Peter Schiff of Euro Pacific Capital spoke out today against Janet Yellen being confirmed as the next Fed Chairwoman claiming that she was “completely clueless” during the 2008 financial crisis. Schiff notes Yellen failed to see the housing crash coming and that she wants to continue Quantitative Easing to prop up the stock market which could have dangerous economic impacts in the future.
It is true that Yellen is more dovish than current Fed Chairman Ben Bernanke and monetary policy under her control will likely result in Quantitative Easing being tapered more slowly. Yet, Yellen will be inheriting the Fed’s nearly $4 trillion balance sheet while the Fed continues its buying of $85 billion in MBS and Treasuries every month. This is a bit concerning.
On one side, I feel that Yellen is qualified to be the Fed Chairwoman. But at the same time, I don’t believe we should be continuing Quantitative Easing at its current monthly pace which Yellen supports. In fact, I think Quantitative Easing should have been tapered months ago when the market was expecting it. Low interest rates are not helping the economy very much at this point in time. In fact, low interest rates may be creating a small bubble in home prices and could create high inflation in the long-term.
Perhaps most important, however, is that continuing Quantitative Easing at this level is boosting the stock market higher and higher causing a large wealth gap between the poor and middle class (who own less assets) and the most wealthy of Americans. Those who really need the help financially, are not getting it.