Yellen’s a bull in a China flop

T HERE are many things Americans import — think chocolates, flatscreen televisions, iPhones and, of course, Germanautos.

But the one thing the US can’t afford to import nowis deflation.

Last year, America brought in $2.7 trillion worth of goods and services, along with cheaper products such as crude oil and Chinese goods.

As trading partners struggle with slowing growth, producers cut pricing to buoy growth. When that arrives here, we are importing deflation.

In psychology there is a powerful process that is very well documented: The Power of Suggestion. Fed Chairwoman Janet Yellen’s suggestion that China was not stabilizing its markets and the Fed was concerned about the US catching all that ails China had a very pronounced negative effect.

Whether she likes it or not, the chairwoman’s chamber is a very powerful spot on the world economic stage, andit is better used in a positive, upbeat way with a clear, credible and cogent message that does not induce collateral damage in the markets and the economy.

Fortunately for Yellen, the Fed got a mulligan on Thursday night. While speaking at UofMass, Yellen reversed course, saying, “Most FOMC[Federal Open Market Committee] participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter.”

Yes, Yellen initially chose to suggest that we may import so me of the global weakness, dampening enthusiasm in our economy, even while still leaving a tightening on the table — completely contradictory moves that confused and confounded the markets into a deeper, costlier correction.

The Fed’s chronic communication problems are now a legitimate crisis that has triggered an unnecessary extension of a market correction that may very likely crimp Christmas sales.

Yellen’s words would be far better used to champion the American economy, as opposed to creating a crisis in confidence. She should be suggesting to buy American, or better still, buy into America.