After a series of twists and turns, U.S. President-elect Joe Biden is getting closer to taking office. Judging from the changes in the political situation after the U.S. election, the biggest challenge facing the incoming Biden administration is still the internal problems caused by a series of contradictions and the pandemic in the United States. The structural problems of the U.S. economy brought about by globalization and the response to the pandemic have prompted Biden to announce his economic stimulus package. The most urgent tasks of the incoming Biden administration are to ease the increasingly extreme political trend in the U.S., to resolve the internal contradictions, and to promote the recovery of the U.S. economy. In terms of the challenges and crises facing the U.S. economy, the 78-year-old Biden's ability to pull through will depend on the new Treasury Secretary whom he will appoint, the 74-year-old Janet Yellen, who will therefore undoubtedly assume a key role in economic decision-making and implementation.
Born in 1946, Yellen is arguably the quintessential American collegiate economic official. She received a doctorate of economics at Yale University, and taught at Harvard University and the London School of Economics before becoming a professor at the Haas School of Business at the University of California, Berkeley. After serving as Chair of the Council of Economic Advisers during the Clinton administration and as Vice Chair of the Federal Reserve Board during the Obama administration, where she was involved in the response to the 2008 financial crisis, Yellen became the first woman to head the Federal Reserve in its century-old history after Ben Bernanke stepped down. She is widely recognized for her work in terms of the overall performance of the U.S. economy in the aftermath of the financial crisis. Her "dovish" views are seen as "friendly" to Wall Street and the U.S. financial markets. As a result, Biden's plans to nominate Yellen as Treasury Secretary was welcomed and endorsed by the U.S. society, including the Republican Party.
Yellen, the incoming Treasury secretary, is seen by many institutions as having enormous influence over taxes, climate, tariffs, and government spending. She will also serve as the lead member of a team of U.S. financial regulators to address emerging risks in the financial system. Having served as the Chair of the Federal Reserve, she also has influence over U.S. monetary policy. As the incoming Treasury Secretary who has served as Chair of the Council of Economic Advisers and Chair of the Federal Reserve, Yellen will have full control of U.S. economic and financial policy. In addition, as she stressed when she was Fed chair, “by longstanding agreement, the Treasury speaks for the U.S. government on international economic policy and the dollar,” the incoming Treasury Secretary will undoubtedly play a key role in the Biden administration's international policy. In that sense, Yellen would play the role of a "virtual president" for the U.S. economy in the Biden administration.
Biden's cabinet picks are diverse, taking into account the origin, background, race, gender, and other aspects, reflecting the "inclusive" character of the Democratic Party. Another feature is that most of Biden's Cabinet nominees are "getting on in years", and many of them were officials from the Obama administration. In contrast to Yellen's appointment, some media commentaries have suggested that this cabinet team lacks character and imagination and reflects the "steady" character of Biden's personality. From this point of view, Biden and the U.S. society have high hopes for Yellen. The stimulus package, the future of the economy, and the future of globalization will all depend on Yellen the "virtual president". In contrast, Biden, who has been touted as "Sleepy Joe" because of his age, may just be a "yes-man".
When Yellen was nominated to be the incoming Treasury Secretary, Yellen spoke of the damages caused by the combination of the Covid-19 pandemic and the recession, with the most vulnerable groups suffering the most. "It's an American tragedy and it's essential that we move with urgency. Inaction will produce a self-reinforcing downturn, causing yet more devastation," Yellen said. She also called for addressing deeper structural issues such as race, gender, and income inequality as well as stagnant wages. Yellen also said in November that the Federal Reserve's remaining monetary policy tools were limited and that fiscal policy would play a very critical role. This means that Yellen, who will take over as Treasury Secretary, will stick to the Neo-Keynesian economics, pushing for a larger fiscal stimulus package to deal with the current crisis. Yellen would be one of America's greatest Treasury Secretaries if she can properly address the structural problems of the U.S. economy, steer it away from the Covid-19 pandemic and drive the recovery of the U.S. economy.
Of course, given Yellen's academic background, most financial market participants on Wall Street and around the world believe that she will still be inclined to defend the dollar's position, which may be at odds with the policy preferences of the Democratic Party, and is a worry for her tenure. After all, the economic and financial environment facing the U.S. this time has changed dramatically from that faced during the 2008 financial crisis. In particular, it remains a huge challenge for Yellen to see whether the U.S. economy can escape the impact of inflation and maintain sustained prosperity in financial markets in the face of unprecedented Fed's loosening policy and high fiscal deficits. Moreover, financial markets have not forgotten her insistence on pushing for the exit of quantitative easing in the United States when she was Fed chair in 2015, the global market volatility caused by her rush to boost the dollar, and the embarrassment of her not being able to serve a second term at the Federal Reserve. Therefore, whether this "virtual president" will be able to survive Biden's first term in the office is the biggest concern. The resulting negative consequences were also fatal for the Biden administration.
Final Analysis Conclusion:
In terms of the economic and financial policies of the new U.S. administration, Yellen will play a key role in the incoming Biden administration, both in terms of her professional background and experience, and could be regarded as the "virtual president" of the incoming Biden administration. She will also face the daunting challenge of resolving the internal contradictions of the United States and steering the economy away from the pandemic, which will have a bearing on her reputation and career, as well as on the fate of the Biden administration.
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