Chair of the US Federal Reserve Hates Unemployment

There was good news last week. The U.S. Senate voted to confirm Janet Yellen as chair of the central bank of the U.S., the Federal Reserve.

What has this got to do with us? A lot. The U.S. is still the engine of the world economy. America is Europe’s most important trading partner. If the American economy doesn’t manage to dig itself out of its hole, it will affect us.

During a period when the political systems in U.S. and Europe have been paralyzed, the central banks have become more important. Ever since the first vigorous stimulus packages after the crash in 2008, financial policies in the U.S. have been constricting and thus obstructing recovery.

Perfect Qualifications

It has been up to the Federal Reserve to prop up the economy. The outgoing chair of the Federal Reserve, Ben Bernanke, has done so with vigorous monetary stimulus packages, the result being that the U.S. economy is recovering from “the great recession” — the long and severe recession that affected Western world economies after the financial crisis in 2008.

Now, Janet Yellen is taking over. She has perfect qualifications: strong academic qualifications, previous experience as chair of the Federal Reserve in San Francisco and as financial adviser for Bill Clinton. Today, Yellen is the vice chair of the central bank and famous for being one of best market timers of the Fed.

But in addition, she has one more characteristic: She hates unemployment. To read Janet Yellen’s speech and listen to her hearing in the Senate feels like a breath of oxygen-rich air after far too long in a stuffy room.

Effects on Cohesion

Yellen views unemployment as the big problem in the economy. She is particularly concerned with long-term unemployment and how this increases the risk of permanent social exclusion. She talks about how the increase in poverty has an effect on both life opportunities and the social cohesion in a society.

Yellen put it like this in a speech in February last year: “The toll is simply terrible on the mental and physical health of workers, on their marriages and on their children.”

Human Point of View

The new chair of the Fed is not a dreamer, and definitely not left-wing in European terms. She is a rather traditional Keynesian, who believes the job of the economic policies is to do what the market cannot.

But Yellen also has a moral and human point of view. The cost of unemployment is too high. The role of the central bank is, as far as possible, to combat unemployment.

The fact that the U.S. has a central bank chair who understands how damaging unemployment is is good for us. This will strengthen the American economy and, with it, that of Sweden and Europe.

It is a shame that the same understanding is not to be found here in Sweden.