Janet Yellen: U.S. Economy May Need More Help From Federal Reserve

DENVER (Reuters) - The Federal Reserve is looking at ways to offer further monetary stimulus to a shaky U.S. economic recovery, the central bank's influential vice chair, Janet Yellen, said on Friday.

Yellen said she was concerned by signals in the U.S. bond market that weak economic activity was again heightening the perceived risk of deflation.

She argued Europe's financial crisis threatened to spill over into the United States, by forcing anxious banks to tighten credit at time when America's rebound is still tenuous.

"The potential for such adverse financial developments to derail the recovery creates, in my view, significant downside risks to the outlook," Yellen told a financial industry conference in prepared remarks.

She argued inflation is not an immediate concern, but that the nation's unemployment problem posed a persistent problem that needs to be addressed by policymakers.

"We are prepared to employ our tools as appropriate to foster a stronger economic recovery in a context of price stability," she said.

Yellen urged lawmakers not to cut back on spending too quickly, since this could also risk derailing the expansion.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Queen Regnant]

12:30 PM on 10/23/2011

Hey! Wasn't it nearly a year ago that those monkeys got swept into office because they were going to fix everything? Gosh, from where I'm sitting everything is substantially worse. And they criticize the president? PULEEZZZ

[Flight]

09:46 AM on 10/23/2011

"She argued inflation is not an immediate concern, but that the nation's unemployment problem posed a persistent problem that needs to be addressed by policymakers."

You think? My, it's amazing those in 'power' have such insight. Our policymakers, aka as BO and Congress, have proven many times they are incapable of leading the country. Their economic policies evolve around helping their cronies, Wall St., lobbyists, etc. - definitely not the people as a whole. Let's hope more lifers on the Hill will be given their ticket home come 2012.

[SitandStay]

01:38 AM on 10/23/2011

I'll be marketing BoA Director starter logs...the hottest selling home heating product in decades.

[MFS001]

10:01 PM on 10/22/2011

"She argued inflation is not an immediate concern... We are prepared to employ our tools as appropriate..."

Why doesn't she just say it -- we will "print" more money and buy more of those increasingly worthless bonds.

[UndeadPoet]

07:57 AM on 10/24/2011

That's because they are not printing money If we were printing money we would be concerned about inflation. They printed the money 15 years ago when they padded the worlds central banks during the 97-98 financial crisis. Now all that money is coming back and they are taking on debt to collect it and destroy it.

That's why we face deflation and not inflation.

[MFS001]

05:08 PM on 10/24/2011

Are you kidding? At least $2 trillion have been "printed" within the last year alone. Look up the statistics recently released by the St Louis Fed. They are not shy about telling you.

The US dollar has lost about 97% of its value since 1913.

[BigDaddyWow]

01:26 PM on 10/22/2011

The Fed has exhausted all of their tools. They have completely failed to truly understand the nature of this crisis. Bernanke, being a scholar of the Great Depression believed the trick was to keep credit flowing through massive bailouts and a constant flow of money onto the banks balance sheets. This failed for 2 reasons: 1) regulator pressure to force the strengthening of balance sheets in 2009 and 2010 (no lending at all) pushed many small business under the "good credit threshold" which continues to compound the problem and 2) banks will not lend now because they want to see investment from corporations, VCs, private equity ect take off before they start lending in earnest. Investments will not start until Obama is out of office or Europe can be stabilized. The Fed is Dead.

The only thing they could do is to "push" money onto the balance sheets of small business employers directly with the requisite "hiring requirements". A trillion dollars puts $1M into the hands of a million small businesses. With a million I could put 15 people (professionals) to work for a year and have a 90% probability of maintaining that employment indefinitely.

This would never work because the very banks that got us into this mess would not allow it. So, the Fed is simply not in a position to help.

[FrGr]

10:08 AM on 10/23/2011

Is not the Fed itself one of "the very banks that got us into this mess"?

[Queen Regnant]

12:33 PM on 10/23/2011

Doesn't matter if businesses have a good cash position. If there is no demand, i.e. sales, there is no need for employees. Why pay people to sit around and do nothing?

[Jerry Lammers]

10:55 AM on 10/22/2011

Janet Yellen has been talking sense ever since I've been a Fed. watcher. She should be Chairwoman and Chairman Bernanke should be sent back to vaunted Princeton where he came from. The Fed. has two MANDATES: Keep Inflation Under Control and Maintain FULL EMPLOYMENT. When Mr. Bernanke took over, unemployment was 4.7%. It was Ms. Yellen who has been a voice for a more aggressive Monetary Policy to get the economy moving and satisfy the Fed's FULL EMPLOYMENT MANDATE. To date, she has been largely outvoted.

The 2008 crash wiped out $15 Trillion in asset valuations. The Fed's actions to date have put back a few $ Trillion. The Fed. should be buying up all maturing T-Bills (about 1 month ahead of maturity) and using the proceeds upon maturity to buy new issues. This will flood the economy with cash to get it moving again, while simultaneously monetizing the DEBT and DEFICIT to remove them as a stumbling block in the future. With spending cuts and tax increases in Washington and a very aggressive Fed. Monetary Policy, it is very reasonable to assume that the entire DEFICIT and DEBT can be eliminated in 10 years, while bringing down unemployment to 5%.. A DEBT FREE United States would be an economic juggernaught.

[Bill Roth]

11:19 AM on 10/22/2011

The banks are already sitting on enough cash. The public is also sitting on a hugh pile of cash. Without confidence in the Lawmakers standing up for the people. And anything short of dismantling the FED's strong arm on the Congress nothing will change. The power to create the money needs to go back to Congress. We should not be charged interest for borrowing from the people of the USA. This idea a private bank acting on the behave of a country is crazy. The FED is only concerned with the board members of the central banking cartel. Interest is the only thing real with their monetary creation. Hence a tax on our income pays for this interest. Not to mention the ingenious concept of fractional reserve banking. Oh, the thinks they thunk. Timothy G. said that it is too complicated for the average citizen to understand. Complication in money leads to corruption. Remove the constant variable of deceit, the FED. Simplification will be ushered in and confidence will begin to be restored. If people can't understand something they can't believe in something.

[FrGr]

10:16 AM on 10/23/2011

"We should not be charged interest for borrowing from the people of the USA."

One of the most disconcerting things about our whole money system is that we're borrowing money from the whole world, NOT "from the people of the USA." China holds more Treasury bonds than anyone else, right? So, as I understand it, we're borrowing mostly from China.

Being beholden to major foreign powers, whether they be sovereigns or hoarders, seems unambiguously bad to me. Think of the role of "the international lenders" in the Greece saga. (I know, Greece is different because they yielded control of their money supply to an external power, the Euro.)

[Queen Regnant]

12:35 PM on 10/23/2011

Debt free is great but revenues as well as debt free is even better.

[knewsreply]

09:21 AM on 10/22/2011

Hasn't the Federal Reserve done enough damage to our country?

[dadw5boys]

09:40 AM on 10/22/2011

read GAO 11 - 696 Report to Congress

the Federal Reserve nursed the Banking Crash along from the Summer of 2006 til Oct of 2008 wilth over $16,151 Trillion Dollars they created and handed out to Banks, Insurance Companys, Investment Houses and even Forgien Corporations.

Millions of Americans would never have been sold Sub Prime Loans if the Banks had been allowed to crash in 2006 .

[shadow013]

04:02 PM on 10/22/2011

See 1912 books telling why the Fed is a bad idea.
Especially look at the political cartoon illustrations. It fits today.
http://books.google.com/books?id=qSs5AAAAMAAJ&pg=PP10#v=onepage&q&f=true

[knewsreply]

08:48 PM on 10/22/2011

Thank you. I downloaded a free PDF copy for my reference file. If someone reads the introductory notes, they will want to read the book to find out what was thought in 1912 verse today. The following is a sample,” a new work [1912] of facts, contains startling disclosures, documentary proof of the great Wall street and bank conspiracy to control politics and corner the currency.”

[joebhed]

08:47 AM on 10/24/2011

Thanks for that.
One important thing to remember was that in selling the FED as a public-private partnership, the Board of Governors included both the Secretary of Treasury and Comptroller of the Currency - such that there could be no break with national policy and no matter not reportable to the Congress via Administration.
Those ties were soon enough undone.
( Statutory Deregulation 101 )
The slippage from a national money system to a corporate money system became complete.
The choice is still ours.
United States Money (of, by and for the people) or the private Bank-corporate money system of the (non-) federal reserve system.
The Kucinich Bill is for OUR money system.
http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf

The Money System Common .

[TavernAle]

01:19 AM on 10/22/2011

The FED is the problem. They have been printing money out of cotton for 100 yeears and charging us, the taypayer, the issuance of the bill plus the interest. Why not reauthorize executive order 11110 to end this fraudulent institution.

[Bill Roth]

09:58 AM on 10/22/2011

JFK did. He tried to have money baked by silver. If i'm not mistaken LBJ vetoed it as he took over office after the assassination. If memory serves correct law was going into effect on june 4 1964.

[FrGr]

10:19 AM on 10/23/2011

i skimmed http://en.wikipedia.org/wiki/Executive_Order_11110 and i can't see any "end the fed" language in there. what am i missing?

[Bill Roth]

10:24 AM on 10/24/2011

I don't think he was ending the FED . JFK was trying to back the currency with silver. Quite a few silver notes were circulated. Collectors still retain them in their currency collections. FED and banks pulled all that circulated through the coffers. JFK was just trying to remove the power of the FED to create currency out of nothing and charge interest to the taxpayers for this scheme. I believe however his intend was to expose the FED to more people without coming right out and accusing them of being contriving institution.

[rogergoldkin]

11:47 PM on 10/21/2011

...and how is this money supposed to be transmitted into the real economy?

[joebhed]

08:11 AM on 10/22/2011

roger
assuming your comment is directed at Ms. Yellin.....
Yeah, she seems to think there is something that the Fed can do about unemployment and jobs.
Increasing the Fed balance sheet yet again (QE3) by buying up mostly bankcorporate bonds (*) will do nothing but give these corps gobs of taxpayer obligations - as every dollar given is a claim against the real economy.
(*) The scary thing at this point is that the word-on-the-street is that it is the housing market that is dragging down the economy - that's Fed-wisdom.
So, in order to save the economy by creating the movement in the housing sector, word is that the next so-called stimulus will be about buying up yet more mortgage-backed securities(MBS) , which are unfortunately tied into the rest of the toxic garbage out there.
So, it will mean a greater share of toxic assets reside with the public rather than the bankcorps.
This leaves the bankcorps with cash to pay down their other CDOs. etc.
Thanks, Mr and Ms FED !.

The ONLY solution is direct government intervention in the employment of Americans.
This is available with the passage of Kucinich's National Emergency Employment Defense(NEED) Act of 2011 - H.R. 2990
http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf

It was just introduced a month ago.
Thanks.

[dadw5boys]

10:18 AM on 10/22/2011

it appears to me the Fed has been claiming ownership if all the real property in the USA buying up bad paper investments. commerical property loans are still failing

[Bill Roth]

10:47 AM on 10/22/2011

I read through the bill it appears to allow roll over some of the same board members from the FED. Not a good idea. Also there is a provision in the bill to allow more funds to be purchased from toxic mortgages that should be left at the banks that own them now or originated them. Very good step in right direction. I however don't think Congress will address this bill without public demand. Do you? Thanks for the feed.

[dadw5boys]

10:15 AM on 10/22/2011

loans at interest lol high interest

[DismayedRepub]

09:24 PM on 10/21/2011

Expansion? What expansion? The only thing that’s expanded since 2007 is the national debt. How does piling on yet more debt fix a debt crisis? Well, it doesn’t’, folks.

[Trepasky]

11:12 PM on 10/21/2011

JUst because the past failure to save began 30+ years ago doesn't mean that we should try to 'cut' our way out of a recession.

When demand is low, the only recourse is the folks with money. The wealthy and corporations are not helping, that leave the FEDs.

I realize many believe that austerity will make our economy better but that is rather foolish at this time. More layoffs will further reduce demand and will amplify the recession. THe only recovery will come through jobs and increased revenues from spending and taxes.

UNless magical thinking can subvert reality, we need someone to stimulate and create jobs.

If you do not have the money perhaps some of your wealthy friends or banks or corporations would invest in creating jobs?

[DismayedRepub]

12:45 AM on 10/22/2011

There isn’t enough consumer demand to support full employment. There won’t be enough demand until all the excessive debt is destroyed through pay down or bankruptcy. I don’t believe in austerity for austerities sake but austerity is an effect of knuckling down and paying your bills.

This is how I’ve lived my life and my house is paid off, kids are through college and I’ve got a bit put away. I’d like to retire from my job and start a business but I’m not going to risk my lifesavings while the government is so disruptive to the free market. The uncertainty is chaos.

[joebhed]

08:22 AM on 10/22/2011

Hey, you two.
It doesn't NEED to be that way.
The Constitution gives we the people the right to create our own money.
And there is neither law nor science that says that money MUST be created as a debt.
The solution has been widely recommended by economists ever since the FED came into being.
It is to abolish the private debt-based system of creating our money under fractional-reserve banking, and to restore our revolution-won right to create our money without debt.
The debt-industrialist do have us by the short-hairs as long as we NEED more debt to have money.
But we can't dig the debt-hole deeper to solve the debt crisis. The dismayed one is correct about that.
And there is no NEED to do so.
Congressman Dennis Kucinich proposed his National Emergency Employment Defense (NEED) Act of 2011 just about a month ago, as H.R. 2990.
http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf

Please have a read of it and see that the way forward is to restore our Constitutional right to create money - and put the people back to work.
It is what America NEEDs.
Thanks.

[4eva]

09:07 PM on 10/21/2011

'Stimulus' = back door bailouts to bankers and corporations.

No thanks, we've had enough.

[shadow013]

04:10 PM on 10/22/2011

BofA/Lynch already set up another bail out. Their holding company moved European exposed CDS derivatives under the FDIC-insured banking umbrella. FDIC objects. Fed/Bernanke likes it. That sets FDIC (therefore taxpayers) to back up trillions in potential gambling losses on European banks.

See Reggie Middleton's video. This is scary. And if BofA did it, others will too. Trillions and trillions.
http://www.zerohedge.com/contributed/bank-america-lynching-countrywides-equity-likely-worthess-and-it-will-rape-fdic-insured-

[4eva]

04:48 PM on 10/22/2011

Stupendous isn't it?
Yet hardly a peep of protest.

This is big.

[UndeadPoet]

08:21 AM on 10/24/2011

i don't agree...
ALL the bailouts, including cash for clunkers and healthcare have gone to the carry trade and currency swaps.

All of it. The banks are the gov's middle man doing the Feds dirty work...and they are getting paid nicely to take the heat and keep their mouth shut.

[olddognewtrick]

08:29 PM on 10/21/2011

That finger stuck in your...xxxxxxx is not considered an economic stimulus...

[Bill Roth]

06:34 PM on 10/21/2011

Maybe Yellen could suggest to China that it is time to raise the value of their currency. The USA seems to always be open for a low interest stimulus. Don't want to reduce our debt load too soon? Just trying to figure out how we got in debt in the first place. Tool box of the FED seems to be loaded with only interest. Trying to figure out how more stimulus is going to stabilize prices. Law makers still need to spend like it is 1999 to allow for the expansion of more currency to flood the economy. Could inflation not be to far off? Wow all the thinks the FED can thunk. We all should breath a sigh of relieve the FED has our bank; I mean back.

[jwilson1]

06:15 PM on 10/21/2011

The Banks and Wall Street Blew themselves UP!!!!! and we have to still pay more to keep them a float. They are crooks stealing Americans money!

[UndeadPoet]

08:23 AM on 10/24/2011

tha'ts what they want you to think.

and because so many Americans believe this popular nonsense
no one is protesting the Fed and the Treasury.

[joebhed]

06:10 PM on 10/21/2011

"I would if I could. But I can't. So I won't.""
Sayeth Ms Yellin.

The basic problem lies in the impossibility of Fed monetary actions having any effect on the real economy where we all live and work, when we are in a debt-driven deflationary period.
The private Fed fractional-reserve(debt-based) money system does not work when the economy is deflating.
There is no policy mechanism for putting money into the M-1 part of the economy so as to begin the process of increasing demand, therefrom increasing production, therefrom increasing jobs.

So, thanks for the kind sentiments, Ms. Yellin, but, PLEASE, no QE 3 that will yet again increase the unconscionably "excess" reserves at the banks, putting money where the bankers can use it to fund speculative asset and commodity investments.

Only the government could have the authority to directly fund an aggregate demand push for the economy.
George W. Bush's $600 per head did more for the American economy than the Trillions that the Obama Fed has pushed onto the big-bank balance sheet.

Therefore, it is only through government-paid, non-debt funding of the American economy that we can put the American people back to work.
Fortunately, Congressman Dennis Kucinich has such a plan all spelled out here:
http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf

Unfortunately, the solution would put Ms. Yellin and the other Governors on the Fed Board out of their jobs.
Pity.

[Ted229]

12:56 AM on 10/22/2011

"PLEASE, no QE 3"

======================
I agree. I don't need to see my saving devalued again.

[UndeadPoet]

08:25 AM on 10/24/2011

bank downgrades will achieve the same purpose.
debt ceiling in about 3 weeks
bank downgrades about the same time

[Queen Regnant]

12:51 PM on 10/23/2011

Pity I can't fan you again. I often think of GW's little cash prize. I went right out and spent mine. Why has this not been done again? Not enough money left after ensuring no counter parties took a hair cut in 2008?

[joebhed]

03:23 PM on 10/23/2011

Thanks a lot. I am touched.
In truth, there's not enough money left to do anything - that's because we're awaiting the other shoe to drop. That's why the bankers are hoarding their $$Trillions.

Under the debt-based money system, we would need MORE debt to get out of the unpayable debt-hole created by the mal-designed money system itself.
That is just plain un-workable today.
That's WHY we need a new money system.

During the Bush years, with the wars OFF-balance sheet (really just OFF-budget), there was enough room to fund a stimulus.

Now, we're up against stupid debt-ceiling votes and notions of balanced budgets - which are impossible under this system.
The main tenet behind the reforms is the ability of the government to fund the needed job-creation programs without the need to borrow the funds to do so.

Don't look for Krugman or any of the Johnsons, or even the Kuttners or Kleins of the supposedly progressive wing of the Democrats to back such a Bill.
They are all hung up on neo- or post-keynesian ideas that will go nowhere.

We need the radical change called for by Kucinich.
He is the only member of Congress right now who knows what is needed.
Thanks.