WASHINGTON, D.C. Oct. 9 (DPI Analysis) – She’s apparently passed on serving as a spokeswoman for Dr. Scholl’s — Gellin’ with Janet Yellen — and instead the veteran central banker finds herself successor to Ben Bernanke as chair of The Federal Reserve Board, the most important and powerful financial institution in the world.
Her nomination this week by President Obama – she will sail through confirmation hearings, Democratic senators say, as Republicans remain consumed by their anti-tax jihad — signals a victory for the American left, particularly for neo-Keynesians led by economist and columnist Paul Krugman.
Yellen, a widely respected economist, one-time Berkeley professor and Clinton Administration advisor, is seen by many to continue the aggressive policies of Bernanke, whose board authorized the central bank to engage in continuous bond-purchase programs in recent years to keep interest rates down and encourage economic growth. Most observers say she will likely to maintain that status quo, or advocate even greater stimulus, with an eye on job growth.
Meanwhile, more conservative economists say such stimulus policies cannot go on indefinitely without triggering a wave of inflation, which will erode the value of financial and other assets, and strain the nation’s creditworthiness. With the $85-billion-per-month bond-buying spree, the Fed’s balance sheet has exploded; it increased from $1 trillion in liabilities in 2008 to nearly $3 trillion today. They will be at $4 trillion within the year, according to most estimates.
Thus the 67-year-old Yellen, who became the front-runner to succeed Bernanke after Larry Summers withdrew from consideration in mid-September, will be assuming the chairmanship of the Fed at an extremely challenging time — perhaps as difficult and challenging as the fall of 2008, when the US economy faced potential collapse and the banking system received a mass bailout. The current shutdown of the government, triggered by extremists primarily in the Republican party, and the Oct. 17 debt ceiling deadline loom large on a vulnerable US economy.