Thursday, July 15, 2010

Yellen Economics as Magic Bullet Economics

Janet Yellen, who sort of resembles a botoxed version of Ayn Rand, told a Senate committee yesterday, during confirmation hearings for her to become vice-chair of the Federal Reserve, that "job creation must be a high priority of monetary policy."

I am guessing that she said this because she desperately wants to become the Fed vice-chair rather than because she really means it.

I know of no economic theory that specifically targets job creation via  monetary policy. Yes, some hold that an inflationary monetary policy can undo the supposed gridlock caused by supposedly "downwardly rigid" wage rates, but I doubt even these monetary inflation advocates would suggest that such a policy specifically targets job creation and not the entire economy.

This is really JFK magic bullet economics at its best. Total nonsense.

BTW: What she will really do as Deputy Dog to Bernanke is simply follow his lead. As president of the Federal Reserve Bank of San Francisco, she has voted on monetary policy at the FOMC 36 times. All 36 times she has voted "aye". As Jim Grant put it:

...has the Fed been right 36 consecutive times? No. I think Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department. She is ideal from the point of view of the Fed bureaucracy. She will make not one ripple.

1 comment:

  1. Meanwhile, the establishment will cheer her because she's a "woman." There is something equally magic and mysterious about being the first woman to do anything that was once only for those wearing suspenders and wife-beaters.