Is this the death of Janet Yellen? There will be a new finance minister

Treasury Secretary Janet Yellen certainly looks like she has the backing of the “Big Guy,” aka Joe Biden, to continue to be steward of the $25 trillion US economy.

There have been ongoing denials by the White House Flack that Yellen is on the verge of being jettisoned, despite continued speculation to the contrary.

Yellen does a lot of media and takes a lap of honor for her continued role in helping shape Sleepy Joe’s economic policy, indicating she wants to be around.

And yet the speculation continues.

Wall Street executives with White House connections tell me she’s probably leaving; it is not a question of if, but when, the president pulls the plug on what threatens to be a disastrous two-year policy that will lead to what many economists see as an ingrained recession in 2023.

Of course, you can’t blame all the mistakes of the economy on Yellen. But she’s the best cheerleader for an economic blockhead. Biden’s goal since his election in 2020 has been to be more “transformational” (progressives love that word) than his old boss, the economically progressive Barack Obama.

That meant trillions of dollars in unnecessary spending, rationalized as necessary because of the pandemic. Reminder: The spending mainly came in the waning months of COVID as business closures came to an end.

The Biden administration has denied that Yellen will be impeached.
Michael Reynolds – Pool via CNP

Yellen oversaw Biden’s efforts to ramp up economic regulation infrastructure at a time when post-lockdown supply chain bottlenecks began to appear, making them worse.

Combined with the money printing by the Fed (also endorsed by Sleepy Joe and Yellen), the result could be predicted by anyone who has taken Econ 101 (and many sentient beings who haven’t): massive inflation that puts a heavy burden on is for the working class.

Of course, Yellen has done more than just Econ 101. But she has a lot of experience in government and academia (chair of the Fed, etc.) with no practical experience.

inflationary spiral

And it shows. She spent months downplaying the inflationary threat as transient until it was proven not to be so. Ideological left-wing economists of her ilk often have a soft spot for the inflationary spiral, as it usually accompanies growth and wage increases, such as we have today.

Jerome Powell departs after a press conference in Washington, DC on December 14, 2022.
The Fed led by Jerome Powell has indicated that inflation is still high.
Reuters

But history shows that wage increases never keep pace with prices, leading to stagflation as people cannot afford the extras or, increasingly, the basic needs. It can only be unwound by growth-enhancing policies (deregulation, which the Biden people and Yellen refuse to do) or if the Fed steps in, smothering the inflationary fire through higher interest rates, lower growth and a likely recession.

That is what we stand for now. The Fed led by Jerome Powell has indicated that while inflation is declining, it is still stubbornly high and wages are not keeping pace. There will be more rate hikes no matter how much the markets clamor for a so-called pivot. Biden has shown no inclination to give up regulation. In this scenario, there is a good chance that we are headed for a recession; it’s just a matter of how deep a recession we’ll see.

Someone will have to take the blame for the economic mess that is about to hit the nation, probably in the new year, and the bet in D.C. passed to Wall Street’s top executives is that it will be Yellen. The good news is that her replacements are all a step up in the type of economic intelligence that is really needed.

Gina Raimondo speaks about semiconductor chip subsidies at a press conference at the White House on Sept. 6, 2022.
Commerce Secretary Gina Raimondo is a leading candidate to replace Yellen.
Reuters

Yellen, as I said, has no business chops. Now compare that to the background of the people likely to replace her: In the lead, I’m told, is Secretary of Commerce Gina Raimondo, formerly the successful governor of Rhode Island and an economic center who helped reform the state pension fund. . She also worked in venture capital and started a venture capital fund that launched businesses in the state.

I’ll take that over Yellen’s shaky textbook-driven approach to economics any day.

Another major shortlisted contender is Brian Moynihan, the CEO of Bank of America, sources close to the White House tell me. Bankers are hard to sell to powerful progressives, such as Sen. Elizabeth Warren of Massachusetts, who has a say in Biden’s economic appointments.

Brian Moynihan
Brian Moynihan nursed Bank of America back to health after the 2008 financial crisis.
Shutterstock

But Moynihan took over BofA at one of its darkest hours in the aftermath of the 2008 financial crisis and brought it back to health. Today, the country’s second-largest bank by assets is firmly on track due to its steady hand over the past decade. Not a bad economic point man if you expect a recession in 2023.

Could it be Gensler?

The dark horse in the race to succeed Yellen is Gary Gensler, chairman of the Securities and Exchange Commission, a darling of progressives. He has sent the investor watchdog agency into the ESG culture wars with new proposals that would force companies to disclose how they are reducing their carbon footprint.

Gary Gensler testifies before the Senate Banking, Housing and Urban Affairs Committee at a review hearing on Capitol Hill in Washington, DC on September 15, 2022.
Gary Gensler has proposed forcing companies to disclose non-financial metrics, such as how they are reducing their carbon footprint.
Reuters

He is also likely the worst of the three candidates and is likely to generate opposition from Senate Republicans and Democratic moderates that he needs to gain confirmation.

But his somewhat prescient warnings about the dangers of unregulated crypto, his background as a banker at Goldman Sachs and his work in various government economics jobs are a plus.

One thing is certain: any of the three would be a huge improvement over what we have now.