Ludicrous

Wire report on a speech by Janet Yellen, head of the San Francisco Fed:

As the Fed continues to cross "traditional boundaries" in providing liquidity to various corners of the credit markets, Yellen said she was "absolutely open" to the idea of the central bank buying long-term Treasuries if it would help the overall functioning of the credit market. Meanwhile, Yellen told reporters the Fed needed to fight back against the notion that its liquidity efforts would inevitably lead to higher inflation and higher interest rates, terming the notion "ludicrous."

Print it out, tack it to your wall, and wait.

Revisiting a Yellen speech from September 27, 2005:

In my view, the weight of a decision to deflate an asset price bubble rests on positive answers to three questions. First, if the bubble were to collapse on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions in the shortest possible form are, "no," "no," and "no."

As long as there are no professional or legal consequences for getting things so profoundly wrong -- see Bernanke and Greenspan -- after-tax personal savings are not safe in the domestic, dollar-denominated system.