Jeffrey Snider:

The only way any of this makes sense is if you buy the primordial orthodox premise that monetary policy is neutral in the long run (or even intermediately). Taking that line will lead you to believe asset bubbles are just markets gone insane of their own accord. Then again, Yellen has largely been hostile to “markets” since her academic career brought some notice, so this is really no surprise. But to experience, right now, the repo market collateral shortage and QE’s direct impact and to still blame markets for lack of resilience is either inordinate impudence or targeted public relations.
 
 I cannot overstate this enough, the selloff last year was a desperate warning about the lack of resilience in credit and funding. That repo markets persist in that is, again, the opposite of the picture Janet Yellen is trying to clumsily fashion. Central banks cannot create that because their intrusion axiomatically alters the state of financial affairs, and they know this. It has always been the idea (“extend and pretend” among others) to do so with the expectation that economic growth would allow enough margin for error to go back and clean up these central bank alterations. That has never happened, and the modifications persist.