Janet Yellen Now All but Confirmed as Bernanke Replacement

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The Bullion Bank Says Janet Yellen Will Be More of the Same, Good for Gold

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Unemployment is her number one priority and she views continued easy money as the best tool to promote stimulus.

“Dovish” is a term that implies that an individual that is in favor of easy monetary policy and not worried about increasing inflation as a result. Ben Bernanke, the current Federal Reserve Chairman, has undertaken the largest monetary expansion in the history of the United States. His term has ushered in Quantitative Easing programs 1, 2, Operation Twist, and then QE3. His run as Fed Chairman is set to end in January and the long debated replacement has all but been confirmed.

As Larry Summers withdrew himself from the race, the clear front runner became the 67 year-old, female and Fed veteran Janet Yellen. As of October 8th, she has become the official nomination of President Obama. An October 9th Bloomberg article quoted several supporters such as Alan Blinder, a Princeton University professor and former Fed vice chairman who said, “It’s hard to imagine a better choice by virtue of intelligence, temperament, demonstrated good judgment, understanding of the Fed, and extensive experience,”. Yellen, who is a current Vice Chair of the Fed has long been a proponent of the current low interest rate policy and expectations of even easier money are already being discussed. Unemployment is her number one priority and she views continued easy money as the best tool to promote stimulus.

Many free market advocates see the current $4 trillion balance sheet of the fed and perpetual low rates as a dangerous experiment that could easily backfire. Proponents of the current regime claim muted inflation and say that rising rates are dangerous for the economy.

The recent nomination will lead the market to believe that easy money will continue and may allow for a short term rally (lasting several months, maybe even a year or two) in equities and bonds markets. However, real goods and services that people value are not created just by printing money and the distortions caused by low interest rates cannot continue forever. This analyst from TheBullionBank.com believes so called “Gold bugs” may be vindicated as the Fed, supported by both parties, figures out that it can’t escape the roach motel that it has entered.

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Nick Spohn
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