On March 19th, 2018, hundreds of students and faculty members gathered in Zellerbach Theater of the Annenberg Center to attend a conversation between Janet L. Yellen, former chair of the Federal Reserve, and Jeremy Siegel, a Finance professor from the Wharton School. This conversation belonged to the Howard Crawley Memorial Lecture Series and was, in part, sponsored by Wharton Women. As students and faculty were settling in, throwing their arms in the air to signal their presence to their friends and grabbing their phones to takes pictures, they were also excitedly preparing to listen to the wise words of Janet L. Yellen.
Prior to Dr. Yellen’s lecture with Dr. Siegel in the Zellerbach Theatre, she met with a small group of students and faculty for a short Meet & Greet. Everyone gathered in the Dean’s Conference Room in Steinberg-Dietrich Hall for an informal chat with Dr. Yellen before the lecture. Attendees included student club leaders, senior faculty, and members of the Wharton administration.
After settling in, everyone gathered around a conference table where faculty and students spoke to Dr. Yellen and Dr. Siegel, asking them questions and engaging in conversations with them over the future of interest rates and cryptocurrency. After getting a taste of topics that would be discussed in the lecture, everyone headed over to the Annenberg Auditorium Zellerbach Theatre for the event.
At the lecture, Dr. Yellen began by sharing her background, which was fascinating for everyone in the audience. She always loved math and thought that she would be a math major in college. However, when she took economics for the first time in the spring of her freshman year at Brown, she said it was like love at first sight. She enjoyed economics because it allowed her to use her math skills to help tackle issues that affect human welfare, opportunity, and inequality. She decided to major in economics and completed her thesis on unemployment in open economies. Yellen decided to go straight from undergrad to graduate school.
Dr. Yellen spoke a bit about the current state of the economy and how the economy is favorable and growing, which has spurred the Fed to raise rates slowly to prevent overheating in the market. Yet, the real wages seem to be stagnant, potentially due to a lag in productivity. Yellen remarked that total-factor production (TFP) has fallen below what we are used to, and overall business formation and innovation are not what they once were. These trends are global and began before the financial crisis, so we probably will not see a huge increase in productivity any time soon. While her report on the economy included positive and negative news, it was amazing to hear her speak about some of the important national economic issues she has spent the last many years working on at the Fed.
The audience also enjoyed hearing about her personal career as a woman in economics. She noted that at all stages in her career she has been in the minority as a woman. While the representation of women in some economic careers is improving, she highlighted that there are still fewer women in economic careers than STEM careers. It was great to hear about how her husband, who is also an economist and Nobel Prize winner, has supported her throughout her life and career. Yellen told the story of when she received the call that she had been selected to be on the Board of Governors for the Fed. Her husband immediately supported her in this career move, and he was excited to figure out how they would move to Washington, D.C. It is encouraging stories like these that give us so much hope for the future as Wharton Women!
After Dr. Yellen finished her lecture, Prof. Siegel opened it up to Q&A from the audience. The questions students asked ranged from past Fed actions, to cryptocurrency, to the state of the economy, and to the unwinding of the Fed’s balance sheet.
A senior in Wharton asked about the growth restrictions the Fed set on Wells Fargo, to which Yellen responded, “Risk management control is a key responsibility of the Fed,” and that they set certain restrictions and sanctions on the bank, such as a cap on asset growth. Although unusual, similar actions could be deemed appropriate in future situations depending on the size and significance of the actions taken by other financial institutions.
Yellen also addressed a question about her views on cryptocurrencies, stating that it is possible for central banks to create cryptocurrencies and that the Fed has studied the possibility. However, her team has decided that the added element of financial intermediation may not be favorable, as cryptocurrency is not necessary for monetary policy control. The US dollar is alive and well, showing strong demand growth. She further pointed out that most central banks don’t plan on introducing cryptocurrency on a retail level, as the first step in that direction may happen through commercial banks at the wholesale level.
When a junior in the College studying Mathematical Economics asked about further actions to take regarding the Fed’s balance sheet, the former Federal Reserve chair clarified that the gradual, predictable process of lowering the balance sheet towards normal levels began in the fall of 2017, and that incoming Fed Chair Jerome Powell is unlikely to reconsider nor address this topic on the next FOMC statement giving that it is already underway. Nonetheless, the shrinkage should bring the balance sheet down to around 2 to 3 trillion dollars as opposed to 4, which is still higher than pre-crisis levels.
Lastly, Yellen was asked about her thoughts on the influence of the recent trade restrictions set by President Trump. She restated that the Fed stays out of fiscal policy, but that this new trade policy should have a tiny impact on the macro outlook.
If you missed out on seeing the lecture, no worries! The lecture is available to watch online at the following link.
Written by Julia Bache (W’19), Eugenia Carmona Aristeguiet (W’20), Margaux Carré (W’21), and Shreya Subramanian (W’21).