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Unasked Questions for Yellen

dek

Soon after Janet Yellen's confirmation hearing, Nouriel Roubini prepared a list of ten important questions nobody had asked her, and tweeted them.

Of course, given the nature of twitter, he had to offer these questions one by one. Given the nature of a blog, I can put them all together for him here.

1. Do you support optimal control, the notion that inflation sometimes has to be allowed to go above target?

2. You have written that inflation may have to go above target for awhile to reduce labor slack. Do you support this optimal control?

3. Do you agree with Governor [Jeremy C.] Stein that macro-pru will not be sufficient to control bubbles? Would you raise rates sooner to prick bubbles?

4. While you say 'no bubble' today, what is the risk that slow QE exit and policy rate normalization over  4 years will cause bubbles down the line?

5. If the current approach to too-big-to-fail will not work would you down the line support breaking up big banks to deal with TBTF?

6. What will be the Fed losses from paying interest on the excess reserves of $3 trillion when you normalize policy rates to 4% a year. $120 billion?

7. The Fed criteria for a taper is a cumulative improvement in the labor market outlook. Aren't we there now given the fall in the unemployment rate and 180,000 jobs per month?

8.  After all the QEs and related programs growth is still weak. Does this establish that monetary policy is ineffective? Wouldn't a better policy mix rely more on the fiscal side for stimulus?

9. What is risk of fiscal dominance as the Fed is effectively monetizing public debt? Should monetary policy be used to nudge Congress to cut the deficit?

10. What is the risk of debt dominance, that is, of the Fed being unable to raise rates fast enough  as high public/household debt requires low debt service ratio?
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