Treasury Secretary Designate Yellen on the Dollar

From Reuters today:

“The value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy”, Yellen will say, if asked about the incoming administration’s dollar policy, according to the report.

Just because the US takes no action to depreciate the dollar doesn’t mean it won’t move. Market forces includes expectations of future policy, and perceived risk and uncertainty. Just moving to a coherent framework of fiscal and international policies (conjoined with presumably coherent monetary policy) will reduce economic policy uncertainty, which has been elevated during the Trump years.

Figure 1: Real value of US dollar against a broad basket of currencies (blue, left log scale), and Economic Policy Uncertainty index (brown, right log scale). NBER defined recession dates shaded gray; assume last trough is April 2020. Red lines at Lehman Brothers, National emergency announcement. Source: Federal Reserve,, NBER, and author’s calculations.

My estimates, detailed in this post, suggest that the dollar was 12% appreciated relative to a counterfactual of “average” uncertainty, even before the pandemic struck. A reduction in policy uncertainty, as measured by the Baker, Bloom & Davis index, will induce a weaker dollar, holding all else constant. Of course, there is no guarantee that such a uncertainty reduction will occur given the unsettled nature of the current political scene – but surely a set of experienced and consistent policymakers at the helm cannot hurt.



41 thoughts on “Treasury Secretary Designate Yellen on the Dollar

  1. Barkley Rosser

    Funny thing is that when I first saw the title of this thread it was going to be about a proposal to replace George Washington with Janet Yellen on the dollar, an obviously at least premature if not completely absurd idea. As it is, looks like what I would have expected from her.

      1. Barkley Rosser


        Do you think this guy could explain how somebody could misinterpret a post that said MLK would be proud and pleased that a ministerial successor to him at his Atlanta church was elected Senator from Georgia as saying the MLK was pleased about somebody carrying a Confederate flag into the US Capitol. That would probably be of more interest to folks here given that you did exactly that.

        1. Moses Herzog

          @ Barkley Junior
          Hmmm, just for the sake of argument, let’s assume what you said is “true” (which it’s not). I thought it was spelling errors that got you all upset and bothered Barkley???

          I did put the link up to what you wrote, so readers can judge for themselves how that post comes across. For me, the kindest word that came to mind reading your post was~~~tone deaf.

          1. Barkley Rosser

            No, Moses, massive lying that totally misrepresents and distorts bothers me a lot mote, such as claiming something written to honor MLK somehow was some pro-Confederate screed. And what is this bit about “true”? Are you like some Trump supporter who thinks he really won the election and you can just start telling lies and when somebody points it out you start putting “true” in quotation marks? You are becoming beneath despicable.

            To “Ockham says..” Macroduck (which you now will be for the foreseeable future, laughingstock), are you really proud to be the third rate sidekicks of a hate-filled sadistic and misogynistic bully? I do want to clarify that your outburst some time ago when you played Moses Herzog Junior did not “make” me behave as you claimed to these supposedly ignorant “bystanders.” I was always prepared to be peaceful with you (and your outburst was not even against something I said about you, if I remember correctly, which may not be the case). You are both smarter than and better informed about economics than your rotten master, who also lacks that Masters degree credential you have, not to mention you have a respectable job dealing with econ numbers, whereas it is unclear he is even employed at all. I have said on numerous occasions that the vast majority of your comments here are highly reasonable and respectable. Too bad you were not able to take some originally good-natured ribbing about a goofy post better than you did. But then you got egged on by your sadistic bully master, whom I have offered peaceful relations to on several occasions, never to be taken up on that.

            Anyway, my respect for you has now gone totally into the sewer, “Ockham says…” Macroduck.

      2. Macroduck


        You’re onto something in siggesting Barkley has intellectual deficits. Looking at the way the guy waves around his credentials, you have to think he knows he’s not really, as the kids say, “all that”.

        His policing of the language fits the case. Nitpicking is a substitute for actual ideas. The rage he falls into is symptomatic of a shame at his inadequacies. I mean really, the guy talks a big game about his academic position, while standing magnificencely astride the comments section of a blog? It’s embarrassing to watch.

        1. Barkley Rosser

          Gosh, “Ockham says…” Macroduck, have you not yet gotten it that the complaints about spelling were basically a joke, but the inquiry about what the heck he had to do with your post was serious, and you never did answer it? What a loser.

          I should not waste my time with this, but since I was challenged recently on my “credentials” for questioning anything said by somebody at Harvard about black swans, and you think that, wow, maybe there is something to this constant barrage from the bully you shill for, I shall report that last night I was proofreading a section of my latest book that dealt with this matter of black versus grey swans. I finished the text of the book late last week, but I need to get it proofread and edited blah blah blah before I ship it off to Springer to be pubulished. Its title is Foundations and Applications of Complexity Economics. BTW, if you look at the Wikipedia entry on “complexity economics” you will find me cited and quoted more than any other person. But, hey, “Ockham says…” Macroduck, of course you and Moses Senior are correct, I am someone with a serious intellectual deficit and no credentials to disagree with my superiors, much less somebody like you or the lying bully you like to imitate.

        2. Barkley Rosser

          “Ockham says…” Macroduck.

          Tell you what. If you tell us what you had in mind when you put “Ockham says..” at the beginning of that post, as repeatedly requested, I promise to 1) not comment on it even if what you say is as dumb and ignorant as rocks, and 2) will stop calling you “Ockham says…” You can go back to being just good old generally reasonable Macroduck like you have been most of the time. OK?

        3. Menzie Chinn Post author

          Macroduck: Without weighing in on this specific case, I think in an ideal world, people should be commenting under their own name. When one does, I think it is only right and appropriate that such persons can refer to the academic work they have written on a given subject so that people can judge the usefulness of their comments. For instance, you hopefully give me more credence for my views on exchange rate dynamics than my views on the minimum wage, given that I have many published academic articles on the former subject, and none on the latter.

  2. Moses Herzog

    I don’t like many of Biden’s staff choices. Yellen is one of the exceptions. I like her very much. Don’t tell Barkley Rosser I said that though, or he’ll remind me I was wrong that Brainard’s chances were better of getting the job.

    1. Barkley Rosser

      Actually I think we could do worse than having her on one of our pieces of currency. Maybe she can replace Salmon P. Chase on the $10,000, although I think they may not be printing that anymore.

      1. Moses Herzog

        I don’t think it’s very appropriate to have treasury or monetary officials on currency. It seems too self-serving (Yes, I know Hamilton was part of Treasury). They’ve had multiple different kind of quarters, yes?? Unless they already did this and I missed it, I would like to see MLK or other black intellectuals or Native American icons on the other side of the quarter. In essence a “two headed” coin. Since they have already done this multiple times with the quarter, I’m assuming the cost is lower than the cost of changing paper currency, and it would avoid some of the backlash related to taking off founding fathers. No doubt some would complain it’s not as high an honor as being on paper currency. My reply to that would be, it’s better than nothing, and once that step is taken and people realize the world has not come to an end having a “two headed” coin, then maybe something like a $40 bill currency could be made. You could also make a special 50cent piece with MLK. Or even a silver dollar coin.

        Another idea, is maybe putting 3 minority icons depictions on the same paper currency. So instead of MLK alone, you could have MLK in the center, Noam Chomsky (if he wouldn’t spurn the idea) towards the left side (where else??) then on the right someone like Winona LaDuke. Some people might laugh at this, but I don’t think LaDonna Harris would be a “horrific” choice. I think she’s done a lot of work similar to Stacey Abrams in getting people to become more active in the voting process.. But other people more knowledgable than me can make those choices, I was just trying to think of easier ways to actually get them on coins or currency.

        For the record, I’m not even against Washington being taken off the quarter, or “taking shifts” as the personage on the quarter coin. But if you had a “two headed” coin, it takes away the quarrel of “you’re taking off a founding father” argument. I’m sure college football officials will learn to adjust to the new “complexities” on the coin tosses.

        1. Barkley Rosser

          Well, Salmon P. Chase was Lincoln’s Treasury Secretary. However, no bills above $100 have been issued since 1969, and apparently there are now only 336 of the $10,000 ones known to be in existence. So Janet Yellen will not get to replace Chase, unless it gets revived. But then, maybe we’ll have some of those folks you suggest, Moses.

  3. Moses Herzog

    Just an FYI for those interested, Katie Halper had Corey Robin on her YT live stream today. I thought that was a pretty awesome guest “get” by her so I thought I would share that in case anyone here was interested.

  4. pgl

    Milton Friedman would agree with what she said as well as how she said it. Then there are those “sound money” types like Stephen Moore and Judy Shelton who complain about other nations using floating exchange rates to allegedly gain competitive advantage:

    ‘The policy outlined by Yellen would be a return to a traditional posture after Republican President Donald Trump railed against the dollar’s strength for years, saying it gave other countries a competitive advantage.’

    Oh wait if King Donald does it – then it is all OK.

      1. Moses Herzog

        @ pgl
        I don’t see her as the devil. Just one of an ocean of misguided Americans. That gets back to public education, and the quality of grade school teaching when no one wants to pay for decent salaries for educational instruction. No one complains when the city council member vote themselves a pay raise so they can go on giving contracts to sorrupt vendors for kickbacks. Which happens in nearly every municipality under the sun. But vote for a $5,000 pay raise for teachers or vote to have it meat the average salasy levels of the other 50 states?? Or complain about Republicans siphoning off money to their private school administrating buddies?? Well, then you are a “socialist”. Hell, even worse, you might be a Bernie Bro.

        Something tells me if we went into a random Chinatown and found people like Menzie’s and his siblings’ Mom and Dad and asked them about education–they’d have much better ideas than any secretary of education in a randomly chosen American “red” state. My guess is first they’d tell us it starts in the home and pounding in the importance of education and knowledge into their children at a young age, and If I may take the extreme liberty of guessing here, since I never had the honor of meeting Menzie’s parents……. they’d also say if you want a comprehensively and thoroughly educated society—you do that with a quality “FREE” public education system~~with well salaried teachers. Not with “private” (which in fact are largely subsidized now) schools that cost more for both the taxpayer, and for society when those not included in the umbrella end up costing society more in crime and in prison beds.

        The lady in the reddit video is not a “bad person”, just misguided in her thoughts. She’s not standing there (in what seems like cold weather and wind) holding her MAGA sign for any other reason, than a very misguided type of affection for her country. But the video still illustrates a point in a vivid way. I’ve met people in China just like this person, who will sit there and argue with you about Taiwan, no matter how hard you try to avoid initiating the quarrel or engaging in that quarrel, and they think it’s a kind of “patriotism” for China, if they can steal away Taiwan people’s right to vote. This is what they are raised on, and 20+ years of brainwashing isn’t going to be changed with a dinnertime argument.

        1. Moses Herzog

          * “sorrupt vendors” should read corrupt vendors in my above bloviating.

          **WOW, I outdid myself this time on spelling mess-ups, also “meet the salary levels of other states”

          Hopefully the gist still got across.

  5. ltr

    January 18, 2021

    China’s GDP grows 2.3% in 2020, staging robust recovery after containing virus

    Chinese economy in 2020 expanded 2.3 percent, the country’s statistics bureau said on Monday, boosted by a strong recovery in the second half after consumption, investment and export all gained pace.

    That made the country the only major economy in the world to eke out an expansion, while others, facing a voracious virus onslaught, contracted.

    China’s accelerating economic rebound, largely owing to the government’s drastic measures to contain the virus, will help boost the confidence of all other economies where a resurgence of infection cases is still taking tolls. However, the broader rollout of Covid-19 inoculations is expected to stifle a wild spread of the contagion, economists said.

    The country’s total GDP reached 101.60 trillion ($15.68 trillion) in 2020, an astonishing achievement in a depressing year.

    Retail sales, a reflection of nation-wide consumption, dipped 3.9 percent year-on-year to 39.20 trillion yuan last year. Industrial added-value expanded 2.8 percent, while fixed-asset investment rose 2.9 percent to hit 51.89 trillion yuan, the NBS said on Monday.

    The unemployment rate was 5.2 percent at the end of December, the same as the previous month, indicating the country needs to maintain a moderate level of fiscal and financial stimulus in 2021 to pump up the economy and shore up employment.

    The world’s second largest economy returned to its pre-Covid19 trajectory of growth, by an impressive 6.5 percent from October to December, picking up momentum from an expansion of 4.9 percent for July-September, and 3.2 percent for April-June. The economy plunged 6.8 percent in the first three months last year, battered by the Covid-19 outbreak, according to data released by the National Bureau of Statistics (NBS).

    “The government’s strong anti-coronavirus measures that help effectively contained the spread of the virus, the flexible counter-cyclical macro-economic policies, as well as the efforts taken to deepen reform and opening up to the outside world, have all contributed to the better-than-expected economic results in 2020,” Cao Heping, a professor at the School of Economics of Peking University, told the Global Times on Monday….

  6. ltr

    January 17, 2021



    Cases   ( 24,482,050)
    Deaths   ( 407,202)


    Cases   ( 10,572,672)
    Deaths   ( 152,456)


    Cases   ( 3,395,959)
    Deaths   ( 89,261)


    Cases   ( 2,910,989)
    Deaths   ( 70,283)


    Cases   ( 2,050,099)
    Deaths   ( 47,440)


    Cases   ( 1,630,258)
    Deaths   ( 140,241)


    Cases   ( 708,619)
    Deaths   ( 18,014)


    Cases   ( 88,227)
    Deaths   ( 4,635)

  7. ltr

    January 17, 2021

    Coronavirus   (Deaths per million)

    UK   ( 1,311)
    US   ( 1,226)
    Mexico   ( 1,082)
    France   ( 1,075)

    Germany   ( 565)
    Canada   ( 475)
    India   ( 110)
    China   ( 3)

    Notice the ratios of deaths to coronavirus cases are 8.6%, 2.6% and 2.4% for Mexico, the United Kingdom and France respectively.

  8. ltr

    January 18, 2021

    Chinese mainland reports 109 new COVID-19 cases

    The Chinese mainland on Sunday recorded 109 new COVID-19 cases – 93 local transmissions and 16 from overseas, the National Health Commission said on Monday.

    Among the domestically infected cases, 54 were reported in northern Hebei Province, 30 in northeastern Jilin Province, 7 in Heilongjiang Province and 2 in Beijing.

    A total of 115 new asymptomatic COVID-19 cases were recorded, while 788 asymptomatic patients remain under medical observation. No deaths related to COVID-19 were registered on Sunday, and 13 patients were discharged from hospitals.

    The total number of confirmed COVID-19 cases on the Chinese mainland has reached 88,336, and the death toll stands at 4,635.

    Chinese mainland new locally transmitted cases

    Chinese mainland new imported cases

    Chinese mainland new asymptomatic cases

  9. Steven Kopits

    The value of the dollar correlates inversely to the price of oil. Indeed, the collapse of oil prices in 2014 and the subsequent decrease in net oil imports led the traditional US trade deficit in oil falling from $20 bn / month in 2014 to effectively zero in 2019.

    Notwithstanding, the total trade deficit was essentially unchanged, with improving oil import balances offset all but one-for-one by deteriorating balances in other goods. This leads us to believe that the trade deficit was largely determined by the capital account, that is, the global economy needed US debt and was prepared to allow the dollar to appreciate to obtain it. If that’s the case, then we would not expect the dollar to materially depreciate while US net oil imports remain low.

    I would add that the trade deficit data clearly shows both the effects of the 2018 tax cut and the whopping stimulus of 2020. How the current trade deficit unwinds in an interesting question, but the last time it was through a brutal recession.

    1. pgl

      “The value of the dollar correlates inversely to the price of oil.”

      This BS again? It was dumb enough the 1st time.

    2. Moses Herzog

      A Republican arguing that if the American trade deficit decreases (which in all likelihood, compared to the 2018-2020 numbers it will decrease over the next two years), we will have a recession, when we are already in a recession. The cumbersome dullness of “Princeton”Kopits’ mind is too cringeworthy to convey.

      Is Kopits intentionally trying to be so desolate of intelligence just to elicit replies?? The same man who hates undocumented immigrants but wants ZERO punishment for the large companies that knowingly employ them. What a rocket scientist.

  10. Manfred

    Says Menzie:
    “Just moving to a coherent framework of fiscal and international policies (conjoined with presumably coherent monetary policy) will reduce economic policy uncertainty, which has been elevated during the Trump years.”
    Well, not sure about that. Looking at the diagram, the years 2008-2014 (Obama years) are more elevated in uncertainty than the Trump years.
    Yes, the uncertainty index falls 2014 and 2015, and rises in 2016 (still an Obama year). The index under Trump stays at the 2016 level, which is lower than the first 6 Obama years. It rises significantly in 2020 – but any objective observer (difficult to find in this blog) would probably agree that 2020 was a highly unusual year, and thus, yes, uncertainty levels rose.
    I know that criticizing Obama in this blog is almost sedition – Amazon may cancel my account, and Twitter may ban me for life.
    But, the data (which Menzie likes so much) seem to tell a more complicated story than justy a blanket “uncertainty was elevated in the Trump years”.

      1. pgl

        And Jimmy Carter was not President in 1982 but that did not stop Republicans blaming him for the Reagan recession. Manfred practices the fine art of the 3 stooges misrepresentation (the 3 being Stephen Moore, Donald Luskin and Larry Kudlow).

        1. noneconomist

          It took almost two centuries for the national debt to reach $1Trillion. Under Reagan, the debt (almost) tripled it in eight years.
          What are the odds Reagan is one of Manny’s heroes?

          1. pgl

            “Under Reagan, the debt (almost) tripled it in eight years.”

            The late great James Tobin had a wicked sense of humor. When people would say this he would ask them to do this inflation adjusted terms. Then he would smile and note the real debt “only doubled”.

    1. pgl

      “I know that criticizing Obama in this blog is almost sedition – Amazon may cancel my account, and Twitter may ban me for life.”

      I promised myself to just ignore your usual pointless rant but this one was so pathetically stupid that I changed my mind for just a second. No one is banning you here but I hear your mother will take away your access to the internet as she is tired of you for embarrassing her family.

    2. Menzie Chinn Post author

      Manfred: Wow. You really do have a persecution complex. Please point out any time you have been censored on this blog. Otherwise, you are just playing the victim.

      I ran a regression comparing the EPU under Trump and nonTrump using a dummy variable for Trump, and found that the coefficient under Trump was higher. Would it be wrong for me to conclude that EPU was elevated under Trump? On the other hand, you have not provided any statistical evidence indicating the robustness of your conjecture that in non-Trump periods, EPU was just as high as under Trump.

      1. Moses Herzog

        Menzie, you are abdicating your duties as a blog host. You need roughly 20 QAnon members on standby to yell out “AMEN BROTHER!!!!” every time Manfred blows his nose in Kleenex.

      2. baffling

        “using a dummy variable for Trump”
        i know it is not intentional, simply ironic justice that this is a non-partisan and completely accurate and acceptable statement. such statements will soon be lost to history…

  11. Not Trampis

    I don’t think a Treasury Secretary should be yellen at anybody.

    On a serious not moses you are acting a like a trumpist!!

    1. Moses Herzog

      @ Not Trampis
      I was a trumpist in high school, but was so bad at it I had to change over to trumpown. I’ll be at Bad Puns Comedy Club in Sydney this Friday at 8pm

      1. Moses Herzog

        *I could have said trumpbone, but saying I played trumpbone seemed to leave a lot of dangerous openings.

  12. ltr

    Latin American countries have recorded 4 of the 13 highest and 6 of the 25 highest number of coronavirus cases among all countries.  Brazil, Colombia, Argentina, Mexico, Peru and Chile.

    Mexico, with more than 1.6 million cases recorded, has the 4th highest number of cases among Latin American countries and the 13th highest number of cases among all countries.  Peru, with more than 1 million cases, has the 5th highest number of cases among Latin American countries and the 18th highest number among all countries.  Mexico was the 4th among all countries to have recorded more than 100,000 and 140,000 coronavirus deaths.

    January 17, 2021

    Coronavirus   (Deaths per million)

    US   ( 1,226) *

    Brazil   ( 983)
    Colombia   ( 950)
    Argentina   ( 1,000)

    Mexico   ( 1,082)
    Peru   ( 1,170)
    Chile   ( 910)

    Ecuador   ( 805)
    Bolivia   ( 816)

    * Descending number of cases

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