Janet Yellen just gave her last press conference as chair of the Federal Reserve before her likely successor steps into the role, and as the first woman to lead the central bank, Yellen has played an instrumental role in encouraging greater diversity within the economic and banking community. Yellen did a good job of reflecting the consensus of the entire Federal Reserve, but she also had certain topics that were especially important to her. The five following quotes from Janet Yellen reveal some of her most inspiring words she had during her time atop the Fed.
1. On dissent and critical thinking
Listening to others, especially those with whom we disagree, tests our own ideas and beliefs. It forces us to recognize, with humility, that we don't have a monopoly on the truth.
Yellen joined the San Francisco Fed branch in 2004, and her time there and her subsequent roles as vice-chair and chair of the Fed came during periods of extreme uncertainty and crisis. Given the unprecedented situations that policymakers faced during the housing boom, the ensuing bust, and the financial crisis that followed, Yellen took positions based on her beliefs, but she was willing to admit that not all of her views turned out to be correct. Experience taught her to be humble, and investors can learn a lot from their own mistakes and their need to acknowledge their limited abilities to foresee future events.
2. On the need for aggressive action
If it were possible to take interest rates into negative territory, I would be voting for that.
It's difficult to take decisive action in the midst of a potentially catastrophic situation, but Yellen explored the limits of available monetary policy moves during the depths of the financial crisis. Investors often have opportunities to be decisive in their own personal financial moves, but it takes courage and dedication to pull the trigger, especially during times of uncertainty. It's essential to identify the best possible course of action and then move forward confidently to find solutions and seek rewards.
3. On the surprising magnitude of the financial crisis
I did not see and did not appreciate what the risks were with securitizations, the credit rating agencies, the shadow banking system, the [structured investment vehicles] -- I didn't see any of that coming until it happened.
Many ordinary Americans blame the Fed and its leaders for failing to understand the events that eventually led to the financial crisis. Yellen humbly admitted that she hadn't been able to foresee the magnitude of the negative consequences in store for the economy, and many other policymakers throughout the federal government made similar mistakes. Investors need to understand that they can't always count on encountering readily solvable problems, and it can take additional effort to figure out how to weather some potential storms.
4. On bitcoin
We do not interpret bitcoin's popularity as having a relationship with the public's view of the Federal Reserve's conduct of monetary policy.
Some proponents of cryptocurrencies have argued that the rise in bitcoin and other products stemmed from a lack of confidence in the sustainability of fiat currency systems. Arguments point to events like the removal of the gold standard as undercutting the foundation of value for U.S. dollars and similar major currencies. Yet Yellen hasn't seen the rise of bitcoin as a commentary on the Fed's effectiveness, instead referring to it as a "highly speculative asset" that is "not a stable store of value." That won't necessarily cool off bitcoin's run, but it does suggest that it's unlikely that the Fed will take any direct steps with respect to the cryptocurrency.
5. On economic inequality
By some estimates, income and wealth inequality are near their highest levels in the past 100 years, much higher than the average during that time span and probably higher than for much of American history before then.
Arguments about wealth and income disparities between low-income, middle-class, and high-income Americans have become increasingly heated in recent years, and the rise of the stock market since 2009 has only seemed to exacerbate inequality. Yellen believes strongly in the value of keeping all Americans engaged in the health of the economic system, and greater concentrations of wealth at the very top of the population curve make it harder to get buy-in from those who are at a disadvantage.
Janet Yellen has had a remarkable career, and the long economic expansion during which she headed the Federal Reserve is a testament to her abilities. Taking her words to heart can help you better understand how those who oversee our financial system think and the unique angles from which they see the world.