Yellen Says Caution in Raising Rates Is 'Especially Warranted' …  Fed Chair makes case for go-slow changes with rate near zero … Janet Yellen said it is appropriate for U.S. central bankers to "proceed cautiously" in raising interest rates because the global economy presents heightened risks.The speech to the Economic Club of New York made a strong case for running the economy hot to push away from the zero boundary for the Federal Open Market Committee's target rate. –Bloomberg

Janet Yellen was back at it yesterday, talking down the need for a rate hike.

She is comfortable with the economy running "hot."

Say what?

After a year or more of explaining why rate hikes were necessary, up to four or more of them in 2016, Ms. Yellen has now begun speechifying about how rate hikes are not a good idea.

It's enough to give you whiplash.

It sets the stage for increased stagflation in the US and increased price inflation in China. More in a moment.

Here's the real story. At the last G20 meeting in February, secret agreements were made between the most powerful economies to lift both the US and Chinese economy.

The details of these deals have been leaked on the Internet over the past few weeks and supported by the actions of central bankers involved.

It is what The Daily Reckoning last week called "The most important financial development of 2016, with enormous implications for you and your portfolio."

The Fed and other members of the G20, which met in February, intend to maintain the current Chinese system.

They want China to stay strong economically.

The antidote to China's misery, according to the Keynsian-poisoned G20, is more yuan printing. More liquidity that will supposedly boost the Chinese economy.

As a further, formal yuan loosening would yield a negative impact felt round the world, other countries agreed to tighten instead.

This is why Mario Draghi suddenly announced that he was ceasing his much asserted loose-euro program. No one could figure out why but now it's obvious.

Same thing in Japan, where central bank support for aggressive loosening has suddenly diminished.

The US situation is more complicated. The dollar's strength is now seen as a negative by central bankers and thus efforts are underway to weaken the currency.

A weaker dollar and a weaker yen supposedly create the best scenario for a renewed economic resurgence worldwide.

The euro and the yen rose recently against the dollar after it became clear that their central banks had disavowed further loosening.

Now Janet Yellen is now coming up with numbers and statistics to justify backing away from further tightening.

None of these machinations are going to work in the long term. And even in the short term, such currency gamesmanship is questionable in the extreme, as the Daily Reckoning and other publications have pointed out when commenting on this latest development.