Yellen’s Conundrum

She is in a pickle.  It is more and more obvious that QE3 didn’t work.  Hopefully she was smart enough to realize this when she took over, but did not want to offend Ben.

So here we are maybe in the middle of two back to back quarters with a negative GDP, the definition of a recession as I recall. The employment numbers are being anxiously awaited on Friday, estimated by the experts at 240,000 before this morning, now ADP says 169,000, what if they disappoint even more or what if they are good numbers, does it make any difference?

The key is, Cheap money is a sign that things are not well.  Does she punt and raise rates to show that she is really hopeful of an increasing economic environment, or will she let data dependency force her to hide behind patience. Not a lot of good choices as the market says the long bond is not a good investment.