Thursday
August
27
2015
5:14 pm
Weather

  Home
  Local News
  State / National / World
  Sports
  Opinion / Letters
  Business
  Arts / Entertainment
  Lifestyle
  Obituaries
  Calendar
  Submit Event
  Comics / Games
  Classifieds
  DJ Designers
  Archives
  Advertise With Us
  About Us
 
 
 
 
Editorial: Steady hand needed at the Fed
January 08, 2014, 05:00 AM Editorial

Now that current Federal Reserve Vice Chair Janet Yellen has been confirmed to replace Ben Bernanke when he steps down after eight years at the end of the month, it appears she certainly has her work cut out for her.

The last two chairmen certainly knew when to call it quits. After 18 years, Alan Greenspan stepped down in 2006 — right before the toppling of the house of cards that was our economy propped by credit default swaps and easy money policies that made home purchases entirely too easy. The most recent chairman, Ben Bernanke, pulled out every trick in the book to ensure the world’s financial system did not implode. After years of fiscal stimulus, monetary policy expansion — including several quantitative easing programs — and bailouts of key market sectors including banking and the auto industry, it is now time to start winding down. And while Bernanke did some monumental heavy lifting, transferring that awkward amount of weight to the shoulders of Yellen, who will be charged with setting it down gently, will be no small task.

In addition, Yellen will have to contend with increased scrutiny of the Federal Reserve and its policies and overseeing the enactment of the Dodd-Frank regulatory reforms. Depending on your philosophy — free market or Keynesian — that increased scrutiny is either warranted or not. But the fact of the matter is that after years of letting the Fed do whatever it wanted, Congress has taken an interest in its activities. However, how much traction that attention gets is yet to be seen but it’s difficult to see our current Congress agreeing on much of anything — particularly new policy for the complicated and entangled infrastructure that is the Federal Reserve.

But Yellen’s primary task will be to scale back the sheer volume of its stimulus efforts as the stock market is still in a rolling boil. Anyone who knows anything knows there is a danger in such a rolling boil especially if the Fed has had its hand on the knob for about four years. Turn it down to fast and the market will panic and interest rates may rise too quickly. Keep it boiling and inflation and asset bubbles become a risk. Additionally, it is yet to be seen if the market is strong enough on its own to maintain without the Fed’s assistance.

But that is the challenge. And while Yellen was cheered by liberals for her scrutiny of big banks, don’t expect her to do anything but maintain the status quo until the economy is stabilized and unemployment is at least under 7 percent, and maybe even under 6 percent. There are many other factors in play, some are political, some are not, but the Federal Reserve certainly needs a steady hand as it unwinds its years of aggressive monetary policy. Yellen will likely prove to be that steady hand out of necessity.

 

 

Tags: years, yellen, market, after, reserve, federal,


Other stories from today:

 

 
Print this Page Print this Page  |  Bookmark and Share
<< Back
 
Return To Archives
 
  


 
 
 
Daily Journal Quick Poll
 
How long will the Donald Trump presidential campaign last?

A couple more months
At least until the first primary
Early spring 2016
Until the nominating convention
All the way until the election
All the way until the election, as an independent candidate

 

 
 
 
 
 
 
 
US stocks end sharply higher after Chinese market surges
U.S. stocks are closing sharply higher after China’s main stock index logged its biggest gain in e..
US economy surged at 3.7 percent rate in April-June quarter
WASHINGTON — The U.S. economy posted a much bigger rebound in growth during the spring than previo..
Democratic Party lags in money before presidential year
WASHINGTON — The Democratic National Committee barely has more cash than it does IOUs, and it is b..
IS suicide bombing kills 2 Iraqi army generals in Anbar
BAGHDAD — An Islamic State suicide bomber killed two Iraqi army generals on Thursday as they led f..
More >>  
 
 
  
 
  
 
©2015 San Mateo Daily Journal
San Mateo County name change notice