For some reason Janet Yellen makes me think of the French play, La Folle de Chaillot. In the play, the dotty Countess Aurelie, who lives in something of a idealized fantasy world, comes to realize that a group of businessmen who are planning to drill for oil under Paris could ruin her happy and beautiful dream. So she organizes a mad tea party. right out of Alice, with her mad friends. The party consigns the businessmen, seduced by the smell of oil, to a bottomless pit, thus returning life and joy to the world.
Janet Yellen also lives in an idealized fantasy world and runs a mad tea party. Unfortunately, she is consigning all of us, seduced by free money which isn’t really free at all, to a bottomless pit.
Today she passed on what is probably the last opportunity to start to move interest rates back to something sane. Her failure to act confirms that, Beige Books notwithstanding, the Fed sees the incoming economic data as weak. By the July meeting, I expect that the pressure to “do something” to rescue the foundering economy will have become extreme and she will not resist.