Former Federal Reserve Chair Janet Yellen said one of the biggest threats to the U.S. economy is wealth inequality that has been building for decades (mostly due to Fed monetary policies, of course), and that while the economy is in “excellent” shape, there is reason for concern.
“I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” she said while speaking at the World Business Forum.
Yellen said the ongoing trade war between the U.S. and China is hurting businesses and consumers on both sides through higher prices and general uncertainty.
This has been particularly true with the stock market, which has bounced or sagged seemingly on every word uttered about the tit-for-tat tariffs fight — there are few things the market hates more than uncertainty.
And while she said there is no imminent recession on the horizon, there are a number of risks.
“These tariffs are taxes on American consumers and businesses,” she said. “It’s making it more difficult and more expensive to do business, to control costs. And consumers are seeing higher prices from it.”
As far as fighting off a recession, Yellen said the Fed’s three interest rate cuts this year — the first cuts in more than a decade — leave “not as much scope as I would like to see for the Fed to be able to respond to that. So there is a good reason to worry.”
Switching topics to wealth inequality, Yellen said there is “a very worrisome long-term (trend) in which you have a very substantial share of the U.S. workforce feeling like they’re not getting ahead. It’s true, they’re not getting ahead.
“It’s a serious economic problem and social problem because it means the gains of our economic system are not being widely shared,” she said. “It leaves people ultimately with the feeling that the economy is not working for them, a sense of social discontent that is extremely disruptive.”
To close things up, Yellen touched on her time as the head of the Fed. She would get letters all the time from people putting money into savings who weren’t getting any interest because the rates were so low. Rates were at or near zero during her entire tenure, and she presided over just two increases.
“Some of the most disturbing notes came from people who said, ‘I work and I played by the rules and I save for retirement and I have money in the bank, and you know, I’m getting absolutely nothing,” Yellen recalled. “Savers are getting penalized. It’s true.”
Editor’s note: What do you think about Yellen admitting the Fed is basically screwing savers while helping the rich get richer with historically low interest rates? Are you happy to hear her admit it, is does that just make you mad? Share your thoughts below.
