MNI INTERVIEW: Yellen-QE Details May Help, Fiscal Moves Vital

Former Fed Chair Janet Yellen told MNI Wednesday that detailing the trajectory of the Fed's asset purchases could offer a bit more support to the economy's recovery from the pandemic crisis, but not substitute for a lack of sorely-needed fiscal action.

"There might be some small additional measures that the Fed can do. It still needs to clarify its bond buying program and perhaps they can tweak the terms of the lending facilities to make them more supportive," she said, "but the Fed can't substitute for what we need Congress to do."

"It's really essential for fiscal policy to play a supportive role," she said. The Fed can't send checks to unemployed workers, help state and local governments, supply funds for contact tracing and testing and it can't give grants, when many businesses need grants. "These things are very essential for a recovery."

Despite worries that another trillion dollars or more of fiscal spending could add to the already heavy debt burden, Yellen said the U.S. should spend what's needed to stimulate the economy and "a failure to act results in a much weaker economy that also adds to debt burdens, so there's really no way around a long-term fiscal impact."

"We're in a world where rates are extremely low and likely to stay low for a long time," which makes government debt more affordable. "I believe we can live with larger debt as a consequence of addressing the pandemic, but after that's over, eventually we do need to bring deficits under control."