Yellen’s Incompetence on Monetary Policy Now Extends to Climate Change

Let’s be candid. Janet Yellen knows almost nothing about monetary or fiscal policy. This has become apparent over the past ten years in her role as Chair of the Federal Reserve System and her current role as Secretary of the Treasury.

Yellen is basically a labor economist with a knack for statistics but not more than that. She is clearly an affirmative action mascot (First Female Fed Chair! First Female Treasury Secretary!). And she’s a classic example of the Peter Principle.

The Peter Principle states that if you do a good job, you’re in line for a promotion. If you do another good job in your new role, you get another promotion. Eventually, you get a position where you’re in over your head and can’t perform. Then you get stuck there.

This dynamic is known as “rising to your level of incompetence.” This is a factor in the private economy, but it’s even more prevalent in the government sector where there’s no bottom line and no accountability.

As Fed Chair, Yellen initially continued Ben Bernanke’s QE policy, despite the fact that there is zero evidence that QE has any stimulative effect (it does create asset bubbles). She was wedded to flawed economic models such as the Phillips Curve (history shows there is zero correlation between unemployment and inflation, but whatever), and the belief that medium-term rates are a function of a strip of short-term rates (again, there’s no correlation).

As Treasury Secretary, she sponsored economic sanctions against Russia, which are a total failure. She has also embraced Modern Monetary Theory, which is a sandbox-level version of Keynesianism that fails to take into account the impact on the growth of high debt-to-GDP level. So, intellectually she’s a two-time loser.

Undaunted, she has now joined the climate change cult with a view that climate change could cause losses in asset values that pose financial systemic risks. This is another example of her incompetence.

Remember global warming? The best evidence today is that the planet is measurably cooling. There’s no evidence that CO₂ is more than a trace gas and an important source of plant food that we need to survive. In all events, there is no reason to believe we are facing a climate apocalypse.

Predictions that “the world will end in ten years” are twenty, thirty, and forty years old, depending on the source. Even if climate alarm were a legitimate concern (it’s not), the “asset losses” will be more than offset by asset gains in terms of more arable land and longer growing seasons.

I’m not sure if there’s a prize for being incompetent in three important fields (money, budget, and climate), but if so, Yellen would be a deserving winner.

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