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.
Let's examine the facts.
Right off the bat at the press conference, Steve Liesman of Comcast's (CMCSA) 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.
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 We know that our inflation statistics are outdated and faulty.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.