Yellen has been doing a lot of talking
where is that neutral rate going and I think what you see is a downward shift
To an activist central bank, the natural rate is thought one of the few methods of calibration even theoretically available.
There are distinctions between real interest rates and nominal, as well as second derivatives - does pushing market rates below the natural rate cause prices to rise or merely accelerate from whatever level they may start from?
the natural rate had been depressed (in real terms)
policymakers are looking at their mistakes.
The unemployment rate may have dropped to what appears to be "full employment" but that is only because at least 10 million Americans are "missing"; perhaps as many as 15 or 16 million.
population, has grown by 20.2 million since the last payroll peak in November 2007. The labor force itself, at least according to the official definition, only added 4.6 million of them (and 2 million of those were in what increasingly looks like a statistical oddity at the end of last year). Because less than one in four new laborers appear to have actually entered the labor market the unemployment rate gets to be less than 5%
Despite continued claims of being the "best jobs market in decades", this was nothing like what had happened in past cycles of true recoveries.
...on August 9, 2007, as what was supposed to be implicit support yielded to explicit pleading. The private money market reacted in ways the Fed just was not prepared for (largely because they believed it all impossible). Before 2007, the Fed's whims were dutifully carried out under implicit belief in legend and myth; after 2007 they were all proved to be nothing more than that. Not only did the Fed fail to stop the illiquidity leading to panic, their balance sheet expansion has failed to do anything for the recovery thereafter.
Thus, when Janet Yellen claims the economy is strong there are only questions; when Alan Greenspan said the same twenty years ago there were only accolades and adoration.
Janet Yellen tries to speak plain and instead comes across as befuddled, confused, and, at best, unconvincing.
In one sense there is the hint of optimism that they are finally starting to "get it"; but that is equally balanced by the shocking realization of how long it took just to begin the realization, and then further reduced by the fact that even if they view the global economic problem as properly monetary they will still attempt to address in the most orthodox of terms; and continue to fail some more. They are beginning to speak something other than nonsense, important stuff, but I doubt they will ever actually let themselves hear it.
Hmm, maybe we need a short version of my Cliff Notes...
