the entire state of georgia. if you like to get the very latest on any of the stories from this news hour, we invite you to head over to our website, there it is. aljazeera.com, aljazeera.com. inside story is next. >> most days, on the new boss janet yellen went on the hill to peek at the crystal ball, we have the "inside story." ♪

>> hello, i'm ray suarez. in her first testimony as fed chair, janet yellen said a few things. the labor market is far from complete, the gyrations of the stock market worldwide coul do t pose as risk to the u.s. market. >> janet yellen, the newly minted chair of the federal reserve said the economy had made substantial improvement over the past four years. >> since the financial crisis since the depth of the recession substantial progress has been made to restoring the economy to health and in strengthening the financial system. still, there is more to do.

too many americans remain unemployed, inflation remains below our longer-term objective, and the work to make the financial system more robust has not yet been completed. >> taking questions, yellen said if the economy continues to show improvement the fed will likely again reduce it's asset purchases. call the quantitative easing, the bond-buying program by the fed slipping $10 million a month into the economy as stimulus. as jobs return and other positive signs come yellen said the fed would likely taper. >> the purpose of quantitative easing, we've been buying longer-term securities and agency backed securities. the objective has been to push down longer-term interest rates, and i believe we've succeeded in

doing that. the purpose is disperse spending in the economy, and to achieve more rapid economic growth. this program is not on a pre-set course, which means if the committee judges there to be a change in the outlook, that it would reconsider, it would reconsider what is appropriate with respect to the program. >> it was congratulations all around from the members on the historic precedence set by yellen's appointment to the chair. >> in the 100-year history of the federal reserve, it has existed for 100 years, there has been only 15 fed chairs. you are the first woman to lead the fed or any central bank op. we are so proud of. >> you thank you. >> but there was some hazing of the new face before the committee. >> so that begs the question today using your words, are you a sensible central banker, if

not, when will you become one? >> congressman, i believe i am a sensible central banker, and these are unusual times. >> yellen's testimony was calm and she seemed prepared and unflappable in questions by the committee over banking rules and there was praise for her forthright style. >> i've been on this committee for many years, and i've understood more of what you have said than the two folks in front of you, so thank you for that. >> reporter: pressed with questions of how the fed can help the economy with more than what it is doing now, yellen held to the unwritten rule of appearances: make no news. >> with the position that fed has taken, the question i think has become a deficit enabler, i would be interested to hearing

your response on that? >> so we're very focused on achieving the objectives that congress has assigned to the federal reserve, and that is maximum sustainable employment and price stability. we've had an economy with unemployment well above normal levels, and inflation is running well below our 2% objective, i don't think it would be helpful either in terms of achieving the objectives that congress has assigned to us, or in terms of congress' deficit reduction purpose to raise interest rates in order to strengthen the committee. >> and the markets which traditionally hang on every word of such hearings and often react with volatility instead moved slowly upward through the day.

[ bells ringing ] >> my constituents absolutely can't understand why-- >> representative michelle bachman pressed yellen on a view held by some members of the g.o.p. that the fed is not transparent in what it does, and should be subject to audit, a notion yell done not oppose. we are audited, the books are independently reviewed. >> however, what i don't agree with and strongly oppose interfering with the independence of monetary policy by bringing political pressures to bear on the committees' judgment about what is the appropriate way to implement monetary policy. >> a democrat from texas was focused on the growing inequality in the country made worse been the great recession and asked if this is stifling economic growth? >> i think it's one of the most important issues, and one of the

most disturbing trends facing the nation at the present time. there has been some discussion about the possibility that inequality is holding back, the recovery because the gains have been so unequally distributed. i think we don't have certainty about that. but certainly rising inequality is not--is partly a matter of a weeweak--a weak job market, bute deeper disturbing structural trends. >> yellen repeated the dual mission of the federal reserve: stable prices and full employment. she stressed continuity of leadership and policy. yellen said the economy is improving, and for now the fed plans to stay the course.

>> does it matter whether one administration picked the economist or another that ends up at the fed chair. what impact could janet yellen have on your life, the economy, the value of your savings? joining us now in studio, nila richardson. from new york, peter cardello, and back in d.c. dartlet nailer, an advocate with public citizen. nila, let me start with you as people are sitting at home watching this program. they're thinking, all right, there is janet yellen. she's in charge now. what difference could she make, does she make on their lives? >> one of the charms of janet yellen is she seems to represent a continuation of fed policy, and also the leader of the shift

starting in the last year in terms of the taper. and finally getting the economy back to normal operating procedure. i think what she represents is a real economist taking about a real economy, and how the fed is going to lead this economy so it operates best for the american people. >> peter cardilo, one of the first stories posted when she concluded her testimony said her opening statement could have been ben bernanke's closing statement a few weeks ago. does it make a difference to have janet yellen in charge? >> well, it's going to make a difference because she's basically continuing ben bernanke's policy, and i think it will make a difference in a sense that, you know, she proved to be quite efficient today. her first time giving a congressional testimony. she basically answered in a very strongly fashion, a very simple

way, and i thinks that great. that means we're going to see the fed become more transparent. and i kind of believe that's going to be quite good in terms of people understanding what the central bank is trying to do. there is no question that, you know, she's going to be a very open fed chair lady, someone that you can understand. i think she has laid that--made that very clear to the markets. the markets are the best barometer of indicating whether or not they're going to have a love affair. i think with today's positive market reaction the answer is yes. >> what are the hallmarks of the yellen philosophy? what should we know about what she sees when she looks at the operation of the economy? >> i think that the slalom course that janet yellen has

taken in position as chair has in one sense taken of edges over a personal fed chair. you asked if yellen will different than bernanke, the answer is maybe not. the answer is to be the fed chair, and in yellen's case she was on the fed and she was at san francisco not long ago. where it is difficult to exercise one's idiosynchrocies, and for the last number of years we have not been able to see yellen's idiosynchrosees, many of which are scrubbed by fed staff. >> well, if you're going to buy or sell a house, if you're heading to the market to look for a car, what can you expect in the coming years in a janet

yellen-led fed? we're going to take a short break and when we come back we'll talk just about that. this is inside story.

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else will ask. >> it seems like they can't agree to anything in washington no matter what. >> welcome back to inside story, i'm ray suarez. janet yellen took the hot seat on capitol hill and calmly answered questions before the house financial services committee. her message: stay the course. yellen said the economy is you improving, unemployment is dropping, and inflation is not a threat. peter cardilo, beyond not being a threat, she said inflation is too low, beyond our long-term goals. i thought inflation was a bad thing and a threat, how could it be too low? >> well, to begin with the opposite of inflation is deflation.

and deflation is never good for the economy, and it's quite difficult to cure as opposed to curing inflation. i think what she was trying to say while the united states is not in a danger zone of entering inflation, inflation is low. it's like inflation at times its like preparing a good meal. you need spicy to it. if you have an economy that has no inflation, well, that can also pose a problem. pose a problem in a sense that we all know that in terms of corporate earnings it's a struggle to keep those corporate earnings up there if you can't pass on price increases. also if things get too low, obviously the profit of margin shrinks. i think what she was saying is we need to maybe get inflation just a little bit higher, but certainly not to the point where it would be destructive in terms of, let's say, eating away at

the value of the currency, or eating away at the value of, for instance, your home. and so from that perspective i think that she's correct, and i don't think she's saying that she's going to do anything to propel inflation higher. by the way, some of the critics--many of the critics of quantitative easing was that that would have brought on a lot of inflation. well, you know, that's not happened. so that's not going to happen until we get, you know, the global economies really propelling at a stronger rate of growth. >> as peter cardilo notes, for years during the quantitative easing period the federal reserve is creating money, injecting it into the financial system, and the threat was this is going to unleash inflation,

and undermine the value of the currency. inflation was just around the corner. well, it never got here, or hardly did, why not? >> presumably not because the economy is in such doldrums. there is money in the economy. you look at the four, five largest banks, and i thought i saw a count of $1.4 trillion in deposit that have not been loaned out. there is money that could be circulated were there to be demand, were there less than 6% or unconscionable amount of unemployment, if there were people who were not underwater in their mortgages, and felt confident enough to consume. quantitative easing was invented because all of the other traditional tools were run out. we're at such low interest rates what else is left? she's under pressure from conservative to ease that under this phantom fear of inflation that has not emerged.

many believe the stimulus was not big enough, and that the tools of the federal reserve are too modest in the face of that. >> if you have money in savings accounts, if you had money in accounts that had checking with interest, if you had retirement investments that featured bonds because they were safe and secure, you would be taking a whacking over the la couple of years because inflation has been so low, and interest rates have been so low. >> this was not necessarily a win-win policy. savers were at a disadvantage at the end of the policy spectrum. it definitely played to people who wanted to play in the stock market. if you wanted a rate of return based on an interest rate you lost out from the stock market boom. i think that is where there has been some distrust from middle america against the fed because they see some of their savings

have eroded as affect of this qe 3, program. think definitely has paid a tax. >> do you think change is on the way if you're one of those people? >> the fact is there is a taper so there is a reduction in the bond-buying program. but ben bernanke gave guidance that they were going to continue the federal fund policy through 2015. that forward guidance is in place. the markets expect t and it would be very difficult to retreat on that promise now. >> so two more years of low interest rates. >> yes, if you're buying a house, if you're buying a car, that's good news. if you're a saver, and you don't want to take a risk in the stock market, that's i not good news. >> we're focus on janet yellen since she became chair. she is not the only person who decides interest rates. there is a vote. thernow it is possible that jant

yellen is on the minority side in that emergence, this could not be all put on yellen, it couldn't be put on bernanke before. this is a collective. >> and are there hawks and doves in the policy making circle that are on the open market committee? >> yes, i think there are four seats that are changing in the last half year. you have one vacant--one seat about to be vacant, and three nominees that have to be confirmed before the senate in the next month or so. so of the seven governance, we're having half of it change. we could see a vastly different yesterday. some of it could be yellen, but not all of it will be yellen. >> we'll take a short break and then come back and take a look at the coming year or two.

we'll put you on the federal reserve bank. what decisions will have to be made, and soon. this is inside story. scrimmagvinlan vigilantes rose up.

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>> welcome back to inside story. i'm ray suarez. on this edition of the program we're talking about the federal reserve under the leadership of janet yellen. the stock market liked what yellen said on capitol hill. investors pushed chairs higher on wall street and news that house votes raising the debt ceiling won't hurt. we're discussing the fed and still fragile economy is nila rich son, and peter cardilo, and bartlet nailer. nila, yellen was pressed on her understanding of why the labor

market participation rates are so low, where she saw inflation coming in the coming year, there is a lot to handle. there are some things she has to be watching closely because she and her fellow governors have some decisions to make. what are they? what is in the pipeline? >> i'm going to guess it's not the obamacare enrollment numbers. i think what they're going to be looking at is the labor market, first and foremost the sticking point in the u.s. economy. the under employment rate, the number of people who would like to work full time and can't find a full-time job are far too high. participation levels are 1978 levels right now. and even though that unemployment rate is coming down, it may be coming down for reasons that are not good, people are giving up, retiring prematurely. all of these factors have to be taken into account as the fed decides how to taper.

>> peter, there was a lot of back and forth over the labor force participation rate and trying to figure out people who might otherwise be working who weren't or if there is a demographic change where the baby boom is working. >> it's important you know, because the participation rate is basically for instance, if you look at last friday's employment data you'll see for the first time we have more participants. that was entertainmented as a good enough as opposed to a bad number. the question is, you know, as you pointed out, is it demographics? is it the baby boomers that are dropping, that are retiring, and of course you have less workforce and less people looking for work. but i think the problem with the labor market stems from the fact

that there are many jobs out there that have been lost that will never come back, that, you know, will it replace--that will replace with new technology. i think that, you know, the feds really can't do very much about that. so it's a--it's a political question i think more than an economic question at this point. >> bartlet, are there competing interests here? it do you have a different set of druthers from what jamie dimon might want in the near term? >> sure, and i'm glad you raised my favorite banker, yes, the fed has winners and lossers. when it raises rates, it's advantaging users and

disadvantaging credit. there are winners of inflation, and that is creditors, people who owe. >> because they pay back with cheaper dollars. >> it's an important point that also on janet yellen and the federal reserve is the completion of wall street refo reform. while we are in this economic rut it is in so small part because of bank recklessness that exploded five years ago because regulators, in this case alan greenspan and then bernanke right before it crashed, and the fed has yet to institute all the rules. yes, the volcker rule was finalized, but it might not be a year or more before it's enforced. bankers were paid, given outrageous amounts. jamie dimon paid a $13 million fine to the justice department, but then a week ago got a 70%

raise of $20 million. there is a rule in dodd frank. they can stop any pay that leads to risk taking. that's a thousand days past due that it should have been instituted. >> you have to explain this to a specialist audience. would it be better if more general audience understand the fed. how much of it is restrained by what the public wants, needs or knows or doesn't know. >> it is data driven. it is looking at the public in macro-data, represented in macro-data, but i want to piggyback on a point that bartlet made, the true legacy, the legacy of janet yellen's first testimony, the true legacy of janet yellen will be how she

institutes dodd frank. ultimately it was the financial system and the collapse thereof that affected the american people, the middle class, the homeowners, jobs that are lost. >> and why dodd frank was passed in the first place. >> it is important that the american people understand what the fed is doing. ultimately the fed makes it's own decisions independently, as much as some congress people don't like that fact, they do make their decisions independently. >> thank you to you all. that brings us to the end of this edition of "inside story." we want to hear what you think about the issues on this or any day's programs. you can log on facebook page, twitter, our handle is aj inside story am or reach me directly at ray suarez news. see you for the next "inside

story." in washington, i'm ray suarez. people being deported from the united states. >> right now we're headed to san juan bosco, a shelter here in nogales where the mexican immigration authorities have picked the people who were just deported, they take them there so they have a place to stay on their first night back in mexico.