Janet Yellen made her first appearance in front of the Senate for her confirmation hearing. While she was lightly challenged, there is not much question at this point that she will be confirmed as the next chair of the Federal Reserve.
Yellen said that we are in "a virtually unprecedented situation". She was referring to the unemployment rate, but she should have been referring to the Fed's monetary inflation.
Yellen said, "We know that those long spells of unemployment are particularly painful for households, impose great hardship and costs on those without work, on the marriages of those who suffer these long unemployment spells...So I consider it imperative that we do what we can to promote a very strong recovery."
Haven't you already done enough? She is certainly right about struggling families, but this is due to two main factors: big government and Fed policy. Of course, the two go hand in hand. If it weren't for the Fed, the government would be more limited in how much it could spend. And if it weren't for the government, the Fed would likely not exist, or at least not in its current state.
On top of this, Yellen said that she doesn't see any major bubbles right now. She said, "Stock prices have risen pretty robustly, but I think that if you look at traditional valuation measures...you would not see stock prices in territory that suggests bubble-like conditions."
This reminds me of Greenspan and Bernanke, who both said that there was no housing bubble. Yellen's comments almost want to make me heavily short the stock market at this point.
While I think that Janet Yellen will be a figurehead and will not be solely responsible for our future monetary policy, I do think she is symbolic of what we have. She is certainly no better than Bernanke and it is possible she could be worse, if that is possible.
Yellen is a lot like Paul Krugman. The Fed has been increasing the monetary base by $85 billion per month for almost a year now and this is still not enough. She thinks the Fed needs to keep stepping on the monetary accelerator because unemployment is still too high. It never occurs to her that it might be the Fed's monetary policy that is contributing to the continually high unemployment rate. It never occurs to her that it was the Fed's policies that led to the high unemployment rate in the first place.
Janet Yellen is a perfect Keynesian. She believes in more government spending and more monetary inflation. I don't know what to expect from her if price inflation goes up. I do know that we are already in a mess and she is inheriting it. At least her and her Keynesian policies can take the blame when everything blows up.