Why Janet Yellen Would Be The Most Powerful Woman in World History

Queen Victoria presided over a five-continent empire. That's nothing compared to the influence Janet Yellen will have if she's confirmed as Fed chair.

MATTHEW O'BRIENOCT 9 2013, 12:51 PM ET

She's been called a "small lady with a large I.Q.," but future Fed Chair Janet Yellen should be called something else now: the most powerful woman in history. Okay, I know that sounds a little hyperbolic. A lot hyperbolic actually. How is the ability to set interest rates more powerful than Queen Elizabeth and Victoria's five-continent empires, or Catherine II's efforts to bring the Enlightenment to Russia?

Well, the answer is one part context, and another part depressing. The context is that the Fed Chair is maybe the third-most important job in the world right now, and being powerful in a globalized world matters more than in a non-globalized one. Queens could only dream that their edicts moved the world economy as much as a dramatic FOMC announcement does today.

The depressing bit is that there just haven't been too many powerful women before her. The list of female heads of state or Fortune 500 CEOs or central bankers is still far too short -- particularly that last one. So it's not too much to say that Yellen, our first female Fed Chair and certainly the most qualified nominee ever, will have more influence over the world than any other woman before her. Let's think about why.

The Fed is as powerful as it is boring. (Alright, maybe not that powerful, but you get the point). See, its job is to make sure the U.S. economy stays in the Goldilocks zone: growing neither too fast nor too slow, but just right to keep both unemployment and inflation low. It raises interest rates when it thinks growth is too high, and cuts them when it thinks growth is too low -- and it does all this by controlling how much money is in the economy. But the Fed's interest rate decisions don't just set the course for the U.S. economy; its decisions set the course for the world economy too. That's because the dollar is the world's reserve currency, and so many emerging markets have pegged their own to it -- which means they've decided to import our monetary policy. Think about it this way. If I say my currency will always be worth a certain number of dollars, then I have to print more of it when the Fed prints more dollars. That's why economists call the Fed a monetary superpower: it's the world's central bank all but in name. And, as you can see in the chart below from economist David Beckworth, the Fed's hegemony isn't limited to emerging markets. The European Central Bank (light blue line) and the Bank of Japan (black dotted line) have also followed the Fed's lead the past 10 years or so.

full article:
http://www.theatlantic.com/business/archive/2013/10/why-janet-yellen-would-be-the-most-powerful-woman-in-world-history/280423/