What Yellen's Nomination Could Mean for the Economy

Shallon Weis |

There's optimism in the air. As announced last November, former fed chairwoman, Janet Yellen will be Biden's nomination as Treasury Secretary. 

Her's is a familiar name that carries a strong alliance with her old pal, Federal Reserve Chair, Jerome Powell, and the Federal Reserve board made of up seven members.

But the relationships enter in a seemingly continued era of chumminess ahead as the ring of familiar friends regroups and is expected to reopen their school of Keynesian economics. That means for investors like you and me, we can expect easy money policies ahead.

The Fed Family and How They're Related

While not blood related, certainly as past and present Fed Chair pals from administrations gone by, the relationship between Powell, Ben Bernanke, Yellen, and Steve Mnuchin is longstanding and seemingly respected.

Powell was a Federal Reserve governor during all four years of Yellen's run as Fed Chairwoman from 2014 to 2018 under the Obama administration and the two have a close rapport. 

Yellen was Bernake's vice chair from 2010 to 2014 when he served as Fed Chairman. 

It's a small world of experienced and inter-connected Fed talent from which seems to flow similar mindsets in policies...easy money and unlimited quantitative easing (QE) that came out of the economic crisis of 2008 and 2009 led by Bernake.  

Enter Steve Mnuchin and Stimulus

Current treasury secretary, Steven Mnuchin, while at initial odds with Powell has recently favored stimulus. In fact, he said President Donald Trump would sign off on Senate Majority Leader, Mitch McConnell's bill to extend unemployment benefits through the month of January.

Yellen's potential appointment could further smooth relations with Mnuchin and Powell and continue a road to interest rate policies steeped in economic stimulus.   

While her work and policies during the 2008 financial crisis have been scrutinized along with her predecessor, Bernake, of impacting the risk of inflation by keeping rates too low for too long, Yellen seemed to steer the economy safely through the crisis.

Keeping the central bank's role stable and enact policies that stimulate the economy in times of crisis is the main theory of Keynesian economics and if Yellen is officially appointed, could mean economic stability for the next four years.