Dear Mrs. Yellen: Get A Real Job

August 27, 2014 – This past weekend saw the6648032895_c81828ba60_z Federal Reserve’s annual Jackson Hole summit take place, an event sponsored by the Kansas City Fed that draws top Fed officials along with the world’s top central bankers. It has become a central bank retreat of sorts, an opportunity for the central banking elites to meet and talk in relative privacy, savor fine food, and enjoy some of the most beautiful landscapes the United States has to offer.
Because of its more relaxed setting, the Jackson Hole meeting has also has become a more widely covered event in recent years, as people hope to glean tidbits of information from informal remarks that otherwise would never make it into official speeches or testimony. Federal Reserve Chairman Janet Yellen gave a much-anticipated speech on Friday, in which she laid out the Fed’s view of the labor market and its relationship with the Federal Reserve’s monetary policy.
Not surprisingly, it only took her two sentences before things began to go horribly wrong. She stated that “More jobs have now been created in this recovery than were lost in the downturn…” Well, it’s not really true that that many millions of jobs were created. Employment peaked in early 2008 at 138.4 million jobs. It bottomed out in late 2009 at 129.7 million jobs, and it only reached the pre-crisis peak in May of this year. Even now, there are only about 650,000 more people employed than there were in early 2008. Yet since that time, the US population has increased by 15 million people. At best, the economy has gained back what was lost during the crisis, but it really hasn’t gained much on top of that.
Gaining back what you have lost isn’t really creation. Imagine your mutual fund dropping from $10,000 to $5,000 in one year, then rising to $10,500 the next year. Have you gained $5.500 in value? No, you’ve gained $500. The rest is just getting back to where you started. But the Fed has to try to play with the numbers to put the best spin on the anemic recovery. Certainly the labor market is complicated, and factors such as immigration, offshoring, and retiring Baby Boomers play roles too, but crowing about how wonderful it is that five years into the “recovery” we’re right back to where we left off in 2008 is crazy.
The Fed’s solution to the unemployment crisis was to pump trillions of dollars of new money into Wall Street. And after many years and trillions of dollars worth of asset purchases, Wall Street has been making record profits. All the while, millions of Main Street Americans continue to suffer unemployment or underemployment. Focusing on aggregates, the Fed says that everything looks wonderful, but because their economic school of thought ignores individuals, they fail to see how ordinary people continue to suffer. As long as aggregate wealth keeps increasing, Keynesians are unconcerned that their policies continues to siphon wealth from the middle class to the rich. Isn’t it time to say that the Fed has failed?
That’s the problem with creating a central bank, staffing it with people who have never worked outside banking or academia, and then giving them carte blanche to run the economy. These are people who have spent their entire lives in ivory towers, cushy government jobs, or Wall Street banks. They have no understanding of ordinary people and what we have to go through. Not only are they out of touch, but they’re also insulated from the results of their actions. Janet Yellen won’t get fired no matter how badly the Fed does, and when she leaves the Fed she’ll rake in huge amounts of money in speaking fees and find a high-paying, low-effort professorship position at some prestigious university. It’s time that we realize that we don’t need a central bank, we don’t need a monetary policy that creates booms and busts, and we can do without economic central planning. Let’s End the Fed and let Dr. Yellen and her colleagues find real jobs.