Janet Yellen: Keynesian Egghead

A Lifetime Worshiping a Bad Theory [The Daily Reckoning] March 24, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Janet Yellen: Keynesian Egghead - Unlike old soldiers, Keynesian economists never die… - Janet Yellen, egghead… - Then Byron King shows you the myths of Keynesianism and how Janet Yellen embraces them… [Urgent Note From Chief Science Officer For My Readers]( I called the rise of 5G technology all the way back in 2011. I called the boom in pot stocks long before they hit the mainstream. I recognized the opportunity in Tesla years before it became the hottest stock in the world. But today, I’m making the biggest call of my career. And if you act fast, it could deliver even bigger gains than 5G, pot stocks, Tesla or anything else… [Click Here For The Details]( Pittsburgh, Pennsylvania Editor’s note: Natural resources maven Byron King studied geology at Harvard at the same time Janet Yellen was there “teaching” economics. In today’s reckoning Byron shows you how Yellen has spent an entire lifetime embracing the myths of Keynesianism. [Byron King] BYRON KING Dear Reader, “Old soldiers never die,” said Gen. Douglas MacArthur in his long-ago farewell address of April 1951. “They just fade away,” he added with a note of deep sadness. I sure wish we could say that about Keynesian economists. That is, about economists who follow the doctrines and dogmas of John Maynard Keynes (1883–1946), a British economist whose main works were published in the 1920s and ’30s and whose influence still steers the field of economics in the current world. Because not only do old Keynesians never seem to die, neither do they even fade away. Indeed, on occasion old Keynesians become secretary of the Treasury, which is the case with Janet Yellen. Here’s why I bring it up… A while back I was organizing boxes in my basement. Inside one carton I found a collection of old Harvard student course catalogs from 1972 through 1978, the years when I studied geology there. Coincidentally, those mid-1970s years also cover a time when a much younger Janet Yellen was on the economics faculty at Harvard. In 1971 Yellen earned a Ph.D. in economics from Yale University. Her thesis was entitled Employment, Output and Capital Accumulation in an Open Economy: A Disequilibrium Approach, prepared under the supervision of Nobel laureates James Tobin and Joseph Stiglitz. Then with new her newly issued New Haven degree in hand, Yellen migrated north to Cambridge, and went on payroll as an assistant professor of economics at Harvard, 1971–76. It’s fair to say that Yellen rubbed elbows with quite a distinguished group of Harvard colleagues, back then. While paging through the old tomes, I saw familiar names of long-ago professors from whom I took an economics course or two — Otto Eckstein, Kenneth Arrow, Robert Dorfman, Wassily Leontief. And then there was Janet Yellen, assistant professor of economics, with her bright, shining future still to come. In 1972–73, Yellen taught a course in Aggregative Economic Policy. This covered “theories of national income determination, employment, interest, investment, money and economic growth from Keynes to the present.” In 1973–74, Yellen taught that course again, with the same name except the course description changed to “Keynesian and post-Keynesian theories of national income determination, introduction to monetary theory, cyclical fluctuations and economic growth.” A year later, in 1975 after a leave of absence, Yellen taught courses entitled Macroeconomic Theory and Economic Theory. The first course covered “Keynesian and classical models of employment and income determination; theories of inflation, aggregate fluctuations and growth; principles of stabilization policy; theories of consumption, investment and portfolio choice.” The second course in 1975 covered “Static Keynesian models and their classical antecedents; modern monetarist and post-Keynesian models; theories of consumption, investment and portfolio behavior; theories of aggregate fluctuation and inflation; economic models and policy optimization.” Yes, it’s all quite a mouthful. And do you notice anything about Yellen’s choice of titles and subject matter? I mean, aside from her extensive use of deep-insider academic jargon that almost no mere mortal can begin to fathom. Exactly: Everything is all about Keynes! In essence, back when Yellen was fresh out of Yale she taught party-line, orthodox Keynesian economics. And what was that? Well, Keynesian economists believe that private-sector economic decisions often lead to what they perceive as “inefficient” macroeconomic outcomes. That is, an economy typically just does not do what central bankers and government planners want it to do. And this lack of efficiency is a very bad thing in their collective mind. When viewed through a Keynesian economic prism, people don’t behave properly. Their cumulative, microeconomic sins all add up to grave policy faults and macro-inefficiencies. Thus, according to Keynes and his acolytes, something must happen to correct the problems. And what might that be? Read on for the full breakdown… Regards, Byron King for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: Jim Rickards has revealed [a series of new gov’t regulations that are set to impact 90% of all publicly traded companies in America.]( He also talks about a small handful of stocks that are designed to give you [protective immunity]( against these new regulations. But the one thing Jim DOES NOT explain in [his new expose]( is that one of these companies is about to ignite like a lit stick of dynamite. Already, in the first quarter of 2023, the company has grown its revenue by 303% compared with last year. They’ve also grown their earnings by an astonishing 1,175% over that same time frame. This can’t be understated… [At about $11 per share this may be the most undervalued stock in America right now.]( The one company that you can add to your portfolio, and by this time next year, see a potential 200% windfall on. We say that with no exaggeration. Want in? [Go here for all the details.]( [Crypto Legend Reveals: “The Next Bitcoin”]( He called Bitcoin at $61. Now he says this next crypto will be even bigger. In fact, he’s targeting 25X gains over the next year alone. [Click Here To Learn More]( The Daily Reckoning Presents: “Yellen’s central bank approach dramatically reshaped the economy in a low interest environment, and a certain class of people made one heck of a lot of money”… ****************************** The Career of a Keynesian Mediocrity By Byron King [Byron King] BYRON KING The standard Keynesian policy solution to economic inefficiency is that government takes active measures via a (supposedly) wise and knowledgeable central bank, one filled with people who hold Ph.D.s in economics from top-notch universities. Because they know stuff. These central bankers act in tandem with fiscal policy emanating from a (supposedly) all-seeing, all-knowing government, one filled with well-intended political actors. And politicians know stuff, too. Well, that’s what they tell you, anyhow. Under Keynesian theory, between those wise bankers and politicians at the helm, the overall economic ship will sail much better. To continue the nautical metaphor, a well-guided economic ship will hit no icebergs. Or that’s the idea. Indeed, the Keynesian goal is “stabilize output,” especially over and around business cycles. In other words, the Keynesian approach is intended to smooth out the economic bumps. Or from a more political angle, it eliminates those pesky recessions that lead to large-scale business failures and unemployment. No Roaring 1920s; no Great Depressions of the 1930s. That’s the lure. Cynics might call this an “economics-lite” version of a 1920s/’30s-era Soviet Five-Year Plan, in which the central state controls money supply and directs investment to virtuous ends that the commissars discern. Because that planned Soviet model was Keynes’ intellectual competition back then — or the economic counter-model. In the 1920s/’30s, the world was evolving out of both the Great War (aka World War I), as well as the Bolshevik Revolution. The Anglo-Saxon model — meaning primarily what was happening in Britain and the U.S. — competed for world intellectual acceptance with the Lenin-Stalin model in the Soviet Union, based on Karl Marx and his Das Kapital, the first volume of which was published in 1867 as a critique of proto-capitalism. So as you may have discerned from this timeline, much of what passes for modern economics — certainly Keynesianism — is rooted in century-old thinking that formed as a counterpart to even older, Marxian ideas from 150 years ago. That is, Keynesianism involved government control but through the more benign approach of a so-called “mixed economy.” The private sector must jump through myriad policy hoops created by government and its legions of Very Smart People, the ones with those Ph.D.s in economics. And again, the desired end-state in all of this is to avoid recessions. I won’t belabor the preceding points; people write long books about Keynesianism, versus, say, Soviet central planning, let alone the far more free market-focused “Austrian” school of economics. Of course, smart people also argue over the merits of recessions. Because one way or another, recessions happen. Economies undergo periodic and sometimes major contractions that tend to clean out the accumulated muck of malinvestment and poor spending decisions. And of course, people argue over whether or not it’s truly possible to control business cycles. There’s all of this, and much more to discuss about Keynesianism; and really, at the end of the day how much government control do people really want in life, right? But for now, let’s return to Harvard and Janet Yellen. Because by 1976, and despite her Stakhanovite focus on instructing Keynes to eager, impressionable students, young Yellen was denied tenure by the cognizant faculty committee. She received her walking papers. Ms. Yellen packed her bags and went on to another series of jobs over subsequent years, back and forth between government and academia. In the late 1970s and ’80s, Yellen’s employment ranged from staff work at the Federal Reserve to an appointment as a professor at Berkeley — not shabby at all. In the 1990s she found a gig with the Clinton administration, and some years later, under President Obama, rose to become vice chair of the Fed, 2010–14, and Fed chairwoman, 2014–18. Note that those years — the 2010s — with Yellen near or at the top of the Fed were also a time of long-term, historically low interest rates, and in fact negative real rates when inflation is counted. [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here for more...]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a complete, step-by-step plan to surviving and beating inflation… one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings… [See Them Here]( It’s not inaccurate to say that low interest rates of the 2010s were a backdoor central bank subsidy to the broader bank sector. The macro idea was for the Fed to help recapitalize the banking sector in the wake of the 2008–09 global financial crash. But at the same time, this low-interest subsidy came out of the collective hide of savers and investors who muddled along with next to no return on their socked-away cash. Some commentators have calculated a $4 trillion cost to all of this, taken from savers and handed to bankers. And if you dust for fingerprints during that decade-long spree of government subsidy, you will absolutely find those of Janet Yellen. Her Keynesian upbringing was on display throughout that episode. Yellen’s central bank approach dramatically reshaped the economy in a low interest environment, and a certain class of people made one heck of a lot of money. With this in mind, it appears that across her career Ms. Yellen’s inner Keynesian instinct has always been at the forefront. She literally talked her book in the 1970s at Harvard, and even today still deeply believes the Keynesian dogma that central bank monetary tinkering can successfully manage a vast economy. To keep with nautical analogies, Yellen believes that Keynesian economics will steer the proverbial ship through the field of economic icebergs. Another angle of the Yellen-Keynes approach is that if the economy doesn’t respond as intended, then there just wasn’t enough government oversight and central bank tinkering. Recently, we saw more of that Yellen Keynesianism on display when she simply and summarily overrode the law and rules that govern federal deposit insurance on bank accounts, in the matter of Silicon Valley Bank (SVB). No doubt you’ve followed the tale. The Federal Deposit Insurance Corporation (FDIC) will backstop a maximum of $250,000 per account holder at any given bank. But at the ill-fated SVB, about 97% of total holdings exceeded that number, a factor of about 33-to-1. Another way to say it is that the depositor base included a large number of cash-rich, if not well-off people and businesses. Unilaterally, Yellen and her associates within the Biden Treasury Department rewrote the FDIC rules to “insure” every dollar claimed against every deposit in SVB. Yellen removed the limits, and no depositor lost a dime. And then Yellen rigged the FDIC fund to tap a new assessment onto other banks out across the country, where the solvent ones — and their customers, like you perhaps — would pick up the slack for the insolvent SVB. When asked about it, Yellen replied that the idea was to save “systemically important” banks. Oh, now she tells us. Except that SVB was not previously considered critical, not before a bunch of well-connected people stood to lose some serious money. But hey, with Yellen at the helm, the ship made a quick course change, and the depositors got their money back, no issues. Even more recently, Yellen testified to the U.S. Senate that she would make those “systemically important” calls when, where and how she determined. Anymore, it’s all up to her and her government staff. So now, under the ministration of Janet Yellen, the entire banking system has reached a point of profound contradictions. Among those is an FDIC with rules on the books about insurance limits, but the rules don’t apply when Yellen thinks differently. Another way to say it is that we now live in an era of intellectual chaos within the field of economics writ large, and banking more specifically. “Buy rumors, sell news,” goes the old saying. And the news is that America’s economic system has just hit one of the biggest icebergs in the sea, with Janet Yellen at the helm. Sad to say, her Keynesianism never faded away before we reached this awful point. Oh, and if you want a more direct takeaway, buy gold. Regards, Byron King for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Ed. note: Jim Rickards has revealed [a series of new gov’t regulations that are set to impact 90% of all publicly traded companies in America.]( He also talks about a small handful of stocks that are designed to give you [protective immunity]( against these new regulations. But the one thing Jim DOES NOT explain in [his new expose]( is that one of these companies is about to ignite like a lit stick of dynamite. Already, in the first quarter of 2023, the company has grown its revenue by 303% compared with last year. They’ve also grown their earnings by an astonishing 1,175% over that same time frame. This can’t be understated… [At about $11 per share this may be the most undervalued stock in America right now.]( The one company that you can add to your portfolio, and by this time next year, see a potential 200% windfall on. We say that with no exaggeration. Want in? [Go here for all the details.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Byron King] [Byron King]( is Senior Geologist at Rickards' Gold Speculator. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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