Outgoing Treasury Secretary Janet Yellen has apologized (sort of) for the Biden administration’s failure to reign in the U.S. financial house and presiding over an increase in trillions of dollars in debt for the nation. According to Tyler Durden, writing for Zero Hedge, Yellen said at a Wall Street Journal organized event in December:
I am concerned about fiscal sustainability and I am sorry that we haven’t made progress . . . . [T]he deficit needs to be brought down especially now that we’re in an environment of higher interest rates.*
A little too late – don’t you think, Janet?
Yellen was Federal Reserve chairman from February 2014 to February 2018 and, before that, served as vice chairman under Ben Bernanke. She was replaced by President Donald Trump with Jerome Powell.
Yellen, as do all Fed officials, reiterated the point that the central bank remains “independent” to pursue its mandate of full employment and price stability.
This is nonsense like most of what she has said over the course of her long and disastrous career. Instead of independence, her move from Fed chair to Treasury secretary is a striking demonstration of just how political the Fed and the nation’s entire monetary and financial system truly is.
Nevertheless, she continued to espouse the hypocrisy:
I see from my own experience is that countries perform better – they have not only inflation performance – but real performance in terms of job creation and growth is also stronger when a central bank is left to use its best judgement without political influence.
Under Yellen as Fed chair (the direct subordinate to Ben Bernanke), and as Treasury secretary, it has been estimated that the U.S. debt skyrocketed to the unfathomable amount of $15 trillion. Yet, it is only when she is about to depart her post that Yellen is lamenting the Biden administration’s efforts to reign in the debt. In fact, there were none.
Besides the debt, the interest on it under Yellen’s watch stands at $1.2 trillion yearly, which is now the second-largest federal expenditure only topped by Social Security. In her mea culpa, Yellen ignored this ticking timebomb.
One of the non-sensical reasons that Yellen often gave to justify massive U.S. borrowing was that interest rates over the past decade had been historically low. She argued that the federal government should take advantage – and did – of the low-interest rate environment.
Economic nincompoops like Yellen apparently didn’t understand that interest rates were low because the Fed was artificially suppressing them through currency debasement.
Recklessly borrowing for this reason would be similar to a drunk refusing to sober up because liquor prices had fallen to all-time lows. Yet, this is what a secretary of the U.S. Treasury espouses for monetary policy. Worse, few in the financial press or Congress, where Fed officials routinely testify, are ever questioned about such a dangerous idea.
Most sensible people, if given the chance, would ask: “What would happen to the debt and interest on the debt if rates would go up?” The United States may soon see this unpleasant reality come to fruition.
Sadly, Yellen’s replacement, Scott Bessent, who was a business associate of George Soros, is an “easy money” advocate, as is Trump, who continually badgered Fed Chairman Powell during his first term for not cutting interest rates.
It will be interesting to see what actions the new Treasury secretary will take if the long-anticipated debt crisis arrives. More likely than not, the second Trump administration will follow the monetary policies of the disgraced Janet Yellen.
*Tyler Durden, “Janet Yellen ‘Sorry After Presiding Over $15 Trillion Increase in US Debt.” 13 December 2024 https://www.zerohedge.com/markets/janet-yellen-sorry-after-presiding-over-15-trillion-increase-us-debt
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