1.) “I will be the first to say that it is always difficult to get monetary policy just right. But the Fed’s analytical prowess is top-notch and our forecasting record is second to none”
2.) “Q: Can you act quickly enough to prevent inflation from getting out of control?A: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Q: You have what degree of confidence in your ability to control this [inflation]?
3.) “People don’t realize that we cannot forecast the future. What we can do is have probabilities of what causes what, but that’s as far as we go. And I’ve had a very successful career as a forecaster, starting in 1948 forward. The number of mistakes I have made are just awesome. There is no number large enough to account for that.
4.) “I know that it is fashionable to talk about a “dual mandate”—that policy should be directed toward the two objectives of price stability and full employment. Fashionable or not, I find that mandate both operationally confusing and ultimately illusory: operationally confusing in breeding incessant debate in the Fed and the markets about which way should policy lean month-to-month or quarter-to-quarter with minute inspection of every passing statistic; illusory in the sense it implies a trade-off between economic growth and price stability, a concept that I thought had long ago been refuted not just by Nobel prize winners but by experience.”
- Janet Yellen, Fed Chairwoman and before that Berkeley Economics Professor
- Ben Bernanke, Former Fed Chairman (2006-2014) and before that Princeton Economics Professor
- Alan Greenspan, Former Fed Chairman (1987-2006) and before that Private Sector Economist
- Paul Volker, Former Fed Chairman (1979-1987) and before that Private Sector Economist
All four quotes are from individuals who served as Chairman of the Federal Reserve. Notice any patterns in the quotes? I do. The level of hubris has increased exponentially since Paul Volker was Chairman. What might be the cause? It probably isn’t a coincidence that Dr. Yellen and Dr. Bernanke spent their careers in academia while Mr. Greenspan and Mr. Volker were private sector economists before leading the Fed.
Jeremy Jones, CFA
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