Neither preference inspires confidence.
--CGE
On Oct 10, 2013, at 8:36 AM, Robert Naiman <naiman at justforeignpolicy.org> wrote:
> This is a very nice piece, except for three things:
>
> 1. The headline: "Obama picks full-employment advocate Yellen to head
> Federal Reserve." Calling Yellin a " full-employment advocate" seems unduly
> generous/wishful thinking in the context of what the piece actually reports.
>
> 2, "Yellen is expected to continue, if not step up this policy." I'm not
> aware of any expectation that Yellin will "step up" the policy. The
> widespread expectation is that Yellin will be more cautious in pulling back
> on the Fed's monetary stimulus than Summers would have been.
>
> 3. "Yellen is expected to continue, if not strengthen, the Fed's commitment
> to keep interest rates steady at least until the U.S. jobless rate goes
> down to 6.5 percent, as long as inflation does not go above 2.5 percent.
> The official jobless rate now is 7.3 percent."
>
> Here is the meat of the matter. 6.5 percent is not full employment.
>
> Yellin is to Summers on monetary policy as Obama is to Romney and McCain on
> war and peace. Unless you belong to the "worse is better" school, you'd
> rather have Yellin than Summers at the helm, just as you'd rather have
> Obama than Romney or McCain at the helm. But it's still going to be a
> fight, because the person at the helm has a foot in both camps. That
> improves the terrain for fighting over the situation where the person at
> the helm has both feet in the enemy camp. But it means you can't sit back
> and watch. People's World ought to be saying this: the masses need to
> engage in the fight over Fed policy.
>
> On Thu, Oct 10, 2013 at 7:31 AM, c b <cb31450 at gmail.com> wrote:
>
>>
>> http://peoplesworld.org/obama-picks-full-employment-advocate-yellen-to-head-federal-reserve/
>>
>> Obama picks full-employment advocate Yellen to head Federal Reserve
>>
>> Print
>> Email to a Friend
>>
>> by: John Wojcik
>> October 9 2013
>>
>> tags: Federal Reserve, economy, jobs, unemployment, inflation, housing
>> bubble, monetary policy
>>
>> WASHINGTON - President Obama has nominated Janet Yellen, Federal
>> Reserve vice chair, to run the Federal Reserve, the most important
>> central bank in the world.
>>
>> If confirmed by the U.S. Senate, Yellen will be the first woman to
>> lead the Federal Reserve in its 100-year history.
>>
>> Terry O'Neill, president of the National Organization for Women,
>> praised the nomination, describing it as "another crack in a glass
>> ceiling that needs to be shattered. O'Neill said that "in the middle
>> of a government shutdown brought about by bitter extremism, Dr.
>> Yellen's nomination is an opportunity for Republicans to show they
>> really can work with Democrats - they should take it."
>>
>> Yellen won confirmation to her original term on the Federal Reserve in
>> a 94-6 vote, and sailed through her confirmation as Fed Vice Chair on
>> a voice vote.
>>
>> In addition to women's groups, the nomination of Yellen is getting
>> high marks from labor and its allies who see her promotion as a sign
>> that the Federal Reserve will acknowledge that bringing down
>> unemployment is no less important than keeping inflation in check.
>>
>> "The AFL-CIO applauds President Obama for nominating Janet Yellen,"
>> the nation's largest labor federation said in a statement today.
>> "Prof. Yellen is a brilliant economist with a strong record of
>> leadership."
>>
>> Yellen has earned a reputation as the Fed official most concerned
>> about unemployment and least concerned about inflation.
>>
>> "With employment so far from its maximum level and with inflation
>> running below 2 percent, I believe it's appropriate for progress in
>> the labor market to take center stage in the conduct of monetary
>> policy," she said in March.
>>
>> Yellen served as president of the San Francisco Federal Reserve Bank
>> where she says she got a firsthand look at the over-heated real estate
>> market. She was first among her colleagues to warn of the impending
>> and disastrous housing bubble, a major factor in the Great Recession.
>>
>> "President Obama's nomination of Janet Yellen to be the next chair of
>> the Federal Reserve is encouraging news," said Josh Bivens, an
>> economist at the Economic Policy Institute. "Most importantly, she has
>> had a correct diagnosis of what is driving the chronic joblessness
>> crisis in the U.S. economy: aggregate demand for goods and services
>> remains too weak to support full employment."
>>
>> Bivens said that the "contractionary" fiscal policy pursued in recent
>> years has caused the recovery from the Great Recession to proceed much
>> more slowly than it otherwise would have.
>>
>> "Government spending over this recovery has been nowhere near the
>> trajectory it was on after every single other recession since World
>> War II," he explained. "Had it been equivalent to the increased
>> spending trajectories that happened after those prior recessions, 90
>> percent of our excess unemployment would be gone by now. And, the
>> unfortunate thing is that we just didn't do things to slow the
>> recovery but we actually did things to additionally damage the
>> economy.
>>
>> "Soon after the recession hit, we began on a path to austerity - this
>> was damaging enough but then, on top of that, we threw in the
>> sequester. Even without the sequester we were on a path to 700,000
>> fewer jobs at the end of 2013. With the sequester, it's worse."
>>
>> Obama selected Yellen after a former economic adviser, Lawrence
>> Summers, withdrew from consideration in the face of strong opposition
>> from progressives in the president's own Democratic Party. With
>> Republicans opposing anything Obama does and the opposition of liberal
>> Democrats it would have been impossible, observers say, for Summers to
>> win Senate confirmation.
>>
>> "In any case," said Bivens, "Yellen is a much better choice because
>> she doesn't have Summers' long record of deregulating the financial
>> sector.
>>
>> Bivens said he was also impressed by Yellen's "willingness to admit"
>> that in the early 2000's the Fed didn't "worry enough" about the
>> housing bubble and deregulation. "She has the ability to come out and
>> say 'we were wrong.' That's encouraging." Yellen made those admissions
>> he was referring to at a March forum held at AFL-CIO headquarters in
>> Washington D.C.
>>
>> Republicans can be expected to challenge the president's nomination of
>> Yellen. Conservatives disapprove of her position that inflation is
>> less worrisome than unemployment. Senator Richard Shelby of Alabama, a
>> Republican, said he has concerns about her "proclivity to print
>> money."
>>
>> "I voted against Vice Chairman Yellen's original nomination to the Fed
>> in 2010 because of her dovish views on monetary policy," Sen. Bob
>> Corker of Tennessee, another Republican said. "We will closely examine
>> her record since that time, but I am not aware of anything that
>> demonstrates her views have changed,"
>>
>> Bivens said that both Republican senators were echoing the big
>> business policy of pushing aside concern for employment and
>> highlighting concerns about inflation. He explained that in recent
>> years the Fed has tried to bolster the economy by annually purchased
>> roughly $80 billion in treasury bonds, thereby infusing more cash into
>> the stagnant economy. Yellen is expected to continue, if not step up
>> this policy.
>>
>> "While this helps working people and, when combined with keeping
>> interest rates low helps a bit more you can't solve joblessness with
>> just using one monetary policy vs. another," Bivens said. "Job
>> creation requires massive federal spending to create the jobs the
>> private sector is not creating."
>>
>> Yellen is expected to continue, if not strengthen, the Fed's
>> commitment to keep interest rates steady at least until the U.S.
>> jobless rate goes down to 6.5 percent, as long as inflation does not
>> go above 2.5 percent. The official jobless rate now is 7.3 percent.