Yellen not reassuring choice as Fed chief
By John Browne
Published: Saturday, Oct. 26, 2013, 9:00 p.m.
The chairman of the Federal Reserve Board is probably the world's most important job.
The central bank can influence economies around the world by manipulating interest rates and regulating the supply and purchasing power of the dollar, the international reserve currency, which is used for global trade and held by more than two-thirds of foreign central banks because it is believed to be strong and stable.
Earlier this month, President Obama nominated Janet Yellen to replace Ben Bernanke in this role. Investors, business people and politicians throughout the world will try to evaluate what changes, if any, Yellen likely will bring to Bernanke's policies.
When the Fed was authorized in 1913, Congress gave it a dual mandate: Protect the strength of the dollar and — unlike central banks elsewhere — ensure full employment. The first was a financial goal. The second helped politicians win elections. Often the two conflicted.
Over the remainder of the century, the political goal overwhelmed the financial goal as the dollar lost some 97 percent of its value. In recent decades, this reduced the living standards of American workers while benefiting politicians, owners of real assets and financiers.
Yellen's three immediate predecessors — Paul Volcker, Alan Greenspan and Bernanke — all began their Fed chairmanships as what is known as “sound money” men. They believed in a strong dollar. Backed by the strong money President Reagan, Volcker held to his principles. Persuaded by politics, Greenspan and Bernanke adopted the debt-fed economic growth through quantitative easing, the printing of synthetic currency and currency-debasing policies of British economist John Maynard Keynes.
In 1933, Treasury debt stood at $4.9 trillion. Twenty years later, it is more than $17 trillion, nearly 3.5 times as much.
During the great Greenspan/Bernanke asset booms, wealth — of those rich enough to own real estate, stocks, bonds and precious metals — mushroomed. Meanwhile, the standard of living of most ordinary Americans eroded markedly. Single-job families became two-job dependent to get by.
Bernanke used the nation's credit to save the “too-big-to-fail” banks. No major financial leader was arrested for the widespread frauds.
In an excessively indebted economy, Bernanke's quantitative easing of $85 billion a month in bond purchases has provided only tepid economic growth. The activity has become so bad that even within the Fed there is strong disagreement.
Unlike her immediate predecessors, Yellen is an avowed Keynesian from the start. She believes that just 12 people should regulate the price and supply of international Reserve Currency for the more than 7.1 billion people in the world. Furthermore, at her acceptance, she reaffirmed her belief in the controversial dual mandate.
Yellen's appointment promises increased Fed distortion of money and markets. It is unlikely to end well.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Contact him at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Young Pakistani immigrant linked to Pennsylvania woman known as ‘Jihad Jane’ sentenced to prison
- NBA player plans Russia’s 1st Hooters
- Wrongfully arrested man sues city of Pittsburgh, police
- Pens insider: Penalty killing a concern in Stanley Cup playoffs
- Emboldened by Italy move, QVC to expand into France
- Kittanning baseball scores 5 runs in 1 inning for win
- Undersized rookie Gibbons is blur on ice for Penguins
- High school roundup: West Allegheny softball earns Section 2 win over Montour
- Putin’s national address to Russians raises fears of possible incursion into southeastern Ukraine
- Plum native Umberger inching closer to return for Blue Jackets
- Penguins’ Bylsma, Blue Jackets’ Richards know each other well