Federal Reserve chair nominee Janet Yellen Wednesday suggested that she will put a renewed emphasis on “jobs” in her role as Chairwoman of the U.S. Federal Reserve Bank.
President Obama nominated Yellen, a vice chairwoman of the Board of Governors of the Federal Reserve System and former president and CEO of the Federal Reserve Bank of San Francisco, to run the U.S. central bank Wednesday. If confirmed by the Senate, Yellen will become the first woman to run the Fed in its hundred-year history.
Yellen is expected to accelerate the devaluation of the dollar by continuing or even expanding the Fed’s open-ended bond-buying program. She has been consistently favored by job-creation hawks, who hope that she will follow a looser inflation policy than they expected from her chief rival for the Fed job, former Treasury Secretary and Harvard University President Larry Summers. (Related: What’s the difference between Yellen and Summers?)
“I think it’s a really good pick,” economist Mark Vaughn, a fellow at the Murray Weidenbaum Center on the Economy, Government and Public Policy at Washington University of St. Louis, told The Daily Caller. “She’s eminently qualified. She’s got the best résumé of any designate. She’s been president of a bank, and she’s been on the board. She’s got an esteemed academic career. She’s a good manager and a good leader.”
Yellen’s brief comments Wednesday suggested she may fulfill some of the hopes of job-creation zealots. Preposterously asserting that “the economy is stronger and the financial system is more stable,” Yellen added that despite “progress” under current Chairman Ben Bernanke, U.S. monetary policy has far to go.
“The Fed’s mandate is to serve all Americans,” Yellen said. “Too many Americans still can’t find jobs and worry how they’re going to pay their bills and provide for their families.”
Yellen was alluding to the Fed’s “dual mandate” of managing inflation and maximizing employment. This mandate is based on an antique economic theory called the “Phillips Curve,” which posited an inverse relationship between inflation and unemployment.
The Phillips Curve, a relic of Keynesian mythology, has been abandoned by economists after repeatedly failing to bear out in reality — most notably during the stagflation of the 1970s, and arguably during the unprecedented economic stagnation of the past six years. Since 2007, Bernanke has quadrupled the monetary base, and inflation — which is widely described as being under control or even too low — has in fact robbed the dollar of 13 percent of its value, according to the Bureau of Labor Statistics’ inflation calculator. Yet the economy has moved sideways, unemployment remains above 7 percent, and household net worth is about where it was prior to the recession — amounting to a massive disappearance of buying power with no discernible positive effects on the economy.