The truth of the matter is that normally functioning
capital markets, and most specifically the markets that involve lending money
for interest, are all about future expectations. A man loans money to a
corporation because he believes the corporation will make enough money in the
future to pay back the loan, plus interest. A man loans money to another
man to buy a house because he believes that the borrower is creditworthy enough
to pay back the loan over time, plus interest. A man lends money to a
government because he is sick enough to believe that the government he is
lending to won’t default on its bonds at some point.
Given this stupidly obvious truth, the fact that Grandma Yellen can’t
bring herself to tell us what the hell she is going to do reveals that she does
not understand even the banal foundations of normally functioning capital
markets. She is absolutely terrified of the effect her decisions are
going to have on the markets, and so she cowardly does nothing while promising
to act “when appropriate.”
