Bernanke chaired his last FOMC meeting and he is out of the door. Some applaud his tenure, others detest his leadership and most do not care. The fact is that the next decade will determine the true impacts of Bernanke’s time at the Federal Reserve. The matter of fact is that at this point it may make a good discussion or confrontation with your trading peers, but reality is that a new old era is about to begin with second-choice for the job Yellen set to take the top job at the Fed.
She is taking over a multi-trillion US Dollar balance sheet which continues to amass an expected additional $500 million this year given no unexpected halts in tapering or forex markets forgive an increase towards the end of 2014. Just remember how the Fed was supposed to be done tapering when the unemployment rate approaches 7.0%.
Reality painted yet another picture as the Fed merely started to taper at that point while pledging to keep interest rates on hold through 2015. Yellen is a known dove who will easily sacrifice any chances for inflation as well as deflation for the sake of an unemployment rate which is computed by a rather questionable approach. As long as equity markets are happy she may be forcing a smile as well.
Now let’s take a look at confidence, do you really feel confident to have an individual running the Fed which already admitted to Congress that she thought everything leading up to 2008 was just fine and there are no problems in the system. She realized them after the financial meltdown which still impacts the financial system and in the US scenario made it not only much weaker, but also uncompetitive.
Janet Yellen will take over now as Bernanke is leaving the building; unfortunately the chances for an improvement are very slim. Greenspan failed at containing an asset bubble and Bernanke went out of his way to create one which means Yellen’s primary job may become cleaning up after good ole Ben. She may reduce stimulus by another $10 billion during her first chair of the FOMC just to reassure markets that she will continue down the path Bernanke paved for her.
Do you really want a repeat of Bernanke?