While stock market prices are acting positively after Janet Yellen’s speech stating that the Fed will keep interest rates low, the real story behind the announcement is just how fragile and weak the U.S. economy is. If Yellen were to have come out and state that the Fed will look to raise the interest rates it would be because the economy is healthy and could sustain an increase, and normalcy, of interest rates that would increase savings, investment, and strengthen the dollar. Yellen’s announcement that the Fed will keep interest rates low for a long time point to the complete opposite, revealing that the economy is completely dependent on the printing of US dollars to maintain the illusion of economic strength through rising stock prices and home values.
In addition, liberal economists seem to have forgotten the rhetoric of former Fed Chairman Bernanke who had repeatedly stated that once the unemployment rate fell to 6.5% the Fed would increase interest rates. Bernanke had stated this strategy over the last two years as quantitative easing had grown to the $85 billion per month pace. Three months after Bernanke has been replaced, Yellen’s message that the 6.5% unemployment rate benchmark needs to be updated to modern times has been widely accepted without any questioning as to why that is the case. It seems the liberal economists all agree that the summer of 2013 was ancient times and that an updated policy with regards to the unemployment rate to QE ratio makes sense; of course these people also believe that all forms of money expansion and money printing have only positive effects to the economy with no negative attributes.