Treasury Secretary Janet Yellen ranks 33rd on our list of the World’s 100 Most Powerful Women.
Getty Images
Asthe first female chair of the U.S. Federal Reserve Bank, Janet Yellen was second on the Forbes list of the World’s 100 Most Powerful Women in 2014.
This year, as Secretary of the Treasury — she’s shattered that glass ceiling as well — Yellen takes the No. 33 spot.
The 76-year-old Brooklyn native is helming the Treasury at an inflection point. U.S. debt is piling up, inflation is unrelenting and economic sanctions against Russia have called into question the safe-haven status of U.S. Treasury bills. Add it all up, and Yellen’s tenure is showing that there’s more to the job of Treasury Secretary than being a technocrat.
Power-broker status doesn’t automatically come with heading up the Treasury Department. In fact, the job has often been dismissed as nothing more than a glorified bond trader. For most of the last century, hawking U.S. debt hasn’t exactly required twisting arms or negotiating backroom deals.
That’s because U.S. Treasury bills are the lifeblood of the global financial system. Friends and foes alike need to buy the stability only the Treasury can sell. The rules that govern the international monetary system practically require it.
The humdrum nature of the job may be why Treasury Secretaries typically stick around only for a short time. From 1981 to 2014, the average time on the job was just 2.79 years, according to the Washington Post. That was the second-shortest average tenure for any cabinet-level position.
That was then.
Today, across the board, the biggest buyers are cutting back. That includes the Fed, which binged on U.S. debt under the quantitative easing policy that Yellen championed as a board member and as chair. Foreign governments, central banks and large financial institutions like the Japanese pension system are also buying less than they used to.
They can hardly be blamed. U.S. debt to gross domestic product, a measure of the government’s ability to pay back what it owes, has skyrocketed to more than 120% since the onset of the Covid-19 pandemic.
By that measure, depending on where you get the data, the U.S. is either more indebted than it’s ever been or within a whisker of peak post-World War II levels.
Then there’s that little issue of inflation.
Buying U.S. debt is a bad deal if you want your money to keep up with rising prices. That means that if inflation doesn’t relent, investors will lose money, in real terms, on every bill that they buy. The current global financial regime guarantees buyers will continue to line up. But they won’t like it.
There’s more. In response to Russia’s unprovoked attack on Ukraine, the Biden Administration has weaponized treasury holdings through unprecedented sanctions.
U.S. debt has become a cudgel. Previous Treasury secretaries have overseen the enforcement of financial sanctions before. That’s not new. None, though, has ever handled a policy that Yellen is stuck with. By blocking Russia’s access, the Treasury risks undermining the very safe-haven status that’s helped make the U.S. dollar the world’s reserve currency.
Yellen’s legacy rides on whether she can enforce sanctions while not simultaneously providing an excuse for other countries to flee the U.S. monetary order.
For these reasons, Janet Yellen may end up wielding more power than any of her recent predecessors. Maybe that’ll be reason enough for her to stick around longer than 2.79 years — or make her a scapegoat for a spiraling U.S. economy who will be forced to leave before she wants to.
MORE FROM FORBES
Source: https://www.forbes.com/sites/brandonkochkodin/2022/12/06/why-janet-yellen-is-about-to-become-even-more-powerful/