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article imageOp-Ed: Will Janet Yellen put the final nail in the U.S. dollar's value?

By Andrew Moran     Nov 22, 2013 in Business
Washington - The United States Senate Banking Committee voted overwhelmingly Thursday in favor of approving President Obama's nomination of Janet Yellen to chair the Federal Reserve once Ben Bernanke's current term expires Jan. 31, 2014.
Yellen received full support by the Democrats on the committee, except for West Virginia Senator Joe Manchin, and garnered the approval of three Republican senators. Her final nomination process will be sent to the Senate for a full vote, where it is expected she will garner the 60 votes needed to become the first woman in the central bank’s 100-year history to head the Fed.
“Dr. Yellen is a model candidate for Chair of the Fed. She currently serves as the Vice Chair, she was the President of the San Francisco Fed for six years, and she served on the Fed Board of Governors in the 1990s,” said Senate Banking Committee Chairman Tim Johnson in a statement.
“She has devoted a large portion of her professional and academic career to studying the labor market, unemployment, monetary policy, and the economy. As we saw in her testimony last week, Dr. Yellen understands the challenges facing our economy and the balance the Fed must strike as we navigate the path back to full employment. Dr. Yellen also showed in her testimony that she understands the importance of completing ongoing Wall Street Reform rulemaking and of the Fed’s regulatory role in supervising the riskiest banks.”
Last week, Yellen gave testimony in which she wasn’t really given the hard questions. Many argue that this was the case because the Senate Banking Committee is largely a part of the Keynesian economics doctrine. Nevertheless, she was grilled by Nebraska Republican Senator Mike Johanns, who asked her about savers, investors and senior citizens — though Keynesians like to establish a difference between savers and investors.
The Fed’s $85 billion per month stimulus program, she argued, was intended to help everyone, including savers and senior citizens, despite them being affected dramatically due to artificially low interest rates and inflation.
“But you know, if we want to get back to business as usual and a normal monetary policy and normal interest rates, I would say we need to do that by getting the economy back to normal,” Yellen told Senator Johanns. “Take into account the broader array of interests they have in a strong economy, they would see that these policies — even though they may harm them in one respect — are broadly beneficial to them as I believe they are to all Americans.”
In a speech delivered to the National Associations of Business Economists earlier this week, Bernanke gave his support to Yellen and concurred with her assessments that the Fed must be employing all of the tools today to promote a better economy tomorrow. He also added that artificially low interest rates could be here for longer than expected, even if the jobless rate dips to 6.5 percent (official government figures).
“I agree with the sentiment, expressed by my colleague Janet Yellen at her testimony last week that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery,” Bernanke stated in his prepared remarks.
Since being on the list of top candidates to lead the Fed for the next four years, she has hinted at using additional stimulus tools and perhaps even expand the current amount for its quantitative easing initiative. What came out of the meeting last week led to this article’s key question: will Yellen further devalue the U.S. dollar?
QE affinity?
This week, minutes were released from the Oct. 29-30 Fed meeting in which it was generally agreed that it would be tapering quantitative easing (QE) “in the coming months.” However, financial experts like Peter Schiff, president of Euro Pacific Capital, who was the only one in the mainstream media to note in the summertime that the Fed wouldn’t be tapering, believes it won’t taper again.
“The recovery that the Federal Reserve is bragging about helping create is 100 percent dependent on the quantitative easing that it is supplying," Schiff told CNBC in September "Like every drug, the economy's going to need more of it to sustain the phony economy. Far from diminishing QE, the next big move is going to expand it."
Marc Faber, meanwhile, the publisher of The Gloom, Boom and Doom Report, says the argument right now isn’t whether or not the Fed will pullback its bond-buying measures, but how much it will increase it.
“The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month,” Faber told CNBC.
As Schiff noted in his comments, economists from the Austrian persuasion say that the market depends solely on injections because the fundamentals of the economy are not sound. If the Fed were to ease back its stimulus then the markets would crash. It could be akin to what former Budget Director under the Reagan administration, David Stockman, told news outlets in April:
“The minute they lose confidence that the central bank can print our way into permanent salvation they will start selling bonds and others will sell the bonds and there will be no bid,” said Stockman. “It gets liquidated. This is all debt on debt; nobody owns the bond they borrowed 98 cents to buy.”
As Murray N. Rothbard wrote in “America’s Great Depression,” as central bankers expand credit and establish a low interest rate artificially, it leads to serious distortions in the market and then causes the booms and busts, otherwise known in the Austrian circle as the Business Cycle Theory. The reason why these rates cause the busts is because the market then invests too much in capital goods – the boom period is a period of misinvestment and malinvestment, according to the libertarian economist.
$100 bill and its devaluation
In October, the Federal Reserve issued brand new $100 bills with advanced security features that will make it much more difficult for counterfeiters to replicate (of course, this does not include Bernanke or Yellen).
Some of the security measures consist of a blue, 3D security ribbon and color-shifting ink that readjusts from copper to green when the Federal Reserve Note is tilted. The image still features Benjamin Franklin. Aside from the $1 and $2 bills, all other U.S. fiat currency has been redesigned over the past decade to fight fraud.
In its history, the $100 bill has been changed dramatically, according to an infographic sent to Digital Journal this week. The infographic designed by Landmark Cash looks back to the year 1862 when it was first established and depicts how it has been visually evolved changed since that year.
Over its long history, the $100 bill has featured many statesmen, including President Abraham Lincoln, Senator Thomas Hart Benton and Admiral James Glasgow Farragut. The $100 bill back then actually maintained some sort of value because it was backed by gold and silver. Nowadays, $100 doesn’t really buy the average household much because its purchasing power has dramatically decreased, which is why the infographic is important to understand just how much the $100 bill whose value has been eroded.
It has been widely known that the U.S. dollar has lost more than 90 percent of its value. However, there have been some so-called experts, such as Business Insider’s Joe Weisenthal, who wrote this week:
“You've probably heard the line about how inflation has destroyed 90 percent of the dollar's value over the last several decades.
“It gets repeated ad nauseum by inflation truthers, gold bugs, Fed haters, and all of their fellow travelers.
“The problem is that it's almost entirely BS.”
A simple Google search will dispel this statement. By using even government CPI numbers on U.S. Inflation Calculator, if in 1953 an American would purchase an item $100 then today that same item would cost $874.70, which is an inflate rate of 774.7 percent in a 50-year period.
Robert Wenzel of Economic Policy Journal wrote about Weisenthal's claims in a post this week: “Bottom line: Weisenthal and [Matt] Busigin are totally clueless about how the value of the dollar changes, its relation to interest rates and the overall economy. But, Weisenthal could prove me wrong and show me that he is on to something, if he cuts his wage to $2.30 an hour.”
We have come full circle: will Janet Yellen further erode the $1, $2, $5, $10, $20, $50 and $100 bills?
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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