Treasury Secretary Janet Yellen certainly looks like she has the backing of the “Big Guy” aka Joe Biden to remain steward of the $25 trillion US economy.
Despite persistent speculation to the contrary, the White House continues to deny that Yellen is set to be jettisoned anytime soon.
Yellen does a lot of media and does a lap of honor for her continued role in helping Sleepy Joe shape economic policy by signaling that she wants to be in it.
And yet the speculation continues.
Wall Street executives with White House ties tell me she’s probably gone; It’s not a question of if, but when the President will pull the plug on what is shaping up to be a disastrous two-year policy leading to what many economists see as a baked-in recession in 2023.
Of course, you can’t blame Yellen for all of business’s mistakes. But she’s the top cheerleader for an economic moron. Biden’s goal since his 2020 election has been to be more “transformational” (progressives love that word) than his old boss, the economically progressive Barack Obama.
That meant trillions of dollars in unnecessary spending rationalized as needed because of the pandemic. Recall: Expenses mainly came in the last few months of COVID as business closures ended.
The Biden administration has denied Yellen will be ousted.Michael Reynolds – Pool via CNP
Yellen oversaw Biden’s push to expand the economic regulatory infrastructure at a time when post-lockdown supply chain bottlenecks were beginning to show, making them worse.
Combined with the Fed’s money-printing (also aided by Sleepy Joe and Yellen), the outcome could be predicted by anyone who’s taken Econ 101 (and many critters who haven’t): Massive inflation imposing a onerous tax on the is working class.
Of course, Yellen took more than just Econ 101. But she has a lot of experience in government and academia (Fed Chairmen etc.) with no real world experience.
inflationary spiral
And it shows. It spent months downplaying the threat of inflation as temporary, until it turned out that wasn’t the case. Ideologically left-wing economists of their ilk often have a soft spot for the spiral of inflation, since it usually accompanies growth and wage increases as we have them today.
Jerome Powell’s Fed has indicated that inflation is still high.Reuters
However, history shows that wage increases never keep pace with prices, leading to stagflation as people cannot afford the extras and, increasingly, the basics. It can only be unwound through pro-growth policies (deregulation, which the Biden people and Yellen oppose) or if the Fed steps in and smothers the inflationary fire with higher interest rates, lower growth, and a likely recession.
That’s what we’re facing now. Jerome Powell’s Fed has signaled that inflation, while slowing, is still stubbornly high – and wages are not keeping pace. There will be more rate hikes no matter how much the markets are clamoring for a pivot. Biden has shown no inclination to slack on regulation. In this scenario, there is a good chance that we are headed for a recession; it’s just a question of how deep the downturn we’ll see.
Someone is going to take the tumble for the economic chaos that will hit the nation, likely in the New Year, and the bets in DC being passed to Wall Street’s top executives are that it will be Yellen. The good news is that their successors are all a step up in the kind of economic intelligence that’s really needed.
Trade Secretary Gina Raimondo is a top candidate to succeed Yellen.Reuters
As I mentioned before, Yellen has no business ideas in the real world. Now compare that to the background of the people who are likely to replace them: At the top, I’m told, is Secretary of Commerce Gina Raimondo, formerly the successful governor of Rhode Island and an economic centrist who helped reform the state pension fund . She also worked in venture capital and started a VC fund that established companies in the state.
I’ll pull this over Yellen’s shaky, textbook-driven approach to economics any day.
Another leading contender on the shortlist is Brian Moynihan, CEO of Bank of America, White House sources tell me. Bankers are a tough sell for powerful progressives like Massachusetts Senator Elizabeth Warren, who has a say over Biden’s economic appointments.
Brian Moynihan nursed Bank of America back to health after the 2008 financial crisis.Shutterstock
But Moynihan took over and brought BofA back to health in one of its darkest hours after the 2008 financial crisis. Today, the country’s second largest bank by assets is on solid footing thanks to its steady hand over the past decade. Not a bad economic point man if you expect a 2023 recession.
Could it be Gensler?
The dark horse in the race to succeed Yellen is Securities and Exchange Commission Chairman Gary Gensler, a progressive darling. He has steered the investor-watchdog agency into the ESG culture wars with new proposals that would force companies to disclose how they reduce their carbon footprint.
Gary Gensler has proposed forcing companies to disclose non-financial metrics, such as how they reduce their carbon footprint.Reuters
He’s also likely the worst of the three candidates and is likely to draw opposition from Senate Republicans and moderate Democrats, which he needs to gain confirmation.
But his somewhat prescient warnings about the dangers of unregulated crypto, his background as a banker at Goldman Sachs, and his work in various business-related government positions are a plus.
One thing is certain: any of the three would be a vast improvement over what we have now.
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