Yet Another Unprovable Keynesian Counterfactual Excuse: Controlling Inflation Would Have Cost 15 Million Jobs

Click here to read the original Cautious Optimism Facebook post with comments

Among Janet Yellen's mixed bag of commentary the last four years the Cautious Optimism Economics Correspondent has heard quite a few zingers, but in her last week at Treasury it looks like she's stumping for a new job at Babylon Bee.

"We would have thrown 15 million people out of work if we'd controlled inflation..." 

...is the ultimate Keynesian excuse for the Fed's massive inflation failure of 2021-2023. It belongs in the pantheon of legendary rationalizations like 2009-2015's "Well the recession would have been WORSE if we hadn't borrowed and spent trillions" or "The deficit stimulus package just wasn't big enough to end the recession quickly."

Former Treasury Secretary and
Keynesian economist Janet Yellen

And recall that during the first year of rising inflation Yellen insisted it was all "transitory" and not a problem.

Now she's changed her tune to "Well if we had stopped the inflation [that I said was only transitory] it would have produced Great Depression-level unemployment."

For the record, by the time inflation started to rear its ugly head in the fall of 2021 the economy was fully reopened from Covid lockdowns, the return to normal business conditions produced annualized real GDP growth rates of 5% and 6%, and businesses hiring back all the workers they had previously been forced to let go lowered the unemployment rate from a lockdown high of 14% in 2020 to 4.7% (aka. full employment).

But according to Yellen, if the Fed had backed off ballooning the money supply from +13% a year to a less inflationary +7% a year the return to business as usual would have completely reversed itself and thrown 15 million people back out of work!

Sorry Janet, it wasn't the nonstop printing press that rehired all those millions of workers in the second half of 2020 and 2021. It was the reopening of an economy that had previously been forced into a coma. Now she's writing a fictional version of history to "prove" she and the Fed did the right thing all along.

(BTW 7% more money offset by 5% real GDP growth = roughly 2% price inflation omitting changes in monetary velocity)

Read Marketwatch story at:

https://www.marketwatch.com/story/yellen-says-u-s-couldve-kept-inflation-stable-if-it-threw-up-to-15-million-people-out-of-work-0ef8f975