Will Yellen Reduce Unemployment and Boost the Economy?

Hope that Janet Yellen's appointment as Fed Chairman will bode well for the economy springs now from the pen of Ambrose Evans-Pritchard:

Rejoice: the Yellen Fed will print money forever to create jobs

Or does it? The intelligent and always thoughtful journalist for The Telegraph questions the relentless, probably ramped up, fusillade of QE-style money printing that a Yellen chairmanship seems to promise.

Acknowledging her economic "pedigree," he reminds us that Ms. Yellen was one of the few Feds who suspected a storm was brewing in 2007. Here's what she said:

“The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real. At the time of our last meeting, I held out hope that the financial turmoil would gradually ebb and the economy might escape without serious damage. Subsequent developments have severely shaken that belief,” she said.

So it seems our new monetary master is no blind bureaucrat. Ah, but what solutions might she offer? Here Evans-Pritchard questions Yellen's intellectual acuity, pointing to her perception that the sticky increase in unemployment stems from cyclical rather than structural causes. As such, it's nothing a good heavy dose of "aggressive" monetary policy won't cure. As a result, she will pursue and perhaps increase the sort money printing policies of her predecessor trumpeted since our crisis began in 2008: QE. In his own words:

The next chairman of the Fed is going to track the labour participation rate. Money will stay loose. Markets have been spared again. The Brics can breathe easier.

This leaves me deeply uneasy. We are surely past the point where we can keep using QE to pump up asset prices.

Evans-Pritchard prefers injections of massive quantities of money directly into the economy via fiscal policy, rather than what he seems to see as the monetary tinkering preferred by the Fed.

Who is right? For now, it seems Yellen will continue the drug-like QE injections, albeit with perhaps bigger and stronger doses. Evans-Pritchards will have to clean and polish his money canons for now, hoping for the day when they can be locked, loaded and fired into a flagging economy that he sees as flopping in the breeze.

But whether you agree or not that more money on top of more money will lead us out of the doldrums, The Telegraph's financial guru seems to agree with our comment of a few days ago: Wall Street must be rejoicing. More free money! 

The question now is whether the free money can keep sustaining asset prices at these levels. It seems Ambrose-Pritchard doesn't believe it can.

Reason and common sense would tell us he may be right. This can't go on forever. On the other hand, it may continue far longer than any or us might have imagined.