Amidst a government shutdown, a debt-ceiling crisis and other assorted financial turmoil, President Obama this week nominated Janet L. Yellen to chair the Federal Reserve Board.
As a Keynesian economist and academician who served as second-in-command at The Fed, her boost to the top spot was about as predictable as another budget crisis in Washington. She still needs to be confirmed by the U.S. Senate, but confirmation there is also as predictable as another budget crisis in Washington.
So what can we expect from the first woman to ascend to one of the most powerful positions in the free world?
The presses will keep rolling. Current Chairman Ben Bernanke has become the King of Quantitative Easing, but he has been in denial about it. His roots are as a monetarist. You wouldn’t know it by his record as chairman, but he is a follower of Milton Friedman.
Ms. Yellen, conversely, is a true believer. As an “unreconstructed Keynesian,” which we assume is the opposite of a reconstructed Keynesian, she believes that stimulus is a cure-all. If the government spends more and the Fed prints more, evidence to the contrary, the economy will boom.
As such, we can expect a continuation of QE. The King is dead, long live the Queen.
Jobs will be The Fed’s focus. Chairwoman Yellen will see reducing the unemployment rate as her most important job. That’s commendable, as the real unemployment rate (the U-6 rate) is still close to 14%, but it doesn’t mean that she will be lobbying President Obama to strike the Obamacare employer