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Janet Yellen - opinions please

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An improvement over Bernanke.

I think she sees the folly of throwing QE and extraordinarily low rates at any economic problem, but she is a very cautious character, worrying particularly about higher unemployment.

Her caution may mean she never gets to the point of choosing present economic pain to help straighten out the system in the future.

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Trump criticised her during his campaign.  I think her raising rates is a no-brainer.  If it crashes the economy Trump will take the political heat.

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It's not at all clear to me to what extent the FED is a free agent. The impression I have is that the markets and the vast flows of international capital determine interest rates to a high degree of precision, and the FED can only push in one direction or another against the banks of that river of money. If they tried to impose a nonsensical interest rate, outside of that, they would get swept away in the flow. However, that pressure at the edges can, over time, change perceptions in the markets and pull them into a different phase. The corrosive, accommodative policies of Greenspan, and the painful restorative actions of Volker being key examples.

I think Yellen, though no Volker, would like to be pushing in that direction, if ever so slowly.

I'm really interested to see what happens if President Trump manages to institute any protectionist and pro-industrial policies. How will those policies push the market-driven interest rates, will the inevitable turmoil give Yellen the cover to act - and if it does, will she have the courage to do so?

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Trump criticised anyone and everyone in the establishment, because he needed to be seen as the candidate for change. I don't think Yellen would necessarily take that personally.

The content of the criticism before the election was that she had dragged her feet on raising rates - acting "politically". The noise after Trump's inauguration was that he wants a higher growth rate, and the press, on the theory that reducing interest rates drives growth, deduced that there would be conflict with Yellen because she wanted to raise rates, since the economy is now back on track, and inflation is inching up.

If someone can point to a Trump quote saying that Yellen has too accommodative a policy stance, then I stand corrected - but my belief so far is that there is no actual conflict between the two, and she is safe in the job, for now.

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Off-topic ... but I thought I should do a quick search for information about "Trump on Yellen", and then had a moment of existential dread that I might see something I would never be able to forget.

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40 minutes ago, Toast said:

It's not at all clear to me to what extent the FED is a free agent.

QE is authorised by the Treasury, so not at all.

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She isn't independent.  If she puts rates up she'll be the one triggering a depression far worse than the 30's, how history will ultimately view that she has no control over but she clearly won't want the short term political scapegoating and pain.  Plus she'd be sacked.  If she does nothing and keeps taking the money she'll be viewed historically as inept but more likely keep in the job.

The Fed is now the glue keeping the global economy together, but it really can't keep doing it indefinitely, one wonders if Keynes had got his way with the worlds reserve currency being an independent entity under the IMF whether we would be in such a mess or just an equally big one with different scenarios.

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1 hour ago, interestrateripoff said:

She isn't independent.  If she puts rates up she'll be the one triggering a depression far worse than the 30's, how history will ultimately view that she has no control over but she clearly won't want the short term political scapegoating and pain.  Plus she'd be sacked.  If she does nothing and keeps taking the money she'll be viewed historically as inept but more likely keep in the job.

There's also the awkward issue of Fed profits hanging over independence. 2016 was the first year since QE began that payments to the Treasury of profits based on stimulus and low interest decreased, though at $92bn still not an insignificant sum as regards Treasury decision-making:  http://uk.reuters.com/article/us-usa-fed-payments-idUKKBN14U24K

Yellen seems to understand the implications of her decisions on individuals and companies better than most central bankers, and she's very cautious around unemployment as Toast mentioned. The alternative view that her concern is affected and provides a convenient excuse to delay rate hikes is also plausible, but I'd say she's far from the worst among them.

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9 hours ago, darkmarket said:

 

Yellen seems to understand the implications of her decisions on individuals and companies better than most central bankers, and she's very cautious around unemployment as Toast mentioned. The alternative view that her concern is affected and provides a convenient excuse to delay rate hikes is also plausible, but I'd say she's far from the worst among them.

I think this is a very important distinction between her and bernanke, and especially Carney, not to mention Penfold.

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