While the withdrawal of Larry Summers from consideration for the top job at the Federal Reserve Bank is good news for those of us who are hoping for some sanity from the Fed, the battle is not over.
“Summers, widely regarded as a brilliant economist and a shrewd and decisive policy-maker,” reports Reuters, “was considered to be the front-runner for the position to replace [current Fed Chair Ben] Bernanke, whose second term expires in January. However, Summers was dogged by controversies including his support for deregulation in the 1990s and comments he made about women's aptitude while president of Harvard.”
So now that Summers is gone, the big question lingers: Will we never exhaust the endless supply of brilliant, shrewd, liberal economists who know how to do only one thing, namely, print more money?
No, probably not.
Because after Larry Summers, then there is Janet Yellen, who now appears the front runner for the top job at the Federal Reserve Bank.
Yellen, like Ben Bernanke—and Larry Summers-- is known to be accommodative when it comes to monetary policy. That means that Yellen, like Bernanke—and Larry Summers-- favors quantitative easing efforts.
So prepare to keep the printing presses going boys… and girls.
Maybe. Just maybe, not definitely.
Increasingly, I have been getting the impression that even dovish bankers, like Yellen, are looking at the QE printing presses with a more skeptical eye.
This, perhaps more than any single thing, was the reason why Obama favored Summers over Yellen.
Yellen, as Fed Chairman, will do what her cold, brilliant(!) economist, misguided, liberal heart tells her to. Summers on the other hand would bend purely to politics over policy. Summers is more a liberal politician; Yellen is more a liberal banker.
Summers, for example, would continue the quantitative easing program in perpetuity as long as it allowed the White House to say that the recovery is moving along just as they planned, regardless of the risks to the economy.
But I get the sense that there’s a rift between the White House and the bankers, like Yellen, and that in part is the reason why Ben Bernanke, who is also purely a banker-- even if an academic one-- did not get a shot at a third term as Federal Reserve Chairman.
Okay maybe not so much of a rift as a disconnect.
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