In her speech at the New York Economic Club on Wednesday, Janet Yellen said it is “quite plausible” the economy will reach full employment in a couple years with just the right amount of inflation, which to her mind means two percent a year.
If the economy surprises her, the Fed will “systematically respond to unforeseen economic developments.” But what exactly does this mean? How will the Fed respond?
The Fed has already made loans available to New York and foreign banks at negative real interest rates and created trillions of new dollars–all without support from either history or theory. What other steps could follow?
Here are a few of the radical ideas floating around the halls of the Fed and associated Keynesian economics departments:
Hunter Lewis is co-founder of AgainstCronyCapitalism.org, co-founder and former CEO of Cambridge Associates, a global investment firm, and author of two recent books, Free Prices Now!, about the Federal Reserve, and Crony Capitalism in America 2008-12.