It’s been a while since markets have heard from Janet Yellen in an official capacity, but back in the mythical past before there was a Trump Presidency, she commanded a considerable degree of respect in her capacity as chair of the Fed.
In that context she was a fairly safe bet for Joe Biden when he got round to considering candidates for Treasury Secretary, and, on the strength of her first testimony before Congress in her new role, his faith is likely to prove justified.
Republicans are wary, of course.
The worry for them is that the Democrats will use the unprecedented stimulus packages, both proposed and ongoing, to smuggle in liberal measures and laws that have little to do with coronavirus relief.
In this, they may well be right.
But the market’s more concerned, short-termist as it is, in the economic implications of her decisions.
Here, there was, for the time being at least, a quiet reassurance. As one commentator put it yesterday, markets have to a large degree already priced the end of the coronavirus in, even if governments and populations haven’t quite caught up to that fact yet.
Yellen did nothing to undermine this sentiment. US stimulus will be big. She was strong on the size and scale, and was widely quoted in her desire to “act big.”
That’s good for markets in general, and equity markets in particular, because not only will there be more money around to stimulate growth, but that money itself will be worth less, meaning prices, and in particular equity prices, will go higher.
That equities may actually only be retaining their value in real terms is of little concern in the short-term, where profits are counted in dollars, and legitimately so while inflation remains low. And crucially on this point, Yellen said nothing about overly seeking a weaker dollar.
Donald Trump was very explicit in his calls for a deliberate devaluation of the dollar, but Yellen, a trained economist, is, as is to be expected, more cautious.
Nor will she openly embrace modern monetary theory, although in reality the process of undermining the value of the dollar by printing new money will continue unabated.
Instead, she took a sideswipe at cryptocurrencies, which may now feel the deadweight of government bearing down on them, arguing that they are used to facilitate what she called “illicit” financial transactions.
The idea that those transactions may only be “illicit” in the eyes of those wearing spectacles tinted a certain political way did not enter into her discussion, at a time when the owners of gun shops and those who would take a different path on coronavirus are being deliberately excluded from standard electronic money and banking services.
Be that as it may, holders of bitcoin have been put on notice.
Meanwhile gold, continues to hover at around US$1,850, weakened by Janet Yellen’s apparent unwillingness to escalate the currency wars, but supported by the ongoing programmes of quantitative easing.
For now, she said, the focus would be on recovery. Who’s going to pay for all this was not the subject of a wide-ranging exposition. But that’s the US economy for you – buy now, pay later. The questions that remain are: who is going to pay, and how?