The Atlantic’s Matthew O’Brien has a bold claim: Janet Yellen, the soon-to-be Fed Chair, will be the most powerful woman ever. While Queen Victoria, Maggie Thatcher and Merkel were or are very powerful, O’Brien argues, their power was limited by their countries’ borders. Yellen, on the other hand, will determine the economic fate of a country dominating the world economy, which gives her “more control over the global economy than any other living person once she’s confirmed as Fed Chair”.
The argument sounds compelling, but I think O’Brien overestimates the Fed’s power. Sure, the Fed could do some serious damage – as it did with some bad decisions in 1929. But Neo-Keynesian thinkers have made a pretty compelling case that monetary policy itself can only go so far, and loses much of its impact when interest rates start nearing zero. The post-2008 crisis is a case in point. The Fed’s quantitative easing may have prevented further damage, but it was unable to create significant economic growth by itself. As long as fiscal policy doesn’t play along, Janet Yellen will by no means decide the fate of the world economy.
She will be very powerful, sure. But she won’t rule half the world – as Queen Victoria did. She arguably won’t even have as much influence as Angela Merkel, who holds the keys to Europe’s economic future.