Did Janet Yellen say "Let them Eat Cake"?

[daredtowork]

Last edited Fri Sep 19, 2014, 08:42 PM - Edit history (1)

A few days ago I read the article in which Janet Yellen opined that Americans needed to protect themselves from "financial setbacks" by "saving more".

http://bigstory.ap.org/article/336c5b954e1e44c1a167d240f0f553cf/yellen-says-us-families-need-boost-savings

This article was immediately disheartening for me because I not only have no savings, I don't even have enough work credits for minimal social security, so no matter what I'm looking at a future of dire poverty. I've been painfully aware of the fact that I missed the window for putting away money for my retirement. All the savings I did put in an IRA while I was working got burnt after my unemployment insurance ran out and before I went on to welfare. I currently have no direct cash income at all. Literally, I have nothing to save.

I read another article on DU about Yellen's recent policies where people started making remarks like "let them eat cake". This led me to articles where this was headline sentiment.

http://www.nakedcapitalism.com/2014/09/fed-forget-escape-velocity-not-gonna-happen-ever.html

http://truth-out.org/buzzflash/commentary/message-to-janet-yellen-if-you-don-t-earn-enough-to-survive-you-can-t-save-money

http://www.zerohedge.com/news/2014-09-18/trolling-continues-fed-chairwoman-expresses-her-condolences-americas-poor

Then there was that thing a few days ago where Yellen was messing with municipal bonds and forcing city governments to live "within their means": http://wallstreetonparade.com/2014/09/the-fed-just-imposed-financial-austerity-on-the-states/

And if your means are smaller than everyone else's then...tough.

I've been told that Yellen's policies are also ultimately responsible for rising rents and the housing crisis where I live because quantitative easing and stimulating the stock market encourages property speculation, especially in desirable areas. So it seems the Fed's policies are making me poorer while I'm being asked to save (in accounts that currently have no interest rates).

I never studied economics in either high school and college, and it often shows. I don't care if I look like an idiot when I ask questions about it because when push comes to shove, I want to actually know what I'm doing when I vote. In reading all this, it seems to me that Yellen is genuinely unaware that, far from being in a position to save and "build assets", a lot of people are creatively financing their survival right now: they are living at home, they went back to school, they are already living on fixed incomes (disability or retirement), they are living on unemployment insurance, they are living off the dregs of their savings (burning their future retirement), they are on their third mortgage, they are balancing debt on 20 credit cards, they are living out of their car, etc. Yellen seems to be projecting the options available to her normative lifestyle on to a lot of people that don't have that option.

So when Yellen says: "Let them save", I do hear "Let them eat cake."

Anyone else hearing that? Wonk'splain me if I'm wrong.

[hobbit709]

1. My comment yesterday was let her work for $9/hr and see how much she saves.

Until then she can STFU.

[daredtowork]

3. The first comment I saw was "Let her eat savings"

Then I saw more and more "Let them eat cake."

A few weeks ago I was asking about the rent-inflation theory (which comes from my house mate), and someone one asked if my house mate was a libertarian. That implied that Yellen was the well-intentioned Democrat using the Fed's powers for greater social justice. But as these articles come out, Yellen is looking less and less like a champion of the people and more and more like some one who has only seen the occasional fake peasant cultivating daffodils at Petit Trianon.

[NYC_SKP]

2. You're right, and it gets worse daily. ACA was the only positive in recent history.

They are threatening to eliminate or greatly curtail social programs, social security, and many of us with modest funds like IRAs saw them vanish while banksters gave themselves raises.

The rich few grow more and more vulgar, while the rest of us have less and less earnings and security in the face of rising costs.

Something needs to give.

[Peacetrain]

5. ^^^^^^^^^^^^^^^

totally agree

[merrily]

6. Most of us would love to see something give. Whether it needs to give is

another issue. Obviously, people like Yellen see no need and they're the ones in power.

I expressed strong doubt about her when she was under consideration. I no longer recall if it was here or another board, but some other Dem gave me what for. Wish I remembered who so I could say "I told you so." Very cold comfort, since I never wanted to be right about her to begin with, but what the hell.

[daredtowork]

15. I always thought she was the good one

After Bernanke left, I thought, "Okay, the Wall Street guy is gone, now we have the sensible woman who is going to do the right thing..."

I'm disappointed.

[daredtowork]

9. IRAs

I took "personal responsibility" when I was working even though I was making an entry level salary, and I put the maximum level into an IRA every year I worked. That enabled me to avoid going on to welfare sooner, but it will do nothing for retirement.

I'm also in an ironic situation regarding the ACA right now. My social services case worker deleted me from the Medi-Cal database. Even though I am eligible, have my Medi-Cal card, and enrolled, I can't access any services, get any medication, or forward any referrals. I've been going without medication for three weeks now. Because the only way the Social Services Appeals unit can address it is to follow the *paper trail*, I'm subject to the time line of whenever they get around to that.

This is "mandated" health care. But nothing is going to happen to Social Services or the State of California for doing this - for putting me through a lot of suffering and possibly putting my life at risk - because kicking me off the program for as long as possible probably saves money somehow.

The really pathetic thing is I was a great ACA success story: I was on track for SSI before I got serious treatment for my medical problems. Now their genius move is to do the thing that's guaranteed to keep me in the system and undo all the progress that was made.

The government savings would have been in investing in the social program, letting it do what it was supposed to do, and helping me get back to work.

[noiretextatique]

22. most of our politicians and the people they appoint

have no idea how most americans live. and they will be fine, no matter what horrible policies they shove down our throats.

[daredtowork]

26. So much for our "representatives"

In my time of greatest need, I didn't make direct contact with even ONE of my LOCAL political representatives. I have never received a stronger message my vote does not count.

[LiberalAndProud]

4. I hear the same.

Truly, truly oblivious to the reality that belongs to far too many in poverty, near-poverty and vanishing middle classes.

[merrily]

7. See, I think she knows the reality very, very well, even if she's never

lived it. I think she knows very well that she is offering "solutions" that cannot possibly be put into practice.

We always assume things like ignorance, cowardice, wanting to be loved by Republicans or some other thing. Personally, I think it's all wishful thinking on our part. I think they know very well what's what and are acting out of self-interest, not fear or need to be loved or anything but self interest.

[daredtowork]

11. Who is she talking to?

Who is her audience here? Who are these fake "solutions" for?

[merrily]

14. ? Did you read the OP and click on the links?

That would answer your question.

[daredtowork]

18. I just saw the CFED one

I thought she was just giving a random press conference to announce Fed policies and general attitudes.

Still, back-scratching fellow agencies isn't exactly focusing on the people who need help.

[merrily]

19. Look again.

[daredtowork]

23. Which article? nt

[noiretextatique]

24. +1000

sickening

[SammyWinstonJack]

77. True.

[daredtowork]

10. I live near San Francisco

Maybe I should go sit outside the Fed for a while and let Yellen take a look at who she's talking to.

[merrily]

21. What makes you think she doesn't know?

Please see Reply 7.

[Thinkingabout]

8. Let's not try to jump over the moon here.

She is very aware if you are low income there is not going to be savings but lots of folks who make much more are not saving either. As a retired person back in the job market in minimum wages I know exactly what people are paid, many that I work with retired and found they could not survive on their retirement whether they retired with a pension and also getting Social Security. I also work with some younger folks trying to exist on minimum wages and with out the social nets assisting them they can not make it.

[daredtowork]

12. Very few jobs offer pensions any more

And people find themselves switching jobs a lot, temping, doing consulting work. Frankly I think Social Security should be buffed up so people can actually retire on it.

[Thinkingabout]

63. I quiet realize there are not many places which offer pensions, we need unions.

To up the Social Security would take more taxes and I would be for upping the taxes. I would like to see wages increase so more people could have the opportunity to join 401's also.

[bbgrunt]

80. well, part of the problem of saving

is that the interest rate is so low there is no value in saving--an objective the fed has pursued for the past 12 years. Since the economy runs on consumer expenditures the low interest rates have supposedly helped maintain investment and consumption.

[Thinkingabout]

83. Yes the interest rate is lower but the need for savings in retirement is greater than the need to

Have earned a higher interest rate.

[hifiguy]

13. They're starting to beg for the tumbrels,

aren't they?

[merrily]

16. Marie Antoinette had, what, the palace guard maybe?

No match for mobs that are large enough.

Today: militarized state and local police; Coast Guard; National Guard; NSA; Homeland Security; United States military; drone technology; Secret Service; CIA; FBI. And, on the other side, a few members of a mostly unarmed, unorganized, untrained left who have no clue how to deal with mace, let alone bullets.

I don't think they're worried that the mob will get to their homes, let alone cart them off.

[daredtowork]

20. Memes of Pepper Spray Cop

Sadly I think that was the greatest triumph of the Occupy Movement on the West Coast.

No, wait. Maybe it was the U.C. Berkeley engineering students who figured out how to float tents over protest areas so law enforcement agents couldn't tear them down. There really should have been more of that.

[merrily]

25. Bulletproof tents? Occupy was a peaceful movement.

Tumbrels were not a peaceful instrument of a peaceful French revolution and that was what I was replying to,

[daredtowork]

27. Flying tents are funny-shaped drones, basically

If you think about it.

I thought they were a great assertion of the potential power of the people to fight back against arbitrary authority.

[awoke_in_2003]

69. Don't forget Blackwater....

or whatever they are calling themselves now to avoid lawsuits.

[merrily]

70. Yes, and other mercenaries. And the Reserve. Plus, I bet if they felt like it, they could

authorize anyone who knows how to use a weapon to get on the protestors, from private security guards to hunters. Maybe some gun enthusiasts would even volunteer to help down put down the left--because, if there were an uprising, the left would be terrorists.

Air marshalls, too.

I'm sure we're still leaving people out. Every department of the federal government has its own personnel whose job description includes being armed and ready to use a weapon.

And that's if the left could even plan anything to begin with, with cameras everywhere and the NSA listening to everything and watching everything. The Tsarnaevs might have fallen through the cracks, but not the left. They've been watching us ever since the first Russian Revolution.

[hifiguy]

81. + a brazilian.

Shit gonna go down one way or another.

[merrily]

99. Yes, it's falling on the 99%.

[geek tragedy]

17. No she was pointing out that many people

suffer from economic insecurity.

[Nye Bevan]

28. No, she did not. And she did not say "people need to save more".

Try reading the transcript for yourself.

[daredtowork]

35. Accumulate more assets isn't saving? nt

[Nye Bevan]

40. She didn't even say "people need to accumulate more assets" (nt)

[VanillaRhapsody]

60. DUH YES they do.....she is stating the Obvious....while pointing out how difficult that is now...

Jeebus H Christ on a Cracker....you Independents do NOTHING but whine about Democrats.....all you co is complain complain complain....and JUMP at ANY opportunity to bash Democrats on DU....this meme makes it quite painfully obvious.....You all whine like Teabaggers! If she opened a window and emptied her own bank account out the window onto homeless people you would complain "that is only a one time effort...what about tomorrow!"

[Adam051188]

29. economics is like everything else.

the big picture is simple. the nuances are more complex and are influenced by other nuances.

people who try to make things seem more complicated than they need to be are usually doing so because they desire to take advantage of others.

when i hear "let them save", to me it means "i have no idea what to do".

[Warpy]

30. I said that yesterday and got jumped on

Oh, well.

If Yellen wants us to save, she needs to do two things: first, throw her considerable clout into getting us a $15/hour minimum wage; and second, get those interest rates above the inflation rate using the CPI market basket before Greenspan fucked it up.

[Nobel_Twaddle_III]

41. I would have to agree with you

In my view, a minimum wage lower then 1/160 of what it cost to stay alive per month, is corporate welfare. I believe this because then my taxes have to go to subsidize their employees food housing and healthcare.

[Dont call me Shirley]

31. That's what I thought "we don't have anything to save, who else but the 2% does?"

I like your "let them eat cake analysis", daredtowork. So many of us are either I the same situation as you or a paycheck away from disaster.

I've been listening a lot to the Beatles revolution lately. Being an ancestor of the American Revolution, I say to the 1% "let you eat cat food"

[daredtowork]

33. They wouldn't get it because

Their cats are eating Lobster Newberg, and they wouldn't turn it down on good china.

[Dont call me Shirley]

37. ..

[Enthusiast]

32. Janet Yellen expressed support for Supply Side Economics.

As if it had been proven effective. Hey, Mr. Obama appointed her so I expect the worst.

[daredtowork]

34. I think the tone was set

When Obama appointed Larry Summers to lead the National Economic Council. All we've had from there on out is the same old bozo Wall Street economics we've been getting since the Reagan era.

[1StrongBlackMan]

49. Okay ...

When did she do that?

[Enthusiast]

82. I watched a short clip on TV, little more than a sound bite,

where she voiced support for supply-side.

[1StrongBlackMan]

87. Of course you did ...

on a completely unrelated matter (I'm sure) ... I googled "Yellen" and "supply-side economics" and the first hit was "breitbart".

[woo me with science]

36. But...but...THIS ADMINISTRATION IS JUST LIKE FDR's!!!11!1!11!

[AZ Progressive]

50. FDR would roll in his grave if he knew how Americans have become

That it's even acceptable now to kick the poor and homeless and blame them for their situation, especially when in reality often a lot of things outside of their control brought them to such a situation.

[Nobel_Twaddle_III]

38. Forgive me but I do not understand "enough work credits for minimal social security"

how could anyone who worked, get anywhere near retirement age and not have enough work credits for minimal social security?
Are you disabled ?

[daredtowork]

42. Yes

I was in graduate school, largely on fellowship until I was 30. Throughout my 30s, I was trying to temp my way into a full time job so I could get medical coverage I needed to beat the problems which come with my genetic condition. In short, I didn't beat that cycle. When I couldn't get temp work anymore, I found I didn't quite have enough work credits for SSDI (which would be the minimum for retirement social security): I had to apply for SSI instead. It takes years to get that, and when my savings ran out I ended up having to go on general assistance welfare.

I'm the textbook argument for universal healthcare. As soon as the ACA kicked in, and I did get some of my problems addressed, I was getting to a place where I no longer met the criteria for being disabled. In fact, I might be back in the mainstream workforce right now if my attempt to work hadn't screwed me over in every way, including getting me thrown out of my medical coverage.

I'm now middle aged: old enough to know when I'm between a rock and a hard place.

[Nobel_Twaddle_III]

43. Thank You! for explaning that to me.

Good luck with the SSI application.

[daredtowork]

47. I was hoping that it would be unnecessary

Or at least that it would be a "closed period" SSI case just to cover the time I've been on General Assistance (which is a loan from State of California).

I've been really amazed at the improvements in my condition over the last few months. Seriously miraculous. I've been pushing very hard very hard to go back to work.

I've been "benched" for years just because I couldn't get a job with medical coverage, and it's hard for a person who is disabled to get a good job in the first place. But if I'd had the coverage, my condition could have improved to the point of being practically normal, especially when I was younger. Not only was my productivity wasted: I became a drain on the system.

And now here I am again, positioned to get back to work thanks to the ACA, the rug is pulled out from under me yet again. I'm not sure what kind of condition I'll be in when my case finally gets heard for SSI, but the State seems to be trying to make sure it's the worst condition possible, and that I'm back on the SSI track again after all.

What pisses me off the most is my political representatives in the area have had nothing to say about this at all.

[Taitertots]

39. It is implied that she was talking about people with enough income to choose to save

If you are going to get your economic news from non-academic sources at least go to "The Conscience of a Liberal".
http://krugman.blogs.nytimes.com/

[daredtowork]

44. I usually get paywalled by NYT

But I read Krugman a lot, as well as Jared Bernstein, whom I had the pleasure of briefly working for once. As I mentioned in my OP, I freely admit economics is a very weak suit for me, and I welcome all insights to make up for that flaw in my education. I grew up in a rural area where the math teachers were the football coaches, no one (except me) went to a 4 year college, and I may just be the only girl that wasn't pregnant before the 10th grade - I'm an autodidact as far as the "fundamentals" part of my education goes, if that explains anything.

[jeff47]

58. Use the "incognito" mode of your web browser to go to the NYT.

Google Chrome calls it "incognito". Other browsers use something referring to "private".

The result is the NYT cookie that causes you to get paywalled gets deleted when you close the browser. So the NYT has no idea how often you've been there, and you don't get paywalled.

[daredtowork]

66. Ooh thanks!

I've tried to eliminate all the variables before via NoScript with no luck. I didn't realize it was a matter of just deleting that cookie.

[Boreal]

45. The other day I was in the car

and scanning the dial for some talk radio. I ended up listening to the Larry Kudlow (CNBC host) show and they were talking about Yellen. He and his guests were complaining that the number one Yellen watches for as a bad indicator for the economy is RISING WAGES! Mind you, this was the CNBC crowd (Wall Street) and they strongly took issue with Yellen on this. In fact, they were all about the "rising tide" POV where Yellen is not.

I really empathize with you, OP. We're broke with a mortgage. I was denied SS disability eight years ago and have had ZERO income since (because I really cannot work) and my significant other is on disability. I'm really worried because it's getting to the point where we're going to have a get a different car and we don't have the funds to buy anything that won't be a risk of more problems.

[1StrongBlackMan]

52. I think you mis-heard ...

or they were spinning with a purpose, e.g., "Bad Indicator", as in "we don't want QE to end."

Yes ... she looks for (among other indicators) raising wages; but not as a "bad indicator", but rather, as a sign of an improving economy that no longer needs to be propped up by the Fed.

[Boreal]

55. No, I didn't mis-hear

Yellen doesn't want wages & salaries to rise because she thinks it's inflationary.

[jeff47]

61. You didn't miss-hear what the idiots said.

However, they are misrepresenting what the goal is.

Rising wages are a sign of inflation. As a result, if wages were shooting up and there were other signs of inflation, then the Fed should raise interest rates to combat inflation.

The idiots have been predicting massive inflation for years. They've been wrong for years. They're talking about rising wages because they're absolutely sure that there's massive inflation, so wages must be going up. Despite wages not actually going up.

Yellen is keeping the Fed's stimulus programs going precisely because inflation is essentially zero, and because wages are not rising. The idiots hate this, and are demanding Yellen raise interest rates now.

[1StrongBlackMan]

85. Yellen doesn't want wages and salaries to rise? ...

have you heard a single word she has spoken before her Fed days? The reason she was selected (one of the reasons) was her academic and advocacy work focused on working class issues.

[daredtowork]

54. I'd keep applying

Do you mean denied after all appeals were exhausted? Because you are denied the first two times just because the State wants to keep people off of SSI. Then the third time you supposedly really need a lawyer or advocate: I think this is unfair because it puts a tremendous burden of legal expertise or ability to chase down that legal expert on the most weak/stressed out/exhausted person in the system. Most nonprofit lawyers have waiting lists a zillion miles long, and private ones will look for the easiest winnable cases. It really is a terrible racket, and no one's focus is on who needs help and how to get them resources as quickly as possible.

I bet there's some sort of good samaritan's list or way to frame a GoFundMe project that could get you the car. Maybe you could propose to paint it in some interesting way. Some guy managed to raise beaucoup bucks for his project making a potato salad a few months ago. If you're not on welfare, or in some situation where you can get burned by the intake of funds, that's what I'd do.

[BobbyBoring]

93. Call Bender and Bender

They got my S.O. disability in a few months.

[marlene.elyse]

46. One of my favorite topics..

If Janet Yellen's advice is that we need to save, that is absurd.

Not to mention the fact that we are in a recession so we need all possible dollars to be moving around the economy right now. The Fed sets the policy that encourages saving or investing.

The Federal Funds rate(the rate bankers loan to one another) has been at zero for years. This was an attempt to try to stimulate the economy and get banks to make loans. When that didn't work they started Quantitative Easing. So the Fed is investing in longer term treasuries and mortgage-backed securities, etc. Creating money and pumping huge amounts into the banking system.

At the same time, our congress decided we needed to cut spending and suffer austerity. Even if the banks were willing to loan, there is no demand. So all this free money is encouraging speculation by the banks, the stock market is through the roof. The more money they print, the more the dollars we are holding are devalued. And with the rates being kept low, there is no incentive for saving.

Anyway, this is my understanding of our current situation.

If you haven't seen it, I would recommend watching the Four Horsemen documentary on youtube.

[AdHocSolver]

76. Good description of how the system works to transfer middle class assets to the 1 percent.

Jobs are created when there is demand for goods and services.

The money given to the wealthy will NOT create jobs when there is no demand.

Does General Motors hire workers and expand production when few people are buying cars?

Would prudent consumers buy stuff when the value of their assets is deteriorating when keeping them in bank accounts paying 0.1 percent interest while the real inflation rate is eating the value of their wages (assuming they have a job).

This is one of the mechanisms that is transferring the assets of the middle class to the corporate 1 percent: The Federal Reserve is duplicitous in this scheme and has been from the beginning (think Greenspan, Bernanke, and ,now, Yellen for this current round of thievery.)

The banks pay around 0.1 percent interest to depositors for the use of their money. They collect 14 percent (or more) on unpaid balances on credit cards. The banks collect, in this case, 140 times the cost of the use of depositors' money ( 0.14 / 0.001 = 140). The Fed makes sure all banks comply with paying low interest rates to prevent competition by the banks to attract depositors by offering higher interest on deposits.

Since demand for goods is too low for corporations to make money merely from producing goods, the banks "lend" money to Wall Street (made legal again due to repeal of the Glass-Steagall Act) to buy out and merge once competing companies, fire "duplicate" employees to boost next quarters' profits, and get away with raising prices since there is now less competition.

The stock market is at record high levels because of all the money being thrown at it. Wall Street "speculators" and corporate insiders "borrow" money at low interest rates, buy up a targeted company's stock, wait for the "suckers" to invest driving up the price still further, and then sell their shares at huge profits.

How quickly the Enron scam has been forgotten.

The Federal Reserve is a central bank run by the banks and Wall Street for their benefit. Forget mission statements and reputed policy goals. Look at what they do and what are the results.

[JEB]

48. Austerity for you peons

so the wealthy can save even more. You can't have too big a pile of money you know.

[FlatStanley]

51. It seems the only citizens expected to live in austerity

Are human citizens; corporate citizens not so much.

[OneCrazyDiamond]

53. She is a banker.

It is what they do.

[WinkyDink]

56. "The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges,

to beg in the streets, and to steal bread."

Anatole France, The Red Lily, 1894, chapter 7

[daredtowork]

57. Except in Berkeley

Had the Sit/Lie law passed here, the rich would have been allowed to continue to sit around the grassy areas of the gourmet ghetto to play at being faux bohemians while nibbling on their artisan pizzas.

The Sit/Lie law did not pass, so now we get a Green Shirt para-police force paid for by local businesses to go around to tell poor people sitting on the public sidewalk to move along, enforcing a non-existing law selectively while continuing to leave the faux bohemians alone.

[WinkyDink]

89. Ah. Well, playing poor has always gone over better than being poor.

[Turbineguy]

59. Context is eveything.

Americans need to save more. And how do they save more? They have get more pay. And how do they get more pay? Well, since increased productivity is not related anymore, how about getting a little from the looter class?

How about voting for a congress that doesn't try and fuck the country?

[pnwmom]

62. Except she didn't say that.

Please provide the link showing where she said that "people should save more."

What she has been saying is that the economy has been bad so that people couldn't or haven't saved more.

Two different things. She's not blaming individuals. She's saying the economy isn't strong enough yet, and that's why she doesn't want to raise rates.

[daredtowork]

64. In the AP article

Yellen's solution is to somehow (unclear how) help people accumulate more assets so...which seems to be interpreted everywhere as "saving".

Again, I'm the first to admit economics is my weak suit. Enlighten me if this is not the case.

[pnwmom]

65. What is wrong with fixing the economy so that people can accumulate more savings?

That isn't at all the same as blaming them for not having saved more.

She was being urged to raise interest rates, which would CONTRACT the economy. She says she won't do that because the economy isn't strong enough -- as evidenced by the low rate of savings.

[daredtowork]

67. That's not how it looks

"She said that the Fed wanted to promote efforts to encourage families to take small steps that could over time lead to the accumulation of assets.

Yellen said nothing in her brief remarks about the Fed's interest rate policies. "

Nothing at all is wrong with having assets or encouraging people to have them. When I was working, I put the maximum contribution in an a Roth IRA every year. For me the problem comes when these assertions are seen as somehow solving problems. In the wrong economic climate, they do not. My entire small savings did not form a nest egg for retirement - it was burned during long periods of unemployment and the years-long application process for SSI.

Doesn't it seem her methods of "making the economy strong enough" are only resulting in windfalls to people on Wall Street and rising rents (due to property speculation) that people on fixed incomes can't afford? Isn't there any change up that could be considered here?

[pnwmom]

68. Wall Street expected her to this time, but she didn't raise the rates.

http://www.usnews.com/opinion/economic-intelligence/2014/09/19/janet-yellen-and-the-federal-reserve-are-right-to-focus-on-jobs

Federal Reserve policymakers reiterated their expectation this week that they would keep interest rates low for a “considerable time” after they end the Fed’s large-scale asset purchase plan (a.k.a. “quantitative easing”), most likely after their next meeting in October. That’s not what inflation hawks and many pundits hoped to hear, but it’s the right thing to do in light of ongoing labor market weakness and no hint of unacceptable inflation on the horizon.

Despite a recovery that began in June 2009, the economy continues to suffer from inadequate demand for goods and services relative to its capacity to supply them. In the labor market, that manifests itself as excess unemployment and underemployment. As Fed Chair Janet Yellen said at her press conference on the Fed’s latest monetary policy statement, the economy continues to make progress toward the Fed’s goal of maximum sustainable employment, but it’s not there yet.

“There are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work, and too many who are not searching for a job but would be if the labor market were stronger,” said Yellen.

[daredtowork]

71. But has QE been creating jobs?

That's where I'm confused. I agree with her reasons for action. I'm just confused about whether the actions are leading to results, considering the fact we STILL don't have enough jobs after YEARS of QE.

[pnwmom]

72. We have millions more jobs since the Bush crash -- but that's not enough.

Last edited Sat Sep 20, 2014, 01:33 AM - Edit history (1)

That's why she's still concentrating on increasing jobs instead of worrying about inflation, like the economic hawks want her to do.

Do you know how many years it took us to dig out of the depression? This crash could have been worse than the Depression, except that Obama and the Congress and the Feds stopped the job hemorrhaging before it was too late. But when Obama came into office, we were losing several hundred thousand jobs every month.

No, I'm not satisfied with the current state of the economy -- but neither is Yellen. That's why she's not going to apply the brakes that a lot of the 1% want her to apply.

I think you're blaming the wrong person.

[daredtowork]

73. I'm not blaming Yellen (yet) on QE

Though I'd like to understand better why it's still the strategy of choice. I'm not for giving the 1% what they want either. I guess I'm just used to the definition of crazy being to do the same thing over and over while expecting different results. It's unclear to me the actions the Fed has taken are in line with the result we supposedly want.

Also if QE is largely responsible for the massive property speculation and skyrocketing rents where I live, that has been devastating to people on fixed incomes and those in the most precarious positions in the economy. I was at an advocacy center on Wednesday, and all afternoon the receptionist fielded one phone call after another from people desperately seeking help with housing. These were disabled people who weren't going to have the option to go out and "make more money". They are facing homelessness over this situation.

What I would blame Yellen for - and again my OP was posed in the form of a question because I'm not sure if I understood her remarks correctly - is if Yellen is seriously suggesting the answer is for poor people to save more so they can weather future "bumps in the road". I think that's akin to "Let them eat cake" - but a number of people have offered other interpretations. I haven't drawn a final conclusion yet - waiting to see how the whole thread shakes out.

[pnwmom]

74. I don't know where you live, but I doubt the QE is largely responsible for the massive property

speculation, because most of the country is NOT having that experience.

I think Yellen understands that it wouldn't be a simple matter for most people to save more and make their lives better. That's why she's determined to keep trying to grow the economy, and why she's standing up to the 1 per centers who want her to slow it down.

[daredtowork]

75. I think QE has to converge with "desirable" property

I live in the San Francisco Bay area. I've lived here since 1992, and I moved several times between 1992 and 1999. I've lived in the same place since 1999. Because I've never been in a position to buy property, I've kept an eye on the rental market the whole time. There has been stead inflation since I've moved here, with a few spurts - but nothing like the last few years. The sense of injustice has been enormous since massive unemployment converged with massive displacement from housing (and a lot of massive pomposity about how long time residents should "move on" since they were now too poor to hold on to their "desirable" property according to the iron laws of the market).

This area is also a major center for the disability rights movement, so there are many people here on fixed incomes. And of course there are many students competing for the cheaper housing as well. And this is an idealistic area: many people work for very low salaries since they are working for nonprofits - and they can't afford housing here, either.

My house mate, who is better at economic argument than I am, places the entire blame on Yellen for this situation. I do not always agree with my house mate: we're both Democrats, but he has a tinge of left libertarian, while I have a streak of socialism. However, since I'm super weak on economics, I haven't contested his theory that attributes rising rents to Yellen. I wish I could see her own answers to his accusation.

[pnwmom]

78. What's going on there is not the convergence of the QE and desirable property.

There is plenty of property in the US just as "desirable" as in the San Fran area (no matter what people there think) -- but what other city has been going through those skyrocketing prices?

What's going on there is the convergence of the millionaires of Google, Apple, and related companies, and all the highly paid tech people who are lured to the area.

If you're leaning socialist, don't trust anything your libertarian-leaning friend says about economics. Consider reading Paul Krugman's column in the NYTimes, instead. He's a PhD in economics who left a tenured spot at Princeton to teach at City University in New York; he's won the Nobel prize in Economics, and he's a strong progressive.

[daredtowork]

79. I do read Krugman

He and Jared Bernstein are two of my favorites - but they tend to write broad opinion pieces. My friend argues "hard economics". I don't have the educational background to match it.

By the way the tech billionaires, including Google, were here before the recent mega rent-inflation. Something new happened over the last 5 years.

[pnwmom]

84. The tech industry has been increasing steadily, but that's not the whole picture.

I was curious about this whole situation because my daughter lives in the larger Bay area. So I went googling.

I suggest you read at least the lengthy article at the first link here, for a really good explanation of the situation. The answer appears to be a combination of market forces your libertarian friend would approve of (lots of demand) and market restrictions he wouldn’t (regulations on housing). But there is no connection in anything of this to anything the Federal Reserve has been doing. The San Francisco bay's current situation is unique.

It appears to be a simple case of supply and demand. New housing is limited by heavy regulations and NIMBY zoning. (There are a lot of people living in their own homes or in rent-controlled apartments who like the city the way it is and have no interest in increasing the housing supply.) The tech industry, and its employment, haven’t been flat since 2007, they’ve been growing. And -- besides being sought after by people in the tech industry -- real estate in San Fran is now being chased by an international clientele, as in New York and other major world cities.

San Francisco’s housing supply has been growing at the rate of 1500 units a year for the last 20 years. Meanwhile, the US census estimates the population increased by 32,000 between 2010 and 2013 alone.

http://techcrunch.com/2014/04/14/sf-housing/

As tech workers have moved into cities, the industry has changed San Francisco’s culture and San Francisco has changed the technology industry.

Nevertheless, while tech is fueling San Francisco’s current boom and has helped cut the city’s unemployment rate by about half since 2010, this gentrification wave has been going on for decades longer than the word “dot-com” has existed.

SNIP

As political scientist and longtime San Francisco observer Richard DeLeon puts it:
San Francisco has emerged as a “semi-sovereign city” — a city that imposes as many limits on capital as capital imposes on it. Mislabeled by some detractors as socialist or radical in the Marxist tradition, San Francisco’s progressivism is concerned with consumption more than production, residence more than workplace, meaning more than materialism, community empowerment more than class struggle. Its first priority is not revolution but protection — protection of the city’s environment, architectural heritage, neighborhoods, diversity, and overall quality of life from the radical transformations of turbulent American capitalism.
While we have to thank these movements for preserving so much of the land surrounding San Francisco and the city’s beautiful Victorians, one side effect is that the city has added an average of 1,500 units per year for the last 20 years. Meanwhile, the U.S. Census estimates that the city’s population grew by 32,000 people from 2010 to 2013 alone.


http://www.bizjournals.com/sanfrancisco/news/2014/07/30/san-francisco-housing-prices-bubble-real-estate.html?page=all

San Francisco, he said, is the least affordable housing market in the United States. According to Trulia data, just 14 percent of homes for sale are within reach of middle-class buyers. That compares to 34 percent in San Jose and 40 percent in Oakland.

But the city’s home prices don’t appear to be in a bubble, he said. At most, homes are about 6 percent overvalued in the city, he said, compared to the fundamentals of income, rents and supply and demand.

“Long term, that suggests we are in line for a 6 percent price correction,” Kolko said.

Using the same data to compare San Francisco’s home prices in 2006 showed that real estate at that time was 53 percent overvalued. “Now that’s a bubble,” Kolko said.

http://www.nydailynews.com/life-style/real-estate/san-francisco-real-estate-prices-soar-article-1.1887324

The technology's industry's rapid growth coupled with 49-square-mile San Francisco's constrained supply of housing is a big part of the story behind the city's ascension to a rarified real estate bracket already occupied by New York City, but Silicon Valley wealth also is stoking the market in the greater San Francisco Bay Area, according to Andrew LePage, an analyst with CoreLogic DataQuick, a real estate research firm in Irvine, California.

George Limperis, an agent with Paragon Real Estate Group in San Francisco, agrees that freshly minted technology millionaires who can afford to bid up a property until they win it with an all-cash offer are helping to drive up demand. But unlike during the city's first tech boom in the late 1990s, the buyers prepared to lay down more than $1 million on a fixer-upper in a neighborhood within walking distance of shops and restaurants also include Asian investors and retirees from other major cities who already are accustomed to skyscraper prices for shoebox dwellings, Limperis said.
"It feels like a very different city than it certainly did even 15 years ago. There is money coming from so many places now," he said. "So many of these buyers today, they have lived in London, they have lived in Hong Kong, they have lived in New York, and to them these prices are parallel. We can't compare San Francisco with median housing prices even elsewhere in California because this is an international level we are dealing with."

http://blog.sfgate.com/ontheblock/2013/10/29/chinese-investor-activity-in-san-francisco-real-estate-reaching-fever-pitch/#17353101=0

Among the United States, California is the most popular. More than half the homes sold to foreign buyers in California go to Chinese nationals, estimates CNN Money. In San Francisco proper, Chinese investor property hunting climbed 84%, month-over-month from July to August 2013– it was also 456% higher than it was this January. And the favorite SF neighborhood? Think iconic San Francisco.

http://blog.sfgate.com/ontheblock/2014/05/02/catering-to-chinese-buyers-in-san-franciscos-real-estate-market/#22929101=0

If Chinese buyers move fast, they also hold for the long-term, something that does concern McLaughlin. While high-end U.S. buyers are likely to purchase a $5-million property and then sell it a few years later to buy a $10-million property, Chinese buyers tend to buy, hold and then buy more. McLaughlin says his firm recently had Chinese buyers purchase a $2-million-plus property in Seacliff because they just had a baby and were planning to move to America in six years for kindergarten. That lack of turnover, especially in places like San Francisco that have low inventory to begin with, could drive prices even higher, he says.

[daredtowork]

86. Thanks for all the resources!

Even if I study them, I doubt I will ever be able to trump my house mate where economics are concerned. He's pretty confidant in his Yellen theory. But this is a matter we analyze often, and it's good to have new fodder for the discussion. I was unaware of the Chinese investor element.

[pnwmom]

88. Just tell him that association is not causation. Surely he's smart enough to understand that.

So what if the QE2 happened during the same time period? So did a huge influx of new people into the city, which was more than enough to explain the pressures on the housing supply.

It's a simple case of San Francisco's very limited supply vs. an ever-increasing demand.

[daredtowork]

90. We live in Berkeley

It's not clear that the problem here is being caused simply from overflow from San Francisco, though the mayor here has been making a strong bid for to attract tech wealth, and neighboring Oakland has been doing the same. The Chinese investing thing might be an unseen factor, though.

There have been several big rent spikes since I moved here, but the ratio of rent spike to displace people over the last few years is like nothing I've nothing I've seen. It might be because I have more regular contact with people on fixed incomes now, though.

It's also pretty clear that the mayor's informal tactic is to drive the displaced people away. All public housing units in Berkeley have been sold. The Section 8 wait list will never open here. Berkeley gets grants for low incoming housing, but the money keeps going to "consultants", and the problem keeps getting routed back into "committee". There is no place to stay while waiting lists for the existing low income units are miles long. A friend of mine who works at a nonprofit was in tears because she had to find a new place to live: impossible on her salary. The mayor gambles that people facing homelessness will choose to go elsewhere rather than sit out on the street. Meanwhile luxury apartments for tech workers get built. It's not that our "political representatives" are unaware of the problem: they are just practicing their own style of social engineering to push the riffraff out.

[pnwmom]

91. I think the points addressed in the first article would apply to Berkeley as well.

And I'm guessing there are more international buyers there, too, just as there are more international students. And all the owners have an interest in keeping supply low, because that raises the value of their own properties.

I know. It sucks, unless you happened to be one of those owners.

[daredtowork]

92. Rich parents also buy property as investments

They give their children a place to stay while they study (and perhaps collect some additional income from renters), and then they profit from the property after their child graduates.

For the 99% college housing is a cost not an investment. In Berkeley, I think you would need a cash down stake in the hundreds of thousands of dollars. Small houses are now in the million price range.

[cheapdate]

94. If low-income Americans would adopt the kind of lifestyles and living arrangements

that were typical for poor people in the 19th and early 20th century, then they could afford to save money for retirement -- that is, when they retire from careers in transient farm labor or itinerant workers.

Americans today are spoiled and should take lessons from past generations. Past generations knew that it took sacrifice to save for a comfortable retirement. They lived in work camps and foraged for wild foods. They were thrifty and didn't spend money on new clothes every season, in fact, they didn't spend money on new clothes ever.

They built IRAs and retired comfortably to Florida.

The End.

[daredtowork]

95. You mean

overcrowded unsanitary disease-ridden tenements? I believe poor people tended to die off before getting to "retirement" in the 19th century.

It seems like you are representing the desire for progress as being "spoiled". I seem to remember Romney's wife saying something about it being time for the grown ups to take charge. So the 1% get to be the autonomous adults, telling the rest of us kids that we're "spoiled" for trying to get out of the work camps?

[cheapdate]

97. I assumed that the satire in my post was fairly obvious.

SNAP and other social welfare programs are about the only things keeping mass numbers of American families from the kind of abject poverty and hunger that was once common. Yet the right is absolutely determined to bring those times back. They won't be satisfied until people are living in rags and foraging and begging for food.

You missed my satire.

Life is becoming harder and harder for millions of people. The basic arrangement of the political structure is being revealed more and more for what it is -- a weapon for the rich and powerful to oppress the weak.

[daredtowork]

98. yep, sorry the satire went right past me

But I agree: Hoovervilles, here we come.

I think a lot of the GOP emphasis on the family is about this being conceived as the structure that shelters the weak and takes care of their problems. This tacit assumption is especially oppressive for women.

An agenda for progress would prioritize autonomy for individuals - reduce their patriarchal dependence as much as possible. We don't want to swap that out for State dependence, but State safety nets can keep individuals from from patriarchal servitude. That's how we should be looking at it.

[cheapdate]

100. I'm not sure I see a lot of GOP concern for structures that "shelter the weak."

The GOP's conception of family can be thought of as a "strict father model". By extension, the strict father model also frames their understanding of government and society. Most conservative political and moral beliefs are consistent with the strict father frame. Right and wrong are strict and unchanging and the father is the guardian. Children must be taught strict morality in order to live productive and secure lives. When they stray, the strict father must deal harshly with it, or else they'll be lost.

"Liberals," on the other hand, follow a "nurturing parent model" in their conception of family, government, and society. Liberals prepare their children for adulthood by allowing them freedom to find their way, within limits.

[hfojvt]

96. she never said "let them save"

She just made the point that people should save - at least up to 3 months worth of expenses.

You seem to want to increase the number of people who are "barely able to get by". It is NOT that large. Maybe 10% of the population can barely make ends meet. And maybe 25% of the population can NOT save money because they don't make enough.

The other 75% of us can.

As for quantitative easing, that should be stimulating the entre economy, and not just the stock market. I agree with Krugman who wrote that the economy seems to run better with 2-3% inflation. Also, that with the near collapse of 2008 one of our big dangers has been DEflation, which we really want to avoid.

I might also note that interest rates seem to have gone up a little bit in the last two months. Which I am taking as a hopeful sign.