Curious Capitalist

Janet Yellen Is Poised to Become the Most Important Person on Earth

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Brendan Smialowski / AFP / Getty Images

Dr. Janet Yellen during her confirmation hearing of the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill November 14, 2013 in Washington.

Federal Reserve vice chairwoman Janet Yellen is a few hours into her grilling by the Senate banking committee, which is part of the process that will most likely confirm her as the first-ever female head of the Federal Reserve. That would make her not only the most important person in finance, but arguably the most important person in the world right now—at least if you measure that position by the ability to fix the economic and employment issues facing the U.S., which is still the world’s largest economy.

So far in her testimony, Yellen has made it clear that unemployment is where her focus is. Speaking to the record number of long-term unemployed in the US, she said, “We know that those long spells of unemployment are particularly painful for such households.” Which is one of the reasons she still believes that when it comes to the Fed’s record $85 billion a month asset buying spree, “the benefits exceed the costs.” Asked about the risk of market bubbles from continuing this kind of monetary stimulus for too long, she said, “I would agree that this program cannot continue forever” and that the Fed takes risks to financial stability “very seriously.” Still, she’s made it as clear as possible from her comments that we shouldn’t look for a hasty tapering of asset buying, despite fears that it’s distorting the global economy.

That speaks to a point that I’ve made often, which is that in lieu of any real job oriented fiscal policy coming out of Washington, the Fed has become the economic stimulator of last resort via monetary policy. One of the reasons that “quantitative easing” as the asset buying program is called, has gone on so long is that Ben Bernanke (and Yellen) believe that monetary policy can substitute for fiscal policy to a certain extent in terms of propping up unemployment. And given the dysfunction in Congress, he clearly felt he was the last man standing in Washington who could actually do something about jobs.

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What’s interesting is that there are now indications that the Fed’s influence is moving into broader areas of the economy beyond just monetary policy. Last week, New York Fed president Bill Dudley made a speech on what he called “deep-seated cultural and ethical failures at many large financial institutions,” and presented potential policy solutions for the Too Big To Fail problem. This kind of frank talk has been in the past nearly unheard of from Fed heads. But given Congressional failure to properly re-regulate finance, the Fed has begun to sound off more loudly on that issue, as well.

More significantly, Boston Fed president Eric Rosengren recently announced the bank’s involvement in a community development program across Massachusetts to revitalize a bunch of old Rust Belt cities, bolstering new business development and offering up prizes for more collaborative government. While the Fed has always had a technical mandate to help in economic development, going out and doing community building at the grassroots level is, once again, a very unusual and important step for the Fed to take. And the focus on better community governance makes a particularly strong political statement given that there’s so much government dysfunction at the national level – which is, as I said above, one of the key reasons that the Fed has had to take what Yellen referred to her in testimony today as “unprecedented action” to stimulate the economy via QE.

14 comments
umpierrez.enzo
umpierrez.enzo

La richesse mondiale devrait progresser de près de 40% dans les cinq prochaines années pour atteindre 334 000 milliards de dollars US d'ici 2018. Les marchés émergents représenteront probablement 29% de cette croissance, la Chine comptant pour près de 50% de l'augmentation de la richesse des économies émergentes. Selon le rapport de 2013 du Credit Suisse sur la richesse mondiale (Global Wealth Report), cette hausse sera principalement portée par la croissance des richesses dans le segment médian, mais le nombre de millionnaires devrait également fortement augmenter d'ici 2013.

http://enzo-umpierrez.blogspot.com.ar/ 

MarthaBenton
MarthaBenton

The Federal Reserve should be abolished like it has been several times in our history. But Democrats kept bringing it back so they could spend, spend, spend!

SilentJay
SilentJay

The Most Important Person in the World?

The Bernanke wasn't and neither is she.

Have you been hitting the pipe with Mayor Ford?




Openminded1
Openminded1

I wonder if she signed up for Obamacare yet? Some how I doubt it.

Brevspread.com
Brevspread.com

The government has very little impact except regulating taxes and assuming it will influence business. Now if grassroot politics can influence enlightened individuals, then America can again become a competitor in the market. How do second-world countries vie to exist? 

ForTheMusic2
ForTheMusic2

Time likes to honor criminals aka Federal Reserve.

MerriAnnMcLain
MerriAnnMcLain

Unsurprising...appointed by the same administration which gave us Fast & Furious, IRS, Solyndra, Obamacare and....well, enough said

tom.litton
tom.litton

@MarthaBenton I doubt this is true (post links if it is), but even if it is, it wouldn't work.

The federal reserve accounts for a very small fraction of federal income.

DeweySayenoff
DeweySayenoff

@Openminded1 @MerriAnnMcLain The IRS was established in the 1920's and formally named that in the 1950's.  Fast and furious was established under Bush (and wasn't publicized until Obama's administration - by a Republican looking to score points against a Democrat).  The funding that brought us Solyndra (and the process of investigating the worthiness of it as well) was approved by a program started by Bush, which like Fast and Furious was continued by Obama.

As for the ACA, that was on Obama's watch and while it's gotten off to a bad start, that's no indication of future performance - unless you're smoking something the rest of us don't that lets you see the future or you're working actively against it to make the worst of it happen.

I mean, really, what does any of your assertions have to do with reality?  Appointing government officials is what Presidents DO, and this person isn't confirmed yet.  It's their JOB, and you'd be ranting if he wasn't doing it.  Jesus, people, how about some rationality for a change?  Or is being rational too much to ask for?

MarthaBenton
MarthaBenton

@DeweySayenoff You seem to be forgetting, the LAST years of Bush's Presidency was controlled by a DEMOCRAT Congress AND Senate! THEY made the rules and regulations. Were any Americans killed by guns sold to the drug cartel in Mexico during Bush's Presidency? I don't think so, but one sure was under Obama/Holder. How many companies went bankrupt after being funded by Bush? ALL of the ones Obama funded have gone bottom up. Chevrolet moved to China after Obama bailed them out. Oh yes, all the mess our country is in today is ALL Bush's fault. Let's see, he's been out of office for FIVE years now with Obama at the reins? Ummm seems strange to me that Bush has such power especially after his last years was ruled by Democrats!

Openminded1
Openminded1

@DeweySayenoff It is to much to ask for. My only assertion was Obama has made the country look as foolish, as he is. Ms Mclain asserted the rest, i did agree how ever with her assertions. Obama has been an embarrassment to this country.