The True Gold Standard (Second Edition)
Well, it’s official. President Obama has picked Janet Yellen as his nominee to be the next Federal Reserve Chairman. In the months leading up to this announcement, the press unanimously dubbed Yellen the Queen of the Doves, pointing to her reluctance to roll back the Fed’s Quantitative Easing program. As it turns out, however, Yellen is hardly the dove she is made out to be. Indeed, when it comes to money supply, Dr. Yellen seems, well, downright hawkish.
Traditionally, the dove label has referred to an emphasis on the Fed’s mandate to pursue full employment (even at the expense of slightly higher inflation), while the hawk label has referred to a focus on the Fed’s price stability mandate. In practice, however, the dove-hawk distinction typically comes down to a question of the money supply: to increase, or not to increase?