Janet Yellin is Vice Chairman of the Federal Reserve’s Board of Governors.She has been assigned the task of making the FED more transparent. She is the chairman of a new Federal Open Market Committee (FOMC) communications subcommittee.
Let me say from the beginning that Janet Yellin makes Ben Bernanke sound like Henny Youngman.
Anyone who reads a Janet Yellin speech while smoking in bed is not a good insurance risk.
Her recent speech reveals new thinking at the FED. (I use the term “reveals” advisedly.) She gave this speech at the University of California, Berkeley, where she used to teach. (I use the term “teach” advisedly.)
As you may know, I am an unofficial translator of Federal Reserve speeches. I will help guide you through Dr. Yellin’s speech.
The FED relies on her to get its message across.
My subject is the recent revolution and continuing evolution in communication by central banks. All of us, of course, live in an era of revolutionary advances in communication: If I succeed in saying anything interesting this afternoon, those words may be posted, tweeted, and blogged about even before I’ve left this podium. So, it might seem unsurprising that the Federal Reserve, too, is bolstering its efforts at communication.
Translation: “The FED is communicating, all right. It just isn’t communicating anything of substance. If you doubt me, read the rest of my speech. See if you find anything interesting.”
But the revolution in central bank communication is not driven by technological advances. Rather, it is the product of advances in our understanding of how to make monetary policy most effective.
Translation: “Our previous understanding of how to make monetary policy effective was unfortunately weak. For example, Bernanke’s textbook doesn’t let anyone predict anything any more.”
A growing body of research and experience demonstrates that clear communication is itself a vital tool for increasing the efficacy and reliability of monetary policy.
Translation: “Too bad nobody at the FED knows how to use this vital tool. Doubt me? Keep reading.”
In fact, the challenges facing our economy in the wake of the financial crisis have made clear communication more important than ever before.
Translation: “That’s why the FED’s lack of ‘transparency’ stands out like a sore thumb. I am here today to call this opaqueness ‘transparency.'”
(To read the rest of my tranlation, click the link.)