Now that President Obama has nominated Janet Yellen to replace Ben Bernanke as Fed chair, his “dovish” pick means expectations are for easy money to continue. But what exactly does that mean and what could the next phase look like?
Jim Rickards, senior managing director at Tangent Capital and author of Currency Wars (and the upcoming Death of Money), says a ‘Yellen Fed’ will be much different than a ‘Bernanke Fed’ at the end of the day.
She’s “more of a hardshell believer in the benefits of monetary easing,” Rickards tells The Daily Ticker. While he describes Bernanke as having a more stop-and-go approach to quantitative easing over the last several years, he says Yellen is much more likely to say, “’We need to print money, we’ve got to have some goals, we’re gonna keep printing money until we hit those goals.’”
Columbia economist Michael Woodford’s calls for nominal GDP targeting would be an example of this type of policy.
So what’s wrong with that approach? Rickards argues that we’re in an economic depression which is structural as is the ongoing unemployment problem, so the Fed’s cyclical policies may not work. Meanwhile, the risk to the downside, in his view, could be a collapse in confidence in the dollar.
(Watch the video to see why he contends the U.S. is in a “depression” and why he expects a recession next year.)
So what else can we expect next year in terms of monetary policy? Rickards predicts ‘helicopter money’ coming in 2014 – an election year when Republicans and Democrats may have a rare moment of agreement on taxes. Wait, why would ‘helicopter money’ involve members of Congress, and what is it anyway? Check out the video to find out.