So, Janet Yellen is going to be the new Fed Chief. I already outlined some thoughts on this previously but given the news it’s worth repeating. She’s actually very similar to Ben Bernanke without the amazing beard. I wouldn’t expect any mind blowing changes in policy from her:
- She’s a fan of clear and concise communication with the market just like Ben Bernanke.
- Forward guidance is a good thing and should be used effectively and often to communicate the Fed’s outlook and potential policies.
- She’s in favor of tougher regulations.
- She’s not much of a believer in the idea of “too big to fail” and would not move to break up big banks.
- She has a strong forecasting record according to the WSJ.
- She’s currently a dove, which means she’s very concerned with the employment picture (more so than the inflation picture).
- She thinks the current unemployment rate is an enormous burden on the US economy.
- She thinks QE has been “reasonably efficacious in stimulating spending.”
- She is a fan of QE’s wealth effect via higher stock prices and house prices.
- She would not be in favor of tightening policy unless growth picks up while employment measures improve.
- She thinks the recent improvement as evidenced by the payrolls reports and unemployment date are insufficient measures of labor market health.
- Her resume is kind of absurd – Brown undergrad, Yale PhD (under mentor James Tobin), 5 years teaching econ at Harvard, 2 years as staff economist at the Fed, married to Nobel Prize winner George Akerlof, 2 years at London School of Econ, Chaired the Council of Economic Advisors under President Clinton, President of the SF Fed for 6 years, Vice Chair of the Fed System under Bernanke.
- She’s a Democrat.
- She’s female, which, given the amount of testosterone running (ruining?) Washington these days, might be a nice thing.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.