Barack Obama’s new book describes former US Treasury Secretary Henry “Hank” Paulson as “tall, bald and bespectacled, with an awkward but unpretentious manner”. I interviewed him once and found him surprisingly inarticulate. However, in a crisis he was exactly the man to have on your side – a lifelong banker who knew how the markets worked and the people in and around them, having lunched with politicians and statesman alike as chief executive of Goldman Sachs. He was the man who stopped the rot in 2008 by acting fast and wisely to curb the crisis that was threatening to destroy the global financial system. President-elect Joe Biden’s choice as nominee for Paulson’s former role, former Federal Reserve chair Janet Yellen , has been loudly applauded by almost all serious commentators in the business media. I disagree. Her appointment is perhaps the worst decision to come out of the new administration so far and is likely to lead to more loose money, further expanding debt, an equity boom and eventually a big bust. This is not to decry her many achievements as a policymaker, practitioner, thinker and guru in the field of economics. She is likely to be the first woman to hold the job in 231 years and will have held the top three economic jobs in the US government, having also led Bill Clinton’s Council of Economic Advisers. Treasury secretary is one of the four great seats of the US government, responsible for financial and monetary affairs. She will play a key role in policymaking by directly advising the president. As Fed chair, she continued the mistaken policies of her predecessor, Ben Bernanke, driving interest rates ever lower to stimulate the economy. When she had the chance to bring rates back into contention as a policy tool, she was too slow to raise them as she prioritised full employment. Will Biden’s treasury secretary pick reverse Trump’s trade measures on China? Some say her policies drove unemployment to the lowest levels in two generations, though current US President Donald Trump claimed the glory . Unemployment is now 6.9 per cent, the highest since 2013, so all those rate cuts were wasted. Yellen’s interventionist economics are wrong for the times. She has a laudable concern for creating jobs but can only subscribe to using government money to buy them. She sounds like a Modern Monetary Theorist , a notion that says governments should borrow now while interest rates are so low. As Yellen drove them low at the Fed, it smacks of circular thinking. +If money has no value, as is the case when interest rate falls to zero, most of our standard economic relationships fall apart. We now don’t know if low interest rates actually create jobs. She destroyed the effective tool of using interest rates to manage the economy by continuing Bernanke’s disastrous policy of quantitative easing. The cost of free money is actually very high and, rather than trickle down to the poor, most of it ends up in the pockets of the already wealthy. Yellen’s greatest weakness is that she is an economist, and it is well-known they drive looking into the rear-view mirror. Their skill is in analysis, and that tends to promote yesterday’s policies today. Will low interest rates keep markets pumping as Covid-19 persists? A technocrat is fine to keep things ticking over, like a balm on a wound, but we are not facing normal financial and monetary times. Asset prices are already detached from fundamentals and keep rising, largely because of Yellen’s legacy of zero interest rates and money being created out of thin air. When the liquidity bubble bursts, it may be on her watch. What we need is a banker like Paulson or an appointee with more private sector experience. Bankers know that markets are forward-looking and make judgments on that basis. Having the Fed and the Treasury both run by Fed economists who have no professional market experience is too much of a good thing. Econometrics encourages following relationships, and the market is always ahead of the trend. Bankers have to look ahead and assess future risks; they tend to be communicators and results-oriented. We don’t want too many bankers, either, but present policy is economist-heavy. To be Treasury secretary you have to wield sharp elbows, thick skin, strong negotiating skills and political acumen to negotiate with Congress – none of which seem to be in Yellen’s toolbox. She is actually too nice; Paulson inspired respect and maybe a little fear. Yellen was unable to keep her own Federal Reserve Board in check as her fellow board members often briefed the press on their own views, confusing the market. To brutally paraphrase the famous words of former Treasury secretary Lloyd Bentsen as he put down Dan Quayle in a vice-presidential debate, “I met Hank Paulson once. Unfortunately, Janet Yellen is no Hank Paulson.” Richard Harris is chief executive of Port Shelter Investment and is a veteran investment manager, banker, writer and broadcaster and financial expert witness