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New Fed Chair Starts With—What Else?—A Forecast

  • Janet_yellen_swearing_in_2010
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Tags The FedInterventionism

01/11/2014

Janet Yellen celebrated her confirmation as Fed Chairman on January 6 by immediately issuing a carefully hedged prediction: “I am hopeful that the first digit [ of GDP growth] could be 3 rather than 2… and  [that] inflation will move back toward our longer-run goal of 2%."

Let's hope she has better luck with her predictions than the retiring Ben Bernanke, who almost always got his wrong.

In 2006, at the zenith of the housing bubble, he told Congress that house prices would continue to rise. In 2007, he testified that failing subprime mortgages would not threaten the economy.

In January 2008, at a luncheon, he told his audience there was no recession on the horizon. As late as July 2008, he insisted that mortgage giants Fannie Mae and Freddie Mac, already teetering on the verge of collapse, were “ adequately capitalized [and] in no danger of failing.”

Following the Crash of 2008, Bernanke’s prognostications did not much improve. Nor did Yellen’s, who had also misjudged the housing bubble, and who became Fed vice chairman in 2010.

The two of them got the “recovery” they predicted, but the weakest “recovery” in history. Real income for the average American fell during the recession, but then fell even more after its supposed end, and now hovers at a level last seen in 1989.

Hunter Lewis is author of eleven books, including Economics in Three Lessons & One Hundred Economic Laws, Where Keynes Went Wrong, and Crony Capitalism in America 2008-2012, and has contributed to the New York Times, the Washington Post, the Times of London, The Atlantic and many other magazines and web sites including Mises.org and LewRockwell.com. Lewis is also co-founder of Against Crony Capitalism.org as well as co-founder and former CEO of Cambridge Associates, a global investment firm. He has served on boards and committees of fifteen not-for-profit organizations, including environmental, teaching, research, and cultural organizations, as well as the World Bank.

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