Justin Wolfers introduces us to Obama’s Fed chair nominee:
Many will be keen to characterize Yellen’s appointment in the usual hawk-dove spectrum, with most analysts suggesting that she’s more concerned about reaching full employment than controlling inflation, making her a dove. This framing misses something important: While it’s true that Yellen has forcefully advocated for more monetary stimulus in recent years, what’s more notable is that she has gotten the big calls right. Those who argued for tighter monetary policy have been proven wrong. Inflation rates that have been persistently below target, and unemployment has been too high.
Dylan Matthews argues that Yellen is less dovish than she is made out to be:
As Evan Soltas and Matt O’Brien have noted, Yellen is plenty hawkish when the situation requires it. In the mid-1990s, when she served on the Fed Board of Governors, she made it clear that she thought unemployment was dangerously low, low enough that employers have to hike wages, which in turn leads to higher prices, i.e. inflation. “We have an economy operating at a level where we need to be nervous about rising inflation,” she said at one meeting. “We can’t dismiss the possibility that compensation growth will drift upward, raising core inflation and in turn inflationary expectations. This is a major risk. Obviously, we need to be vigilant in scrutinizing the data for signs of rising wages and salaries.”
So inflation hawks, take heart — if and when it’s actually worth worrying about inflation, Yellen will be ready to handle it.
Noam Scheiber hopes that Yellen will be tough on Wall Street:
Yellen’s social circle … consists mostly of tweedy professors and government officials. She strikes me as sufficiently devoid of attachments to bankers and money managers that she can imagine them having some truly terrible ideas—even the smart, witty, seemingly upstanding ones. This is in fact more true of her than the average senior Fed official in New York or Washington. Much of her tenure at the Fed was in San Francisco, thousands of miles away from Wall Street special pleaders.
Neil Irwin notes that “the Fed Yellen inherits is even more complicated than those led by Bernanke and Greenspan, so too will be her challenges”:
What unpredictable ripple effects is the multi-trillion Fed balance sheet having for the global economy, and how much should Fed leaders account for those in their policymaking? What is the interplay between the Fed’s low interest rate policies and excessive risk-taking in different corners of the financial world that could create new bubbles? How do you apply the lessons of the crisis to regulate banks and other institutions more effectively, implementing the immensely complicated Dodd-Frank Act? Does the very transparency that Bernanke has spent his chairmanship pushing create problems of its own, markets hear so much information about what the Fed is thinking and doing that there is unnecessary volatility?
Yellen has made her greatest mark as a thinker about employment and monetary. But as chairman, it will now be her problem to come up with answers to this full gamut of questions.
Yglesias sees Yellen’s nomination as a victory for women:
She’ll be the most important woman in economic policy in American history: It’s probably no coincidence that it took someone so super-duper-duper-qualified to break this particular glass ceiling. No woman has ever chaired the Federal Reserve. Nor has any woman ever chaired any of the other major central banks. We’ve never had a woman run the Treasury Department or the National Economic Council.
Hanna Rosin predicts that the focus on her gender will fade:
If all goes as planned, we will soon forget about the fact that she is a woman. Stories about the first female head of a major central bank will die down. Instead, much as happened with Madeleine Albright, Condoleezza Rice, and Hillary Clinton as Secretaries of State, we will start debating her policies, her interest rate decisions, her inflation targets, her easy money programs. We will move one step closer to not having to discuss or even think much about the fact that the person deciding our monetary policy wears lipstick sometimes.
The Dish 