Janet Yellen's Lack of Understanding of Money and The Business Cycle: One Women's Failure to Grasp Microeconomics

David Stockman reports on Janet Yellen:

Some people are either born or nurtured into a time warp and never seem to escape. That’s Janet Yellen’s apparent problem with the “bathtub economics” of the 1960s neo-Keynesians.

As has now been apparent for decades, the Great Inflation of the 1970s was a live fire drill that proved Keynesian activism doesn’t work. That particular historic trauma showed that “full employment” and “potential GDP” were imaginary figments from scribblers in Ivy League economics departments—not something that is targetable by the fiscal and monetary authorities or even measureable in a free market economy.

Even more crucially, the double digit inflation, faltering growth and repetitive boom and bust macro-cycles of the 1970s and early 1980s proved in spades that interventionist manipulations designed to achieve so-called “full-employment” actually did the opposite—that is, they only amplified economic instability and underperformance as the decade wore on.

The irony is that the paternity of this real world proof came from the Yale economics department, which was inspired in the 1960s and 1970s by one of the most arrogant, wrong-headed Keynesians of modern times—–Dr. James Tobin. It was Tobin’s neo-Keynesian theories and activist role in the Kennedy-Johnson White House which gave rise to the Great Inflation and its destructive aftermath.

Still, Professor Tobin could perhaps be forgiven for the original science experiment in full employment economics he helped author from his perch at 1600 Pennsylvania Avenue. After all, economists were just then enamored by newly invented large-scale math models of the US economy and their equations always generated beneficent results.

Click on this link, to grasp what Janet Yellen doesn't know and doesn't want to know about money.