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Will: Quantitatively easing into office

  • President Barack Obama and Janet Yellen, his nominee for Fed chairman, at the White House. (DOUG MILLS / New York Times)

She who is about to become the most consequential woman in the history of American government will find it easier to be confirmed than it was to be nominated as the next chairman of the Federal Reserve Board. Janet Yellen probably was the president's second choice, but Senate Democrats demonstrated their intention and ability to reject Larry Summers.

Yellen, whose confirmation hearings are expected to begin Thursday, is suited to be the most important nomination of Barack Obama's second term (unless there is another U.S. Supreme Court vacancy). She is experienced and accomplished, and she represents a broad swath of academic thinking about the power of monetary policy and the Fed's proper role in wielding that power.

Yellen's confirmation will warm the chilly heart of Wall Street, which fears “tapering” — slowing the $85 billion per month pace of buying bonds, aka printing money — even more than it seemed to fear the possibility of a default. She probably will continue, perhaps even longer than the departing Ben Bernanke would, the “quantitative easing” that is “trickle-down economics” as practiced by progressives:

Very low interest rates drive investors into equities in search of higher yields. This supposedly produces a “wealth effect” whereby the 10 percent of Americans who own about 80 percent of stocks will feel flush enough to spend and invest, causing prosperity to trickle down to the other 90 percent. The fact that the recovery, now in its fifth year, is still limping in spite of quantitative easing is, of course, considered proof of the need for more such medicine.

Easing serves two Obama goals. It enables the growth of government by deferring its costs with cheap borrowing. And it redistributes wealth: By punishing savers, it effectively transfers wealth from them to borrowers.

Although Yellen's convictions are honestly convenient for the current administration, members of the Senate Banking Committee should question her about what she considers appropriate — and inappropriate — relations between a Fed chairman and government's political officers. The senators should read “Inside the Nixon Administration: The Secret Diary of Arthur Burns, 1969-1974,” and “How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes,” by Burton A. Abrams in the Journal of Economic Perspectives (Fall 2006).

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