Peter Coy reports in the latest issue of Bloomberg Businessweek that Federal Reserve chair Janet Yellen is not the pure easy-money “dove” that many observers (presumably including Coy) had hoped she would be.
Yellen isn’t a true dove—that is, someone who consistently puts fighting unemployment above keeping a lid on inflation. The perception that she is may be the biggest misunderstanding in all of finance and economics. Investors and corporate executives who bet that rates will remain superlow in coming months and years because the Yellen-led Fed will hang back could be in for a nasty surprise.
Instead, Yellen is what her former Fed colleague Laurence Meyer calls a “circumstantial dove.” She’s favored easy money until now because the economy has been exceptionally weak, but she’s vowed that when circumstances change, so will she.
One notes with interest Coy’s characterization of the impact of Yellen’s concerns about continuing easy-money policies indefinitely.
What this means for jobless Americans is that Yellen is not their superhero defender. She’s serious about putting people back to work, but she won’t risk overheating the economy to do so.
Here’s a question for Coy to ponder: Why should anyone consider easy-money policies as equivalent to a “superhero”-style defense of the unemployed? Trashing the dollar with the hope of securing a short-term employment bump is in no one’s best interest.
