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Yellen's challenges "unprecedented": Economist Mark Thoma

Monday, December 09, 2013 - 02:40

Janet Yellen could be confirmed as Fed chair as early as Thursday, and she will face the task of navigating the central bank through uncharted waters, contending with the largest-ever balance sheet and untested regulatory powers, says University of Oregon economist Mark Thoma.

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I believe the challenges that. -- Elmo phase. When she is confirmed our unprecedented. I can't think of another fed chair that faced challenges that are as important and as big as she's facing right now. I think there for a challenge is that Janet Yellen will face when she is confirmed. The first in the biggest -- the exit strategy getting the timing right getting the magnitudes right all of those sorts of things he'll be judged in the future quite a bit by how well she manages. The exit from QE if they get this thing wrong. And start pulling back too early in interest rates by congress to try and recovered that's gonna slow the employment recovery is gonna slow the recovery overall -- more unemployment. So the first big one here is the exit strategy I would agree that this program can not continue forever the second thing I think that she will face when she's confirmed as regulations. Although Dodd-Frank passed quite awhile ago only about 40% of its been implemented they're still quite a ways to go lot of rule making to go we've still got the problem of equipment of bank runs in the shadow banking market. Exactly what the problem was during the the financial panic and that problem has been solved yet. So -- that's going to be a big challenge getting that done right the third challenge she may face is whether or not the Fed needs to actively pop bubbles. She made a statement in 2005. That you agree with Alan Greenspan that we shouldn't -- the -- shouldn't pop bubbles that -- only try to clean up afterwards that turned out to be a bad strategy for the housing bubble in 2009 she changed her mind -- -- I think the Fed should actively go in and pop bubbles when they see them. If it looks like there's a bubble inflating for some reason maybe they don't manage exit strategy right or something along those lines. Then she's gonna face a big challenge about how will provide the leadership to either pop that bubble or let it go in the decision she makes could be critical. Finally if the financial sector gets in trouble I think there's a big issue with too big to fail banks in the resolution authority. And whether the Fed and other people who have input on this we'll have the courage to actually put banks through the resolution. Authority let them fail. And then see how markets react. -- is more -- Overwhelming response here 659%. Saying they think Jack McKeon is more dovish fed up Fed Chairman remember back with 15% say much more dovish. Janet Yellen has been. Pegged as a dove and she's studies she doesn't care about inflation all the sorts of things I think she might surprise markets in how tough she'll be. If inflation doesn't fat rear its head. I don't think she's going to put employment over inflation at all she's made indications in the past that she cares about inflation she understands it's important. And if inflation rears his head I think markets might be quite surprised at how strongly she reacts.

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Yellen's challenges "unprecedented": Economist Mark Thoma

Monday, December 09, 2013 - 02:40

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