Janet Yellen: The Deft Central Banker Who Mastered the Art of Language

  Yellen, 76, was the former chair of the Federal Reserve and the first female head of the Federal Reserve in its century-old history.
  ”The Economist” described this economist who smiled as kindly as “the aunt next door” as “everyone can adjust”. She is very popular among the market, politicians, and workers. A number of policy experts have imitated Yellen’s dressing habits and raised their collars to pay tribute to her. Both the progressive left and the conservative right can see something satisfactory in her. place.
  But if anyone thinks that she has reached the pinnacle of power in the world economy due to her “gentle” personality and charm, they are totally wrong.
  Yellen, who studied labor economics, is a typical technocrat who pays great attention to professionalism. Guests who dine with her must be prepared to discuss economic topics with her. In the circle, she is known for her high efficiency, straightforward communication, and sensitivity to economic data.
  She is even upright and tough. To be more precise, the key to Yellen’s victory is that she has found the delicate balance between toughness and softness.
– 01 – “Salt or sweet” leadership

  Back in 2014, the popular candidate to run for Fed chair alongside Yellen was former U.S. Treasury Secretary Lawrence Summers. Many people believe that the affable Yellen will be a moderate chairman compared with the fiery Summers.
  Bloomberg once quoted an economist describing the differences between Yellen and Summers. “If you said something to Summers that was incorrect, Summers would probably say, ‘Did you go to graduate school? Did you study economics?’ And Yellen would say, ‘Did you ever go to graduate school? Have you thought about this issue from this perspective? Yellen has the ability to make people reach consensus.”
  In the end, Yellen was approved by the Senate with 56 votes in favor and 26 votes against, but it was the lowest approval vote received by any previous Fed chair. At that time, people still had many doubts about her. But Yellen left office as a highly effective Fed chair, pushing a group of fractious and outspoken central bankers to reach consensus and smoothly exit the ultra-loose monetary policy launched during the crisis.
  During her tenure, the U.S. unemployment rate dropped from 6.7% to 4.1%, the stock market rose, and the economy recovered. While approaching full employment, Yellen accomplished another goal set by the U.S. Congress, keeping inflation within 2%.
  To outsiders, Yellen’s approach to leadership is seen as collegial, especially when compared to Alan Greenspan, the well-known former chairman of the Federal Reserve. Yellen, who served under Greenspan in the 1990s and 2000s, recalled her old leader’s autocratic management style: “People around the table would say, ‘Yes, sir, I support that. Your proposal’, there was never a policy discussion.”
  Yellen, on the other hand, runs the Fed in a more academic way, adept at balancing competing views to ultimately get what she wants.
  As the first female head of the Federal Reserve in its century-old history, many people question: Does a person who is recognized as “approachable” and “pleasant” have the courage to run the Federal Reserve? The implication is often thinly veiled gender bias. Before taking the helm of the Federal Reserve, Yellen served as chairman of the Economic Advisory Council of the Clinton administration. Colleagues who have worked with Yellen said: Everyone in the Clinton administration is very strong and they are always faced with difficult situations. It is ridiculous to suspect that Yellen is too moderate.
  When Yellen was chair of the Federal Reserve, her deputy was the famous former Bank of Israel Governor Stanley Fischer. Even former European Central Bank President Draghi, author of “Principles of Economics” Gregory Mankiw, Former Federal Reserve Chairman Bernanke was a student of Fisher. Public opinion generally believes that Fisher is “too good” and seems to be overshadowing Yellen. As an anti-inflation activist, Fischer once urged Yellen to enter a more aggressive track of raising interest rates, but failed. Before leaving office, he emphasized how tough Yellen was. When someone picks a fight with her, “she snaps right back,” Fisher said.
– 02 – The ambiguity of the expression is correct

  One of the key responsibilities of a central banker is to manage expectations, and playing with language is a key art here, mastered by former Federal Reserve Chairman Alan Greenspan. He once explained his language style when attending a congressional inquiry – “If you think you understand (my speech), then you must have heard it wrong.” During his long tenure of nearly 20 years, Greenspan
  will He uses his ambiguous and misty language skills so well that market participants can hardly discern any monetary policy trends from his speech. For example, when discussing interest rate hikes, Greenspan always fully lists the pros and cons and avoids any judgmental conclusions. Some market participants were forced to find another way, trying to find clues from the chairman’s walking gait when attending important meetings, the number of documents he brought, etc.
  When Greenspan’s successor, Bernanke, came to power, he abandoned the mysterious style. Bernanke, who was born as a university professor, retains a simple and easy-to-understand language style in the classroom.
  This switch in language style is also forced by the current situation. In 2008, the U.S. subprime mortgage crisis evolved into a once-in-a-century global financial tsunami. Bernanke lowered the federal funds rate to zero in a very short period of time and launched multiple rounds of quantitative easing policies in an attempt to lead the economy with unconventional monetary policy tools. emerging from the severe recession that followed the financial tsunami. Not only does he need to win political support, but he also needs to use clear language to let the market understand the mechanism and impact of unconventional monetary policies as soon as possible.
  In the Yellen era, a new trend emerged in the interactive relationship between the Federal Reserve and the market. The unconventional monetary policy advocated by Bernanke has received mixed praise and praise, and its marginal utility has weakened. In order to minimize public confusion about the Fed’s policies, Yellen, who also has a strong academic background like Bernanke, inherited some of Bernanke’s practices.
  The research trajectory also shows that Yellen has always been concerned about the openness and transparency of the Fed. In 2013, at the University of California, Berkeley, where Yellen had taught for many years, she delivered a speech titled “Changes and Improvements in Central Bank Communication Policy.” Although the Fed’s eight interest rate meetings each year announce the general agenda a year in advance, and all post-meeting minutes are posted online, and the Fed chair goes to Congress for public hearings at least twice a year, Yellen believes that the Fed’s information communication work still needs to be Room for improvement. She firmly believes that the Fed’s influence depends primarily on its ability to change expectations about the future.
  That doesn’t mean Yellen won’t play with the art of language. During her tenure as chairman, the Fed raised interest rates five times and gradually reduced the scale of bond purchases under its quantitative easing policy. At the same time, the stock market rose steadily. Behind this series of operations is the superb ability to manage expectations.

  At a certain Fed interest rate meeting, Yellen made a speech to the effect that: First, whether to raise interest rates or not is a discretionary decision-making process. “There is no preset path.” In the next April, June, July, There is a possibility of action in September, November and December, but it is also uncertain; secondly, the overall recovery of the U.S. economy is steady, external uncertainty has been gradually eased but has not been completely eliminated, and the real economy has both downward risks and risks. An upward trend is possible; third, the inflation data has been at the high end, but it does not mean that the core inflation rate will rise further; fourth, the Fed wants to remain cautious, but does not want to act behind the curve; fifth, the interest rate forecast is not a forecast. Make plans or promises.

  The whole screen is filled with the art of language. On the one hand, what she said was essentially “correct nonsense”; on the other hand, the forward-looking guidance provided by Yellen was not clear and highly state-dependent.
– 03 -Hawk or dove? Or a hawkish dove?

  Yellen also has a reason for unleashing the “right crap.” What determines the Fed’s policy style is not people, but trends.
  As the “number two person” under Bernanke, Yellen’s philosophy is consistent with Bernanke’s and is a strong supporter of loose monetary policy.
  During the 2008 financial crisis, Bernanke led Yellen and other committee members to jointly formulate rescue policies. The essence was to use the power of the government to “cover the bottom” for the recession-the Federal Reserve stepped in to purchase U.S. Treasury bonds in large quantities until the labor market until satisfactory recovery occurs. At that time, Bernanke was portrayed as the chairman of the Federal Reserve who flew a helicopter and dropped money everywhere. This was the origin of the term “helicopter chairman”.
  Yellen and Bernanke are both dovish and one of the designers of the Fed’s quantitative easing policy. But after Yellen took office as the chair of the Federal Reserve, the policy cycle shifted from easing to tightening, and the main task became to gradually exit the quantitative easing policy that had lasted for several years. “Dovish” Yellen is endogenously inconsistent with the interest rate hike cycle. Because of this, internal conflicts within the Fed have become more intense and policy signals have become increasingly blurred.
  It is well known that the economics profession lacks consensus on most issues. This is especially true for the Federal Reserve. Behind every decision-making, it is the result of a struggle and compromise between two factions. It is customary for people to call these two factions “doves” and “hawks”: the “doves” attitude towards inflation is not It is very tough, with little tendency to raise interest rates, and is more worried about weak employment; while the “hawks” have a resolute counterattack on inflation and have a greater tendency to raise interest rates.
  One of the important tasks of Wall Street is to be a “bird watcher” and spend a lot of time studying Federal Reserve officials and the Federal Reserve’s official speeches to figure out whether they tend to be “hawkish” or “dovish” and thus judge market liquidity.
  For example, Greenspan described himself as a “dove-like hawk”. “I have always been considered a ‘hawk’, and I am always ready to take early action to tighten money once the unemployment rate falls below my forecast of a non-accelerating inflation unemployment rate; however, I believe I am also considered a ‘dove’ I am a hawkish figure because I have a certain tolerance for inflation.”
  As for the “dove” Yellen, the “Washington Post” believes that Yellen is a tough “dove” and will do whatever it takes as long as the situation requires it. Yellen is enough to show a “hawkish” style and transform into a “dove wearing eagle feathers.”
  There are also views that Yellen is neither a hawk nor a dove, and appears neutral due to her vagueness. Although the remarks themselves are unbiased, the market’s interpretation is that if they are not hawks, they are doves. Therefore, the foreign exchange market, stock market and commodity market are often excited due to the influence of this unbiased perception. This is also the blessing that Yellen’s balancing act brought to the market in those years.
– 04 -The economics couple who fell in love at first sight

  Yellen’s balancing act also permeates her work, marriage, and daily life as a human being.
  She grew up in a working-class neighborhood in New York, where her father was a doctor and her mother was an elementary school teacher interested in finance who later quit her job to stay at home to care for her children. Influenced by her mother, Yellen is interested in stocks, economics and the business pages of newspapers.
  She quickly grew into an academic and showed talent in mathematics, but she described herself as not a “geek” and spent a lot of time with her friends doing nothing. Later, she decided to follow her interests and attend Brown University to study economics.
  Yellen’s childhood friend Susan Grossat once recalled to the media the Christmas break of her freshman year in college. “She took her first economics course, came home and gave me an hour-long speech on why economics was the best. It was clear from that point on that her passion was all over the place. in economics.”
  Near graduation, Yellen listened to a speech by Nobel Prize winner James Tobin and was fascinated by the lecture. After listening to it, she decided to go to Yale University to study with Tobin. To this day, Yellen still considers Tobin her intellectual hero. “For Tobin, economics is a discipline about how to make people’s lives better,” Yellen said. “What I like most about economics is that it allows people to think about problems in a rigorous analytical way. It has a huge impact on life.”
  Yellen’s love for economics also gave Yellen a marriage full of balanced beauty. Yellen first joined the Federal Reserve as an economist in 1977, where she met her future husband, George Akerlof, in the Fed’s cafe.
  “We fell in love at first sight and then decided to get married,” Akerlof wrote in his autobiography after winning the Nobel Prize in Economics in 2001. “Not only were our personalities very compatible, but we have also been able to achieve almost perfect results in macroeconomics. Consensus. The only difference is that she supports free trade a little more than I do.” Both
  Yellen and Akerlof are Keynesians, believing that human behavior is irrational and the market operates imperfectly. The problems that arise cannot be corrected on their own and the government must intervene.
  They collaborated on numerous books and taught together at the University of California, Berkeley, for many years. Their economic ideas also influenced their only child, Robert Akerlof. Currently, Robert teaches economics at the University of Warwick in the UK, and has published many papers in the same field as his father’s research – narrative economics.
  Friends of Yellen say there is another side to her privately. Laura Tyson, a professor at the University of California, Berkeley, who served on the White House Council of Economic Advisers before Yellen, said: “She has a great sense of humor, and her husband’s jokes can make her laugh to the point of tears. I think she is an adaptable person. A very strong person, and I think she is very happy in life.”
  In addition to economics, Yellen has another hobby that she has retained since her teenage years. She started collecting stones when she was 8 years old and has more than 200 stones. The collection is now housed in a house they own in Berkeley, California. Her favorite piece of the collection is a chunk of Tasmanian hematite that she bought in a store in Manhattan as a child.
  A person with a happy life rarely reaches the pinnacle of power, and Yellen is an exception.

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