Curious Capitalist

Janet Yellen Will Be a Fed Chair for the Real, Everyday Economy

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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.

Janet Yellen, vice chairman of the Federal Reserve, was confirmed Monday by the Senate to succeed Chairman Ben Bernanke as the next head of America’s central bank. Her term, which begins Feb. 1, will mark an important shift in the direction of the bank’s policy efforts, as it begins to “taper” back the past five years of unconventional monetary policy, which have resulted in the Fed pouring some $3.8 trillion into the U.S. economy following the financial crisis.

While Yellen’s appointment marks continuity with the Bernanke era, and with the Fed’s policy of quantitative easing of which she was one of the chief architects, it also heralds a number of firsts. Yellen is the first woman to head the central bank, but even more important, she’s also its first openly reform-minded, Keynesian-oriented leader. A stellar academic economist and 36-year Fed veteran with a particular focus on the human impact of unemployment, Yellen has said on many occasions that the past five years of crisis, joblessness and slower growth “aren’t just statistics to me.”

While former Fed colleagues like Donald Kohn, Alan Blinder and Larry Meyer cite her as among the most data-driven and analytical economists around, she’s also someone who’s more interested in clear, well-articulated ideas with real-world impact than creating the cleverest mathematical models. That commitment was partly inspired by her Yale mentor, the legendary liberal economist James Tobin, who argued that the first priority of economics was to improve the lives of real people.

You can bet that Yellen will be keeping that in mind as she slowly and carefully continues the paring back of quantitative easing that began in December. The challenge will be to keep both the markets and the economy steady as the central bank exits from the largest bout of unconventional monetary policy in history. While the Fed’s dual mandate of keeping inflation and unemployment low will be her first task, there’s currently no conflict there, since inflation is running far below the 2% target that Yellen herself crafted, meaning that tapering doesn’t need to be rushed. She’ll also have her eye on banking reform. Blinder, who was the Fed vice chair back in the 1990s when Yellen was a governor, remembers speaking with her “many times about how the Fed was being too lax on regulation.” And since then, he adds, “things have only gotten worse.”

To do all that, she’ll need to build consensus among a group of Federal Reserve governors who are increasingly independent. Fortunately, says Kohn, who worked with her as a Fed staffer in the mid-1990s, “Janet brings a CEO-type skill set to this job.” He and many others say she’s a “listener and a questioner” who likes to surround herself with the smartest people possible, hear out their arguments, challenge them on any weaknesses, then take her own decisions.

It’s a managerial strategy that seems to have worked, as Yellen has the best track record on policy predictions of any Fed leader since 2009. While she’s often characterized as the “nicest” big-name economist around, no one should mistake that for a lack of spine. “She can get at the strengths and weaknesses of someone’s arguments so quickly,” says Berkeley professor and Haas School of Business colleague James Wilcox, “but so politely. She’s got that ‘iron fist in a velvet glove’ quality.” It’s a quality that will likely serve her well as she steers the most important institute in America today toward a new era of monetary policy.

20 comments
falcon269
falcon269

Quantitative easing has pumped trillions into the stock market and housing. Where are "the people" benefiting? The everyday economy? Yellen needs to find a way to help the economy without having it all go to the 1%.

malakalmaut
malakalmaut

Barry Hussein Soetoro got a lady boss.

Wisdomwithage
Wisdomwithage

Time has lost all credibility.  What a change in the quality of a magazine I used to read in my youth.  Now it's a rag, struggling for survival.

petethottam
petethottam

Time (Luce - Skull & Bones) :  Fed's Yellen clearly being positioned by the 1% and monied interests/universal banks to let the inflation genie out of the bottle.

4714026
4714026

this headline reminds me not to subscribe to TIME.     energy prices up around 50% plus, and the dollar down around 1/3.    a pincer strategy in the Obama "War on America" that would have made Erwin Rommel proud, more diabolical and destructive than any he ever devised.  that has Main Street America firmly by the throat - and Janet Yellen backs that.    "We can compete with the Third World by becoming even poorer than they are."   of course.   that makes sense.     and what will happen, with "more of the same" ?  .... well, probably "more of the same" ......   i.e. higher energy prices, and a lower dollar ....  Americans on Main Street getting ripped off by "their" government, and its crooked sham Federal Reserve.   It is sad the Fed has become a crooked political sham, but it has.   All the parasite sycophants on the various Fed Boards:   NOW you can all DISCREETLY call Buh-rock and put in for your favors.   Like when you were ready to let America go broke a month or so ago, rather than use the Fed's reserves to keep the nation solvent.   You are a bunch of lazy schnorers is what you are - free money politician freeloader bums. 

TenaciousJim
TenaciousJim

Bernanke has boxed her in a corner by giving the Banks $4 trillion.  She can't do anything but lower the QE and balancing the books.

richard.draucker
richard.draucker

A very nice PR fluff piece consistent with the promises to the middle class made upon the appointment of every other Fed governor over the past 50 years that the middle class has been dismantled to the benefit of the idle elite.  Yellen is simply one more in a long line of Jewish bankers (the last Fed governor who wasn't Jewish was appointed by Eisenhower) put in charge of protecting the other Jewish bankers, and her gender is totally irrelevant.  Don't expect any change whatsoever so long as Israel needs to continue controlling American foreign policy in the middle east. 


Openminded1
Openminded1

I will wait and see,  if she is any good or not we will know with in one year.

richard.draucker
richard.draucker

@TenaciousJim She was the #2 person there after Bernanke and has made it clear she was fully on-board with those decisions. 

tom.litton
tom.litton

@SallySnyderI'm not connecting the dots.  Yellen gave some employment stats that you admitted were accurate at the time, and then you say she is a bad economists because those stats changed years later? 

malakalmaut
malakalmaut

@falcon269


No, nothing like that. Actually what i am is rather perpendicular to any forms of schauvinism. Except for when it comes to judeo-american economic, industrial and political hegemonism, war mongering and natural resource predation and parasytism. Now please, feel free to do us a favor and point out the obviously rascist element. 


Thank you very much,


Malak Al-Maut

TenaciousJim
TenaciousJim

@richard.draucker I kind of lean towards her just being a dupe while Stanley Fischer will really be running things unless he doesn't get the number 2 spot at all.

TenaciousJim
TenaciousJim

@richard.draucker He holds some hope. I think the 1st Jackson Hole meeting in 2009 or so he was quoted as saying 'why are we all trying to get back to the way things were before the credit crisis?'