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Editorials
These are the responsibility of the editor and convey the newspaper's view on current affairs-both domestic and international

Business as usual with Yellen

The Fed’s new chairwoman must dismantle monetary stimulus measures with extreme caution

The appointment of Janet Yellen as chairwoman of the US Federal Reserve conveys a clear-cut message: continuity. With the world economy in such a delicate state, President Barack Obama considers this is not the time to resort to experiments; and that the economic priority at this stage is to deactivate, without risk of financial earthquakes, the huge program of financial stimulus measures applied by the present chairman, Ben Bernanke, who will remain in office until next January 31. Bernanke’s stimulus measures have enabled the American economy to weather the destructive financial crisis set off by Lehman Brothers’ bankruptcy; and, if the truth be told, the Fed’s policy has saved several of the country’s banks from collapse.

Obama’s decision is pure common sense. The new hand at the helm of monetary power in Washington has been the second in command at the Fed for three years, and she previously chaired the Federal Reserve in San Francisco for six. She knows her field inside-out, and has the further merit of having fervently defended the stimulus policies deployed under Bernanke. Obama might have opted to re-establish good relations with the banks by appointing Larry Summers; but, having missed that particular train, the best option is Yellen.

The global economic agents (governments, central banks and investors) are nervous about the disappearance of the stimulus package. Monetary facilities cannot be eternal; but their elimination is not easy. This is proved by the departure of capital from emerging markets, in reaction to the announcement that the stimulus measures are to be withdrawn. It must fall to someone to explain that the process will take place quietly and smoothly and with a constant eye on the economic and monetary indicators. Yellen, the very shadow of Bernanke during the last three years, seems the most suitable choice.

IMF warnings

The risks that hang over the world economy make it advisable to move with particular prudence. The International Monetary Fund has issued warnings about the seize-up of the US administration; the possibility that the country may be unable to raise its debt ceiling (though the Fund rules out that catastrophic idea); the excessive indebtedness of companies in southern European states (including Spain), which may oblige the authorities to undertake new rounds of bank recapitalization; and the persistent difficulties of growth in some large economic areas, such as that of Europe.

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