Senate Confirms Janet Yellen as New Fed Chair; Expect More of the Same, Says Filmmaker Who Interviewed Her


The Senate has confirmed Janet Yellen as the new chair of the Federal Reserve in a 56-26 vote. While some media outlets are quick to celebrate the first female appointee to this position, Reason TV talked to at least one person who sees little to celebrate when it comes to Yellen's views on monetary policy and quantitative easing.

Jim Bruce interviewed Janet Yellen while producing the documentary "Money for Nothing: Inside the Federal Reserve," and says the following in an interview with Reason TV (featured below; relevant bite starts at 7:30 mark):

I'm concerned that Janet Yellen is going to follow the policies of Ben Bernanke. It's going to be more of the same. I think she really has all the intentions you want. She wants to help the average person. But I think that her idea is that more quantitative easing, more periods of zero percent interest rates, is going to do that.

Yellen has said as much throughout her confirmation hearings, stating that near-zero interest rates remain a necessity until capital investment has strengthened, while also arguing that high interest rates would be, in a sense, just as "artificial" as current interest rates. Via the Washington Post:

"Isn't the zero lower bound in some ways also artificial?" asked [Sen. Chuck] Schumer (D-N.Y.). "Isn't QE2 just another way to influence interest rates. If you didn't do QE, wouldn't interest rates be artificially high?"

Yellen clearly agreed, and offered what is surely the wonkiest answer in the entire hearing.

"If you judge what's high or low by the needs of the economy, people sometimes talk about a concept called equilibrium real rate," Yellen said. "When there's a lot of saving and not very much investment, which is where we are now, the natural forces of the economy are pushing interest rates down. It is these forces we're trying to cope with."

Against that backdrop, what would happen if the Fed hiked interest rates?

"If we were to try to push rates up when the economy has that much saving and such weak investment, we would truly harm the recovery. Having pushed rates to zero, by many estimates we would want to have negative interest rates. Of course we can't achieve that. As you indicate, that's why we're trying to push down longer-term interest rates."

Watch Reason TV's interview with Jim Bruce below, and check out Bruce's film here.