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What’s up with Yellen

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Hi Cullen – I recently read where Yellen said the following:

“The idea of triggers is motivated by the concern that some have over the picture we have of debt sustainability now and into the future, and I would simply say I am very worried about the sustainability of the US debt trajectory…..The future of the deficit and the debt trajectory “should be a very significant concern,” she said.

If debt sustainability is not a concern, why would she say this? Surely she knows how the financial system works.

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Posted by (Questions: 2, Responses: 1)
Posted on 12/05/2017 10:27 PM
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Hi Richard,

I am not sure what she means by that exactly. She could be saying that inflation is a concern. Or she could be saying that a FX crisis is a concern. I don’t think it’s irrational to be aware that the national debt is very high and a potential risk. Don’t get me wrong – I think the national debt is an overblown risk, but that doesn’t mean it poses no risk at all. But without more context I can’t really know what she means exactly.

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Cullen Roche Posted by (Questions: 10, Responses: 1800)
Answered on 12/05/2017 10:37 PM
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Yellen: “The future of the deficit and the debt trajectory “should be a very significant concern,” she said.”

I understand that the “National Debt” is a joke on us. Uncle Sam is not “in debt”, yet the consequences of believing that the “National Debt” is a big big problem has an influence on Uncle Sam’s spending. We also understand that State, City, and Local debt is a HUGE problem. They are currency users and must balance their taxing and spending. So is the answer to have Uncle Sam stop supporting State, City, and Local projects? Noooo Better yet, let’s make sure the folks that are paying taxes that support State, City, and Local projects be double taxed. Once their State, City, and Local taxes are paid, let the Uncle Sam tax that very moolah again. “Let’s make the USA broke again and let’s make Uncle Sam’s public servants RICH because they WON their elections with the help of their “friends” that are able to decimate their opponents with negative TV ads.

So what Yellen is saying is that debt creation is a problem for institutions that must balance their spending with their taxation revenue. Cullen “But without more context, I can’t really know what she means exactly.”

Yellen: “I would simply say I am very worried about the sustainability of the US debt trajectory.” She did not say “Uncle Sam’s debt trajectory”. She, like me, is worried about the public and private debt trajectory, a trajectory that our Fed cannot do ANYTHING about, only Uncle Sam can help. But Uncle Sam is taking a powder.

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Posted by (Questions: 27, Responses: 283)
Answered on 12/06/2017 4:07 AM
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Posted by (Questions: 27, Responses: 283)
Answered on 12/06/2017 4:18 AM