We now know where we stand. Janet Yellen is to take over the US Federal Reserve, the world’s monetary hegemon, the mistress of all our lives.
Currently vice-chairman of the Fed, she was a junior governor from 1994 to 1997 under Greenspan, and then president of the San Francisco Fed from 2004 to 2010.
Note that she confronted Greenspan head-on in 1996, pushing for pre-emptive rate rises to choke inflation and wean the economy of cheap credit.
That was the moment when the Fed began to make a series of fatal errors, becoming addicted to ever lower real interest rates.
The transcripts show that she clashed with New York Fed chief William Dudley in December 2007 over the risks of subprime mortgage defaults, which is telling since Dudley (ex Goldman Sachs) was supposed to be the official with his finger on the market pulse.
We now know that the US economy was already in recession by then (though the Fed did not then have the data).
We now know too from a devastating book by the Richmond Fed’s Robert Hetzel “The Great Recession” that the Fed itself was the chief cause of the disaster that unfolded in 2008.
Yes, the Fed is committed to tapering QE to zero once the jobless level reaches 7pc (and raise rates once it hits to 6.5pc), and yes, this could in theory happen much sooner than the think want since the headline rate has already plummeted to 7.3pc.
If the current, elevated rate of unemployment is largely cyclical, then the straightforward solution is to take action to raise aggregate demand.
If unemployment is instead substantially structural, some worry that attempts to raise aggregate demand will have little effect on unemployment and serve only to stoke inflation.
The next chairman of the Fed is going to track the labour participation rate.
Nonetheless, please watch the video below, with renowned Peter Schiff an American businessman, investment broker, author and financial commentator and his guest Rand Paul, a member of the Republican Party, and the son of former U.S. Representative and presidential candidate Ron Paul of Texas. on the implication of Janet Yellen’s nomination.