Janet Yellen will hold her first press conference since replacing Ben Bernanke later today. Yellen’s style of communicating may be different but EuroPacific’s Peter Schiff isn’t expecting her message to be more of the same.
“She’s going to talk about how the economy is getting better but she’s also going to try to confuse the markets and get the market to believe that the recovery is self-sustaining.” Implicit in that would be the idea that the Federal Reserve will continue to gradually taper its Quantitative Easing program, eventually leading to an increase in rates for the first time since 2008.
Schiff isn’t having it. In the attached video he says Yellen is “putting lipstick on a pig,” talking up the economy while looking for an excuse to keep stimulus in place. It’s an arguable point, but the fact is market participants have become numb to QE. Little has happened since Ben Bernanke first hinted at the prospect of reducing the program last June. The Fed is still buying $30 billion per month in mortgage backed securities; $35 billion in longer-term Treasuries and economic growth is all but invisible.
The employment picture has improved slightly but not so much that the Fed has felt compelled to move meaningfully closer to make any substantive changes to its easy money approach.
If not for the size of the stakes it would be comical that Wall Street would obsessively debate the body language and tone of an incoming Fed chair rather than the content of what she says, but that’s likely to be the case this afternoon. As it stands, an answer to the question of whether or not the economy would collapse if left to its own devices won’t be answered tomorrow or anytime soon.