If you’re wondering what Janet Yellen would do if she were in Jerome Powell’s shoes, you should just stop. Because Janet Yellen wouldn’t be in Jerome Powell’s shoes.
Had Donald Trump swallowed his pride and reappointed the woman who, by his own account in 2016, presided over just the kind of monetary policy regime the president spends every morning begging for on Twitter, it’s at least possible that some of last year’s market turmoil would have been averted and we wouldn’t have to go into every FOMC meeting knowing that an afternoon selloff is more likely than not.
But Donald Trump didn’t reappoint Yellen, so here we are – “stuck” with “this guy Jerome”. (Oh well, you can’t win them all!)
I agree with @jimcramer, the Fed should lower rates. They were WAY too early to raise, and Way too late to cut – and big dose quantitative tightening didn’t exactly help either. Where did I find this guy Jerome? Oh well, you can’t win them all!
— Donald J. Trump (@realDonaldTrump) September 6, 2019
Yellen – who in February told Marketplace’s Kai Ryssdal that she “doubts that [Trump] would even be able to say [what] the Fed’s goals are – did weigh in on Thursday, while speaking in Chicago at a moderated Q&A session at the fall conference of the National Investment Center for Seniors Housing & Care.
After expressing confidence about the odds of the Fed ultimately succeeding in getting inflation sustainably to target, Yellen admitted of some concern. “Inflation is far below target and no one wants to be Japan”, she warned.
On the economy as a whole, she said it’s “entirely fair” to harbor an upbeat assessment. “We have a healthy economy”, she remarked, before admitting that the odds of a recession have risen. (A downturn isn’t her base case.)
When it comes to rate cuts, she anticipates more easing. “I fully expect they will do more”, she predicted.
As far as Trump’s Wednesday tweet calling on Powell and the Fed’s other “boneheads” to “get our interest rates down to ZERO, or less” so America can “start to refinance our debt”, Yellen said that’s an idea “that has long been rejected”.
Last month, Yellen, along with Paul Volcker, Alan Greenspan and Ben Bernanke, penned an Op-Ed essentially demanding that Trump cease and desist from acting like a maniac. “We are united in the conviction that the Fed and its chair must be permitted to act independently and in the best interests of the economy, free of short-term political pressures and, in particular, without the threat of removal or demotion of Fed leaders for political reasons”, the four said.
That was on August 5. Trump has tweeted about Powell and the Fed more than a dozen times since then.
Lower interest rates to 0% so we can refinance the debt — and kill all incentives to lend, creating even slower growth, more borrowing, even lower rates, ad nauseum. Hello, Japan! Maybe that’s our fate as an aging society and there’s nothing anyone can do about it.
What we need is Beto as Prez and Maxine Waters as head of the Fed.
Apart from Yellen, every new Fed Chair has had a crisis within a year of appointment. Often the crisis is due to their own actions, as is the case with Powell this time. But having been appointed by Trump to (seemingly) slam on the brakes by lifting interest rates more aggressively than Yellen had been doing, he was blindsided by Trump pressing on the gas with massive tax cuts. Driving with one foot on the gas and one foot on the brakes takes a real toll on a car and on an economy. Never mind that Trump is then using that careening car to shoot tariff bullets at another car, that has a single, thoughtful driver and is armored to the hilt. Maybe a little weighed down but at least in control.