes sense to make some portfolio changes.

Sechel
Sechel

These are unusual words for a Treasury Secretary but I looked up what the role of Treasury Secretary is

The President of the United States looks to the Secretary of the Treasury as a principal advisor on economic issues. The secretary makes recommendations about domestic and global economic and tax policy. The secretary plays a very important part in creating strategies that affect economic and government financial outlooks for issues the government faces.

Seems like making sure people don't go hungry is an economic issue. I know I'd rather see these goals coming out of Treasury as opposed to the Federal Reserve

Lance Manly
Lance Manly

Did the R senators note that they did a 1.8 trillion dollar give away to the rich as a countercyclical stimulus?

Eddie_T
Eddie_T

I just did the math to see if we qualify for the new PPP loan......am I the last one to apply again?

I just wanted to see if we really had a quarter that was down 25% y.o.y. before I applied. The loan app does not require proof if it isn’t huge (below 150K) ...but they will ask for it eventually when you apply for forgiveness.

No problem, as it turns out.

Quarter two we were down 57% from 2019 levels. Quarter three was down 46%.

Made my stomach lurch. Worse than I thought.

I probably overpaid my income tax. lol.

I hope to get my application in for the new PPP today or tomorrow. For those who haven’t done it, the app is up on the SBA site, but you need to take it to your bank, from what I gather.

The new (forgivable) PPP amount is 2.5 months of payroll expense. The rules for spending the money are the same as the old PPP, AFAIK.

Rhet
Rhet

If, as Japan has proven, a birth rate of less than 1.7 births per woman is highly deflationary, what's wrong with printing money to maintain price stability?

anoop
anoop

for the first time since early 2008, i am significantly invested in stocks. just move a bunch in to celebrate yellen's appointment.

PecuniaNonOlet
PecuniaNonOlet

It is official, Biden has been sworn in, time to get woke my friends.

RunnrDan
RunnrDan

"Interest rates are at historic lows and expected to remain there for some time, making borrowing more affordable, she said."

Wow, what a tool!

KidHorn
KidHorn

I feel for some of those not paying rent, but stopping evictions is a bad idea. When you stop evictions, people stop paying rent. Regardless if they can afford to or not. People not paying rent is what's propping up the stock market. Many who would ordinarily face eviction somehow have money to buy Tesla stock and Bitcoin.

Who in their right mind would decide it's a good idea to be a landlord right now?

Flatlaxity
Flatlaxity

What's Government debt anyway? It's not like you and me having debt.

Treasuries are being bought by the Fed , and the interest therefrom passed over to the Treasury. The "damage" occurs when the Fed prints money to buys the treasuries. What the Fed has done is to "...water the booze..."

This effect is immediate and contributes to stock market, real estate prices and other assets inflation. The increasing government stimulus only partially (circa 20%) goes to GDP creation which is the intended target to increase/maintain employment and standard of living. Increasing asset prices don't do this - and can eventually bust without enough of a supporting GDP.

Internationally other central banks are doing the same thing, such that the dollar won't suffer.

If the Fed owns the debt, why should there be a push to pay it off.

It's the maintenance of the asset bubble we have to worry about.

caradoc-again
caradoc-again

Can you imagine the disappointment & disillusionment when things don't improve and may become worse over time?

Trump was a reaction to Clinton, Bush, Obama. What will be the reaction to Biden/Harris? Let's hope its good.

Augustthegreat
Augustthegreat

Stop whining! Debts do not matter, once you decided to never reimburse your debts.

Jackula
Jackula

What's next in the Fed's bag of tricks? Now that they've goosed interest rates to effectively zero bound, can't go negative without blowing up the world's capital markets. Created crazy asset inflation that enriched the owners of assets immensly while screwing those not holding assets, tough luck for those saving fiat with some hope of buying assets for cash. Now here come the helicopters to keep this economic monstrosity going into perpetuity, UBI and who knows what else.

nzyank
nzyank

I agree with Flatlaxity. Public debt is not the same as individual debt. The sky isn't going to fall in due to additonal public spending right now, in fact it is what is keeping the sky from falling in.
The real issue is who is in control of the spending and who is benefiting from the spending. Expect lots of political fighting over this, as republicans realize beating the drum over spending is one of their most effective political tools, even though they are just as guilty of spending when they are in control of the purse.

Frilton Miedman
Frilton Miedman

I'm still trying to remove the mental image of Mish's rendition of Johnny B Good from his post yesterday....it hurts...make it stop!

Mish is an Austrian economist, it goes without saying He'll endlessly critique any Monetarist (or Keynesian), any member of the Fed will Monetarist be by default.

So, Mish, while Janet might be "Yellin'", at least she's NOT making karaoke video's!

Oh, god, no....now I'm developing an imagine of Yellin', no!..no!.....go away Yellin, no Karaoke for you!

All in good fun.

Johnson1
Johnson1

I think all houses below $300k or maybe $400k are going up in price.

  • You will have 11 million illegal immigrants that can not legally buy a home. I am guessing the real number is more like 15 to 20 million.
  • Biden is planning on a $15k 1st time home buyer stimulus
  • Biden is also planning on expanding rent assistance beyond section 8.
  • Inventory across the U.S. is all time low. It is about 60% lower than average.

So you add home owner incentives to an environment of all time low inventory. Bullish for homes.

Johnson1
Johnson1

I meant cannot buy a home now but will be able to buy a home.

RonJ
RonJ

The World Economic Forum's Klaus Schwab, says you will own nothing and be happy, after the Great Reset.


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