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Original title: Yellen’s challenge: Once monetary easing is not smooth, fiscal stimulus will be easy
From the chairman of the Federal Reserve to the secretary of the Treasury, Yellen made history twice.
However, Yellen, who has always been an academic elite, is not without doubts.
Wall Street welcomed Yellen with a rally in US stocks.
Zhou Hao, senior economist for emerging markets at Commerzbank, told The Paper that Yellen’s stability and certainty are relatively strong for the market. Everyone has dealt with her in the last four years, knowing that it is not easy to let go. The bland chairwoman of the Fed is one of the biggest reasons Wall Street recognizes her.
But at the same time, the United States in the middle of the Boxer year was in the deepest recession since the Great Depression. Whether Yellen could pull the United States out of the vortex is beyond doubt.
Can you conquer Congress successfully?
As of November 30, local time, according to the latest data from Johns Hopkins University in the United States, the accumulated number of confirmed cases of new coronary pneumonia in the United States has exceeded 13.5 million, with more than 267,000 deaths. Beyond the expectations of the Americans and the world, the United States, as the world’s largest economy, has the highest rate of new corona infections in the world.
What followed was the enormous impact of the epidemic on the economy. In April this year, the unemployment rate in the United States soared to 14.7%, the highest value since the Great Depression in the 1930s. As of October this year, this figure has only dropped to 6 , 9%.
The Democratic Party has proposed a massive stimulus plan of more than $ 2 trillion, including the single most important factor for economic recovery: higher unemployment benefits and additional funds for wage protection programs. However, since there has been no “blue wave” swept away by the Democratic Party, the market generally expects the government and Congress to be controlled by the two parties. This not only means that the scale of the fiscal stimulus is smaller than expected, but it also means that Yellen is about to face a big challenge: Can she get more support in Congress to achieve a larger scale of fiscal stimulus and help the US economy to recover quickly. .
However, Yellen, who has always been an academic elite, is not without doubts.
In memory of another former Federal Reserve chairman, Bernanke, Yellen was an economist who cared about practical policies: he built complex and sophisticated theories over the years and tried to verify his thinking with realistic evidence. During the joint work, Bernanke observed that Yellen made serious preparations before attending a monetary policy meeting, always citing other people’s research literature or personally guiding research conducted by his subordinates, or supporting himself through rigorous analysis. . The opinion of.
In an interview with The Paper, China Chief Economist Wang Dan of Hang Seng Bank said that, unlike Yellen’s previous position, the Treasury secretary position is primarily political. Not only must it obey the instructions of the president, but it must also be subject to the Senate and House. Restriction, the test is the level of political negotiation and commitment.
Zhou Hao emphasized that, although from a political perspective, Yellen may not be as good as the current US Secretary of the Treasury, Mnuchin, because Mnuchin has been working in the US political arena for many years and is older. But don’t worry too much about whether Yellen is good at dealing with Congress, because the Speaker of the House of Representatives is still the Democratic Leader of the House of Representatives, Pelosi. Overall, the Biden administration should be better than the Trump administration in its negotiations in Congress, but it can be a bit challenging in the Senate. In the end, the two parties can come up with an acceptable compromise plan. The two sides basically reached a consensus on the stimulus plan. Now the difference is in the scale of the stimulus. Zhou Hao predicted that the two sides should finally reach a final compromise of between $ 1.7 trillion and $ 2 trillion.
Can Moderate Keynesianism Bring America Back to Full Employment?
In 2014, when Yellen was elected chairman of the Federal Reserve, a popular candidate to run for this position with her was Lawrence Summers, a former US Secretary of the Treasury. In the end, Yellen passed the United States Senate with 56 votes in favor and 26 votes against, but it was the lowest vote of support ever received by the Fed chairman.
However, four years later, the unemployment rate under his management fell from 6.7% to 4.1%. Not only was it close to reaching full employment, but the stock market continued to rise and the US economy continued to recover.
Will Yellen continue to decline in the Treasury position?
Wang Dan noted that Yellen is a very good candidate from multiple perspectives: he understands economics, he has connections, and he does not demonize Keynesianism. The United States now has to deal with the new epidemic crisis in the crown, and managing the crisis requires huge public spending.
Among the four priorities Biden announced during his tenure on his “transition website” BuildBackBetter.com, the response to the new corona epidemic is the first, followed by promoting economic recovery, restoring racial equality and addressing change. climate.
Yellen called for a fiscal policy at the 2020 Economic Innovation Forum in mid-November. He noted that support for the economy cannot depend entirely on the Fed’s monetary policy, and there is a great need for the Fed to constantly ask for more fiscal support. Because the Fed cannot support SMEs. Without financial support, economic inequality will deepen.
Zhou Hao believes that Yellen’s appointment also gave the Fed a clear signal that the Biden administration hopes to do more fiscal stimulus, rather than relying solely on monetary policy. Moving forward, the Fed’s work will focus more on acquiring or buying Treasury bonds issued by the Treasury Department, keeping interest rates relatively low. If the fiscal stimulus plan is feasible, the Fed will not cut interest rates below zero or even anytime soon. This is also in line with the direction and general plan of the Fed.
Yellen’s doctoral thesis advisor James Tobin is a leader of the Keynesian school, and his own academic research is obviously biased towards the Keynesian school, focusing on issues of unemployment and wages.
Yellen’s rich experience in decision making, the combination of Keynesianism and the “moderate” stance reflect that she has been concerned with the problem of high unemployment and the plight of the unemployment problem for individuals, families and communities. She defended post-crisis measures in many speeches in 2017, because the economic recession triggered by the financial crisis is likely to be very deep and will require strong response measures.
In early February this year, the new corona epidemic has yet to break out in the United States. Fed Chairman Powell asserted that the Fed has made progress in achieving full employment and that the unemployment rate can be lower than originally expected without causing inflation. In his speech in mid-November this year, Powell stated bluntly that the American job market is still far from full employment.
Wang Dan analyzed and pointed out that Yellen would also be a very good civil servant in China. He has always emphasized that we must give importance to unemployment, whether it is fiscal policy or monetary policy, we must give importance to unemployment. To maintain stability, don’t always look at inflation, economic policies are promising. On the one hand, Yellen will support a proactive fiscal policy, while at the same time being able to use his experience to pressure the Fed to achieve the mutual assistance effect between fiscal and monetary policies.
Does the economy meet identity politics?
Biden announced the candidates for the main team, establishing 7 for the first time in history, and the economic team represented 4 of them.
Among the six candidates for Biden’s nominated top economic team, four, including Yellen, set the record for the first time: the prime minister of finance, the first African-American vice minister of finance (Wally Adeyemo) and the first chairwoman of the Economic Committee for Women. color. (Cecilia Rouse), the first South Asia Director of Management and Budget (Neera Tanden).
Wang Dan commented that Biden has chosen too many firsts in history, and his list of appointments has a strong Democratic color and a sense of identity politics.
Biden said in the statement that the economic team he appointed is comprised of respected, proven and pioneering public officials who will help those hardest hit by the new coronavirus pneumonia epidemic and grapple with the fabric of the US economy. Sexual inequality.
When Biden formed the cabinet, the Democratic Party wanted him to lean toward women. He is also committed to emphasizing diversity when building the team and has selected women for a number of key positions. Statistics show that 52% of new government employees at Biden-Harris during the transition period are women, and more than half of the 500 members of Biden’s government agency review team are women.
Wang Jisi, dean of the Institute for International Strategy at Peking University and a consultant to Pangu Think Tank, discussed and noted in a recent speech that a major problem in the United States is so-called “identity politics.” (Editor’s note: politics identity policy, also known as identity politics). They will ask “Who are we?” Americans will say they are black, white or new immigrants, old immigrants, etc. These topics are called identity politics or identity politics.
Wang Jisi said that from a global perspective, identity politics is becoming a very important aspect of global politics. Today, different people in the United States have different ideological values and demands. Therefore, when looking at the internal politics of the United States, economic changes, social changes, and adjustments in values and ideologies are also included.
