News. April 30 (Bloomberg) -- When Janet Yellen was first reported to be President Barack Obama’s choice for Federal Reserve vice chairman .....
Less than two weeks later, the former professor at the University of California, Berkeley told reporters that she’d be ready to tighten policy to avoid kindling inflation.
My point. Inflation is closely related to government expenditures (click on the chart to enlarge it). Dr. Yellen can raise short-term interest rates as much as she wants, but if government expenditures are rising rapidly, the result is higher inflation.
I do not think Dr. Yellen has the power to control government expenditures.
Quite frankly I agree with those who think that the Fed has no power at all. The only power they have is to print money when the markets force them to do so. As it happened in all episodes when a crisis emerged (mostly precipitated by previous misguided Fed policies as in 2002-2004).
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest
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