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NEW YORK (TheStreet) -- Federal Reserve Chair Janet Yellen all but admitted that she has no clue as to what the future will bring at last Thursday's press conference. She stated that "it depends" upon lots of unknown factors. Just about every answer that she gave had a positive spin. As a consequence of her answers, I think the Fed has lost credibility.

The truth is that the Fed is scared about the future and will continue quantitative easing at all costs. The Fed's fear is based upon Ben Bernanke's and Janet Yellen's concerns that the U.S. will fall into a 1937 type of depression.

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Let's examine the facts.

Right off the bat at the press conference, Steve Liesman of Comcast's (CMCSA) - Get Comcast Corporation Class A Report CNBC confronted Yellen about inflation. Yellen contended that inflation was under control, and she was looking for 2% inflation as the level to hit before she would consider changing the Fed policy. Liesman stated that we are already there.

Yellen then gave a vague denial, calling it "noisy." Mind you, this was just after the St. Louis Fed posted official data showing inflation at 2.1% and a GDP shrinkage of 1% a year.

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A week earlier, Harvard economist Martin Feldstein stated that inflation was already over 2%. We know that our inflation statistics are outdated and faulty. Skyrocketing food prices, energy prices, asset prices for the rich and so on are not properly weighted.

Steve Liesman was polite in his response to Yellen. I do not have to be polite. Yellen does not seem to have a grasp of the different types of inflation that we are facing. She did not explain that the Fed's fear is deflation, where prices go down in a contracting economy. Yet the current inflation is unlike past inflations where strong economies caused consumer demand or higher wages to increase prices.

Rather, much of today's inflation is being caused by other items besides the strength of our economy. For instance, food prices are skyrocketing due to shortages caused by drought and diseased beef. Oil prices have been going up because of war in the Middle East. Asset prices for the rich, such as stocks and homes in wealthy areas like New York, have been rising because of the Fed's QE policy. Take a look at former Reagan Chief Economic Adviser David Stockman's breakdown of the various components of inflation.

Next came Yellen's insistence that employment is getting better. Based upon the government's dated, unrepresentative numbers, that statement is true. However, we all know that chronic unemployment is at historic highs, many standard deviations beyond anything since the Great Depression. Numerous people who want to work are not included in the government statistics -- and they should be.

Yellen knows that, yet she claimed that the historically high chronic unemployment number was just a "cyclical" factor that would correct itself. The chronic unemployment numbers are anything but cyclical, and they are way beyond anything we've seen since World War II. Just look at the St. Louis Fed's chart of the percentage of Americans who are employed.

From my perch, Yellen's insistence that employment was getting better was strike two in the credibility game. The chronically unemployed reveal the dichotomy between the flawed headline numbers that the public relies upon vs. the numbers that the government does not readily show. Many economists agree that if the government's dated way of presenting unemployment numbers was true, the unemployment rate would be around 10%.

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Yellen stated that the Fed was forecasting an improving economy going forward. Unfortunately, the Fed has consistently been wrong in its forecasts. For example, the negative 2014 first-quarter growth was blamed on the weather, which defies logic. Many economic statistics -- such as all housing metrics -- since the winter persist on being bad. Yellen gave no evidence of the economy taking off.

Essentially, she admitted that there is only hope. And the updated first-quarter GDP results are scary in that light.

Number-crunchers should look at the St. Louis Fed chart that depicts the 2014 U.S. economy. It includes the negative 1% "growth" of the GDP, but does not yet include the June 25 data, with its shocking downward adjustment to a negative 2.9% first-quarter GDP change.

Despite all of the Fed's monetary pumping, things are not good and may be getting worse. This is the worst recovery since World War II. Here is an article from the Council on Foreign Relations that depicts the present weak recovery. The economic community is saturated with similar articles and charts, like this one from the Pew Research Center.

Contrast the GDP shrinkage and the paltry five-year recovery with the unprecedented pumping by the Fed. Something is very wrong when the Fed gives it all it has and economy responds so poorly.

Yellen's statement that stock prices were not in bubble territory was true, but did not paint the complete picture. In fact, stock prices do have room to go higher, but they are relatively high on a historic basis. Furthermore, Yellen did not acknowledge that earnings have recently been skewed by stock buybacks and financial engineering, while revenue growth has lagged. See Apple (AAPL) - Get Apple Inc. Report and IBM (IBM) - Get International Business Machines Corporation Report, both of whose revenue growth has slowed while profits have risen. Why? Share buybacks, funded by cheap debt made affordable by the Fed's low interest rate policy. Higher stock prices are supposed to increase people's wealth, which in turn will be spent on the economy. But that "wealth" is not going into the economy.

Lastly, Yellen tried to spin the potential bond market liquidity problem by stating that she knew nothing about any Fed discussions regarding the potential problem. However, the Fed had previously acknowledged the issue in a statement about suspending convertibility or using "gates" or fees for redemptions that could create runs. The problem is that there is not enough liquidity in the bond market for sellers to get out without a severe drop in prices. How is all of that money going to get out of bonds when the cycle changes and everyone heads for the exits?  In my opinion, a run on the bond market would be the present-day equivalent of the 1930s runs on banks.

In my view, Yellen is praying that the Fed's QE policy eventually takes hold. In five years, it has failed to do so. With the taper ending this fall, another round of QE is possible. If nothing sparks this economy to at least average growth, the Fed will have created the greatest monetary easing in history for almost naught. Yes, they saved us from a depression five years ago, but that ship has sailed. Furthermore, blaming bad times on the winter does not jibe with poor economic numbers such as housing starts, which fell 6.5% in May.

We are living in a world where the Fed just does not know the answers, but is hell-bent on easing in a make-or-break attempt to ignite the economy and avoid a 1937 repeat. The thought of falling back into a post-1989 Japan-like 30-year malaise is anathema to the Fed.

The financial community realizes this. Despite its skepticism of the Fed's policy, it is still absorbed in a chase for yield fueled by easy money. Hence the bond market and stock market rallies. What choice do asset managers have when given free money by the Fed?

In short, the Fed's QE program is no longer just a policy issue -- it is being treated by the Fed like a political issue. Many don't believe in the Fed's logic but still don't see a way out of QE.

The Fed does not want to scare people, but the problems are self-evident. The economic response has been paltry and the Fed has exhausted much of its ammunition. Plus the inflation picture is potentially bad. Many economists still believe that things will get better in the second quarter of 2014.

God help us if this unprecedented QE experiment fails.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.