Markets were pleased Tuesday as some of the lingering uncertainty around the US election lifted and the prospect of Janet Yellen returning to a key role in government inspired confidence on a number of fronts.
The beginning of the formal transition to a Joe Biden administration doesn’t spell the end of Donald Trump’s legal challenges, but it does grant the President-elect’s team access to officials, briefing books and millions in funding to help accelerate the transfer of power, which everyone besides Trump, his two adult sons, and Rudy Giuliani knows is inevitable.
“Transition officials will begin meeting with federal officials to discuss the pandemic response, have a full accounting of our national security interests, and gain complete understanding of the Trump administration’s efforts to hollow out government agencies,” Yohannes Abraham, executive director of Biden’s transition team, remarked, in a statement.
Trump indicated he’ll continue to contest the results “strongly,” but GOP senators were becoming uncomfortable both with the administration’s refusal to facilitate the transition and increasingly brazen moves to cajole state lawmakers into overruling voters. Attorney Sidney Powell’s weekend accusations, which included an evidence-free claim that Georgia Governor Brian Kemp may have committed crimes, were a bridge too far even for the conspiratorial Giuliani, who appeared to dismiss her from Trump’s legal team on Sunday. Chris Christie called Powell’s actions “outrageous.”
Indeed, the entire charade is “outrageous,” with the only saving grace being (ironically) Sidney Powell, whose tales of beyond-the-grave interference by the late Hugo Chávez at least injected a welcome bit of humor into an otherwise sordid campaign to dynamite what’s left of America’s institutions in the apparent hope that the rubble would block the doors to the White House, preventing anyone from getting in (or out).
“While short of Trump completely conceding the election, the move is a net positive for the prospects of ‘relatively’ smooth functioning in Washington as 2021 comes into focus,” BMO’s Ian Lyngen and Ben Jeffery said. “Admittedly, this doesn’t eliminate the risk President Trump will continue to contest the results; even if the prospects of success from such legal actions are fading with the setbacks the process has already received.”
Meanwhile, the Janet Yellen news is positive all the way around — there’s really no other way to put it, unless you’re just determined to traffic in juvenile Twitter memes. As discussed here extensively on Monday, Yellen will likely facilitate the kind of fiscal-monetary partnerships that have the potential to do some real good for real people, although she invariably won’t go far enough in that regard.
Some have suggested Yellen’s only Achilles’ heel could be her inexperience navigating the kind of extreme partisan rancor that’s become a fixture of Beltway brawls over the years, but I doubt seriously that someone with her credentials and record of public service will shrink from the moment. As one Cornell professor put it, “Yellen’s understated style should not be mistaken for lack of political savvy or softness in negotiations.”
No, it should not. And if the tone of her rhetoric from Op-Eds and interviews during the pandemic is any indication, she won’t hesitate to harshly lecture lawmakers who she thinks might need enlightenment. Over the summer, she literally accused the Senate of letting Americans “starve.”
There are some legitimate critiques, of course. Rabobank’s Michael Every offered one up on Tuesday, writing the following:
What does that say to the younger and/or more progressive political voices pushing for fresher thinking? Yellen’s long career arc from academic economics to economic advisor to presidents, then to Fed chief, and now to economic chief for a president, has not exactly overlapped with a concurrent period of relative American economic ascent — or at least not for the majority of its population. Yellen of course expressed her concerns over inequality as far back as September 2014: yet the central conclusion of that speech was that the poor would be less poor if only they had more assets, and her term at the Fed was yet another episode of the US melodrama that has been running nearly as long as Star Trek: ‘Asset Rich, Income Poor’.
Still, there is no chance (none) that Yellen is going to allow Congress to put Powell in the same kind of bind that she and her predecessor were in following the financial crisis, when the fiscal impulse wasn’t strong enough or reliable enough to assist monetary policy. Some readers will say she isn’t in a position to “allow” or “not allow” anything from lawmakers in her capacity as Treasury Secretary. I’d tell you this: Just wait and see.
If Democrats somehow win the Georgia runoffs, none of this is going to matter all that much, as Biden would have a unified legislature which won’t need any convincing. But that still seems a bit far-fetched.
“With Yellen at the Treasury Department, [the] initial perception will be one of greater alignment with the Fed and in practical terms that translates into a larger and more comprehensive fiscal response,” BMO’s Lyngen went on to say Tuesday. “Whether this comes to fruition remains to be seen is will also depend on Congress; nonetheless, such an effort could 1) be simulative for the real economy, 2) rekindle inflationary aspirations, and 3) lower the chances the Fed needs to expand QE in Treasuries from the current pace of $80 billion/month.”
Stability and a calming affects is what old rocking chair Joe is trying to give the American people. Besides the Georgia run offs it now becomes about the midterm Senate.
Hopefully, the 1Q 2021 news will not be filled with endless reports of Janet perpetually meeting with Mitch…only to report “progress is in progress”.
Country should not shut down restaurants, etc. and not have “aid” in place.
Term limits, please.
This is another reason why the Federal Reserve might want to have a digital currency in their back pocket. When the (bi-partisan) government, who we elect and pay, can not get anything done, the Fed could send currency to citizens – in the context of preserving “liquidity” or saving the USD, etc.
Just bypass Congress.
And so it is in the arenas of Trump, the thousands of red hats just like his, the hats that at each rally he throws to the crowd, giving of himself.
Such are the miracles of Trump,
adored for his golden tower,
his golden faucets,
his generosity.
He who has taken the most also gives the most.
Yellen in Treasury and Biden as POTUS just assures the continuation of the Greenspan. Bernanke, Yellen bubble blowing, wealth building of the 1% and the impoverishment of the 90%. To say that policy is not connected with Trumpism – no matter how economically irrational it was, is, and will become – is just stupid. They never built anything other than a pile of money – money that sticks to the fingers of those closest to it (the 1%).
The authoritarians will be back in 2024 even though Trump will either be dead or a malignant fruitcake. Trump will be more valuable as a Little Red Book instead of some out of control buffoon. Homogenized and cleaned up, Trump’s “brilliance” in pithy slices and jabs will ensure the defeat of the much-more-educated multi-racial immigrant majority.
Yellen just assures the continuation of a failing policy – she seems safe, but she isn’t. H – please marshall your wit and brilliance as well as that of your readers to FIND A WAY TO PREVENT THIS HORRIBLE TRAGEDY. What button can we push?
You have a better idea for a Treasury Sec’y?
I’m not sure what you’re talking about. I absolutely support Janet Yellen, and if you read this: https://heisenbergreport.com/2020/11/23/welcome-back-2/ …. you’ll know why
I don’t know how many times I have to explain this: If you put the onus of sustaining economic momentum squarely on the shoulders of monetary policy without a sufficiently aggressive and durable fiscal impulse, you shouldn’t be surprised when you get financial asset bubbles and inequality. If you’re looking to blame someone, blame the elected representatives who continue to insist that deficits matter and that they can’t spend money to help the lower- and middle-class.
The Fed can’t send people checks. Congress can. The Fed can’t spend $3 trillion on an infrastructure initiative. Congress can. The Fed can’t institute a federal jobs guarantee. Congress can. The Fed can’t forgive student debt. Congress can.
Stop blaming central bankers. And start blaming the elected representatives whose job it is to do what you’re putting off on the Fed. I’m tired of this canard. It’s not reality-based. Central banks aren’t the main problem. Elected representatives with no vision are the problem.
So very sorry – I was responding to John Taylor, and should have made that clear. I, too, very much support Janet Yellen. I agree with your analysis and views, H.
I was replying to John as well, there’s just no way to indicate that because of how the comment threading works on the site, which is something I need to fix, but that’s another issue.
And in any case, I’m not chiding anyone, I’m just telling people the truth.
See here: https://twitter.com/heisenbergrpt/status/1331259341291270144
H – I see your point. I guess I was fed up with the Republican treatment of their fiscal responsibility – taxes which they have cut for decades – and the whole regressive structure of QE, Let’s get jobs to the workers = God know there is stuff to build
On all of that, we 100% agree.
H, personally i believe $3T is not enough for infrastructure. We need to soak up the unemployed from small business devastation and provide them with a high-paying sustainable wage. As a reformed but proud never-Trump Republican, Stephanie Kelton might have been a better choice for Treasury Secretary…
Well said. Deficits sometimes matter (bad idea at full employment/robust growth)- but they don’t now in a crisis and when the economy is operating at subpar levels. The failure is not with central banks- it is with the fiscal side- Congress and the President.
I certainly welcome Yellen’s appointment, it does not guarantee improvement, but experience, intellect and competence count, all qualities we have missed sourly the last four years. Even if Mnuchin earned credits for not being a total hack, like most in the current administration, I for once will not miss photo ops of the treasury Secretary on private jets or holding giant checks next to his Scottish Barbie. We had enough bimbos in the Trump administration to last a lifetime.
“sordid campaign to dynamite what’s left of America’s institutions in the apparent hope that the rubble would block the doors to the White House” Trump’s post-election legal assault on our democratic underpinnings, while sickening to watch, have given me optimism that those underpinnings remain intact. It has put a lot of the defense mechanisms to the test and they have been found operable. Hopefully, though, this acts as a wake up call to re-examine and strengthen those defenses so that when the next, not managerially incompetent, authoritarian wannabe comes along they will be even harder to over-ride.
Trump’s authoritarian political maneuverings in the early part of his administration were quite comical to watch in terms of their ineptitude. However, when he was joined in his quest by a more clever Bill Barr things started to get serious. Should the next dictator in waiting prove more managerially capable and be able to keep a clever and devious team together (unlike the narcissist Trump) the assault on democracy just might succeed. The worry is that this episode has demonstrated to the power hungry hidden sociopaths a playbook that if carried out with a bit more finesse just might succeed. Hopefully there will be efforts, post this, to strengthen the guardrails against future nefarious players.
Nothing short of the Senate censuring Lindsey Graham for crossing the Georgia border will put me at ease.
H,
With all due respect & regarding your comment above, it is your kind of thinking that has gotten us into this mess vis-a-vis the Fed all the way back to LTCM bailout. Every time a crisis “end” is on the horizon (we are never allowed to see where the chips acutally fall) the boogeyman of “meltdown” justifies the Fed means. Just because the Fed can do something doesn’t mean they SHOULD do something. And these measures are NEVER taken away, only piled on.
What makes the Fed actions over the past 20+ years absolutely indefensible at this point is, they have consistently lied about the negative effects of monetary intervention and support to the markets–and people have been pointing this out since LTCM. Whether best light it’s the “noble lie” or worst light it’s the Fed enabling the elite looting of America, the Fed to this day refuses to acknowledge the obvious–these policies have absolutely led to a chasm of inequality in this country.
Fed actions have not only led to moral hazard in the markets, it has led to a moral hazard in government; aside from the advantage of damaging incumbent democrats, why on earth would republicans want to provide fiscal support when the very withholding of said support will guarantee further Fed action and further weath distribution to the elites and corporate america?
The Fed needs to acknowledge the obvious–fiscal stimulus is long past it’s efficacy in helping the economy writ large, and it is arguably (IMHO absolutely is) counterproductive in anything but the short term.
Will there be pain? Of course. I don’t want to see the economy crash as much as the next guy. But nobody in government is even beginning to address the long term end game, or a strategy to avoid the worst… and again why should they when the Fed is there to kick that can perpetually down the road.
Maybe you see some MMT miracle where all these debts just magically go away and some kind of painless default is achieved. I’m not holding my breath.
It’s not clear to me that you understand what you’re talking about. For example: You seem to be conflating fiscal stimulus with monetary policy. “Letting the chips fall where they may” is not viable — no serious person suggests that when it comes to existential economic crises. You completely ignore what I’m saying about the necessity of a sustained fiscal impulse to compliment monetary policy and ameliorate the latter’s tendency to exacerbate inequality, perhaps because you don’t really understand the difference between the two. Treasurys are not properly “debt.” They are interest-bearing dollars. The US government cannot involuntarily default. That is a nonsense statement.
And on, and on. It’s not clear (at all) what any of this anti-Fed rant has to do with fiscal policy. Also your characterization of an “MMT miracle” clearly suggests you don’t have a solid grasp of what MMT even is. It’s not a “policy,” it’s a description of reality. What “long-term end game” are you talking about? There is no entitlements “crisis,” if that’s where you’re going with this. The US government can’t run out of money. That is impossible. You think it’s possible because you don’t seem to understand how government finance works, but I can assure you that it isn’t. I won’t be responding to further comments from you on this subject because, again (and with all due respect) it’s not clear to me that you understand foundational concepts, so this isn’t going to be fruitful for either of us.
Finally, I don’t do conspiracy theories here. So, just as a kind of “fair warning,” suggesting that public servants at the Fed are engaged in a conspiracy to “loot” people will result in a comment ban.
I think he might have missed the saliva analogy article. I was raised on and believed the whole fiscal conservatism arguments for decades, having come of age in the Volker years. However, I have been more and more receptive to the MMT teachings as none of the predictions of traditional theory have come to pass over the past roughly 15 years. I do ponder though the importance of maintaining market trust/faith in a currency as a requisite for MMT to succeed in the intermediate, long term. But when you look around globally almost all developed nations seem to be in the same boat so there really is no better competing store of value out there. I don’t like zero yielding yellow metal either. I keep peeking at Japan. Everyone has been predicting their demise for around 30 years but they are still doing just fine while monetizing the government debt. They are even shrinking it via the use of negative rates.
I started college 1975 as an economics major. Gold was a god. The interest rates that Volcher eventually fought were ascribed to US becoming fiat currency. Good observation, maybe. Good is often enemy of the best.
It is all about relative exchange rates. Thats one area of inflation that Japan has proven sublime. Ray Dalio goes to great lengths to equate gold with being the great stabilizer. Invariably it is tandem with wars destabilizing trust in one another’s currencies. Nothing more. That is the whole premise. He has taught the Chinese that we are susceptible to this creed. They went through various Dynasties which were defacto Fiat. Gold and Monotheism are only true in the West. It simplifies our thinking. Good but not best. Mr. Dalios’ mentoring of the Chinese has given them a tactical advantage over us.
Perhaps Bitcoin replacing Gold for a fear bid may eventually take the shine off gold.
All The Yellen news really tells me is that, as previously telegraphed by the FED, the preferred method of default continues to be to inflate it away. Either via stagflation or ‘real’ growth. I give them a low probably of succeeding at either, especially the latter, as long as Mitch and the obstructionists remain in the way, which they very likely will. The obstructionists are Machiavellian creatures who care about wealth and power; they are not reasonable stewards of a functioning democratic society. Which also probably means this is the new high water mark for Dem power (since 2008-2010 and that tragically blown opportunity), and that the ratcheting cycle will continue as the country moves further and further to the right in 2022 and 2024, the latter of which may or may not deliver another form of authoritarianism (maybe of a populist and fiscally loose variety). I’ll be basing my personal decisions around this prognosis, around the history of septuagenarians’ actual behaviors and actions, not their hollow words. Hope and change were concepts ruined in 2010 by their purveyor, a process that echoed again behind the curtain in 2016 and 2020. The never-Trump Republicans will return home, breaking the “coalition”.
Speaking of Machiavelli, he said as much in The Discourses – “few men ever welcome new laws setting up a new order in the state unless necessity makes it clear to them that there is need for such laws; and since such a necessity cannot arise without danger, the state may easily be ruined before the new order has been brought to completion. The republic of Florence bears this out…”