TOKYO – Of all the things Janet Yellen desires in 2021 – a strong US recovery, a stable dollar, patient bond traders – nothing would make the Treasury Secretary’s year more than a time machine.
With it, the former Federal Reserve chair could transport herself back to the scenes of two macro malfeasances now resulting in a possible inflation surge for which the global economy isn’t ready.
The first stop would be Tokyo, circa 2008, to advise the Bank of Japan against making an error that haunts it to this day. The second stop would be February 2018 for a sit down with Jerome Powell in Washington to advise him against following the BOJ’s march of folly.
What connects these events? Central bankers catering to political winds rather than sticking to sound monetary science.
The damage done at both turns explains, in part, why former Fed bigwigs like Bill Dudley, former Treasury chief Lawrence Summers and value-investing guru Warren Buffett are losing sleep over possible interest rate hikes to come.