OPINION: Who’s afraid of the big bad boom? – By Paul Krugman (Las Vegas Sun) / May 12 2021
“If it rains, we might want to open our umbrellas,” said the Treasury secretary.
“Oh, my God, she’s predicting a torrential downpour,” shouted panicked pundits.
OK, that’s not exactly what Janet Yellen said last week. Her actual words were, “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat.” Her remark wasn’t a forecast, it certainly wasn’t an attempt to influence the Federal Reserve, and it was simple good sense.
Still, she shouldn’t have said it. Convention says that the nation’s top economic official must avoid uttering even the most obvious economic truths, even if she happens to be a world-class economist, lest they be read as signals of … something. And the financial media rushed to declare her remarks a scandalous deviation from the Biden administration’s official line.
Luckily, the furor was short-lived, and as these things go, Yellen’s moment of honesty wasn’t a big deal. Market expectations of future monetary policy, as reflected in long-term interest rates, don’t seem to have moved at all in the past couple months.
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