Berko: Obama wanted Yellen all along
Friday, December 06, 2013 7:00 AM
Dear Mr. Berko:
What do you think of Janet Yellen as the new boss of the Federal Reserve? Do you agree with TV commentators that if she were in charge of the Fed today, there wouldn’t be a budget problem? According to many in the media, she will be a lot more effective in helping the nation recover from the recession and in putting more Americans back to work than Lawrence Summers, whom nobody seems to like, would have been. It seems the media believe that Yellen is likelier to get the economy moving up and unemployment moving down faster than current Fed Chairman Ben Bernanke. So do you think the stock market will continue to rise with Yellen in charge? I’m holding more than $80,000 and considering investing about half of this in blue-chip issues. Please advise.
G.P., Erie, Pa.
American citizens learn most of what they know about the world around them by watching television. Television is America’s brain, is its moral compass and defines our expectations. It’s our way of being informed by corporate America, which we’ve empowered to tell us what we should know, what we should think and how we should feel. Because television controls what we hear and see, it also helps keep Americans ignorant. As a result, we know borscht about economics and beans about how the Fed manipulates interest rates. I doubt that one in 50 Americans can explain the difference between fiscal and monetary policy or the difference between the deficit and the debt – even if the life of their firstborn depended on it. And when our favorite TV talking heads tell us that the government will shut down if the debt ceiling isn’t increased, we, with alacrity, accept those comments as gospel.
Americans actually believe that the government will come to a standstill at a trice if the debt ceiling isn’t raised. Well, Jiminy Christmas and Fanny Brice, the government has $250 billion coming in every month from corporate, Social Security, payroll, excise and estate taxes. Only $75 billion of that $250 billion is dedicated to interest payments, so there’s $175 billion left over each month for Congress to blow on whatever it chooses. And Congress is still sending more than $15 billion in foreign aid to Libya, Haiti, Kenya, Sudan, Ethiopia, Pakistan, Senegal, etc. I recall a movie made 18 years ago called “The American President,” in which an aide says to Michael Douglas, who plays the president: “They’re so thirsty for (leadership) they’ll crawl through the desert toward a mirage, and when they discover there’s no water, they’ll drink the sand.” Douglas responds: “People don’t drink the sand because they’re thirsty; they drink it because they don’t know the difference.”
Without having significant information about your needs, income, risk tolerance, goals, etc., I’m unable to give you suitable advice. But I’ll tell you that I believe that the Dow Jones industrial average will continue to do well in 2014, because Yellen’s easy-money policies may make Bernanke look as stingy as a miser. Please consult with your accountant or a money manager, who can give you accordant advice.
Meanwhile, most folks don’t know that Yellen was President Barack Obama’s first choice. Obama cleverly nominated Summers knowing that Congress would not approve of Summers, so he got his first choice by default. Summers’ conservative policies are anathema to influential members of Congress. Many believe that Summers would have initiated an end to the stimulus this year, that he is a fiscal and monetary hawk and that he would have chided Congress for its excessive spending. And certainly, Summers, who privately does not approve of Obamacare, would not approve of a government-sponsored bailout of Detroit and Illinois. He fears – and correctly so – that it would set a precedent. So Obama nominated Summers because he really wanted Yellen, knowing she would be more amenable to his administration’s policies.
Ain’t that just ducky?
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