Fed Head: Sitting in the Hot Seat
Just a few days ago on July 27th President Barack Obama said that the next Fed head had to consider average Americans when setting monetary policy. If only that were true. How Voltarian Candidian to believe that any Federal Reserve Chairman actually knows what an average American is and even if they did, that they would be so optimistically believing in the idea that ‘all is for the best in the best of all possible worlds’. But Obama should remember that the French philosophy Voltaire believed that the world had far too much suffering to imagine that we lived in the best of all possible worlds and that optimism couldn’t exist ultimately because of that. Only Candide was naïve enough to believe that. In the same way, Obama seems rather naïve to believe that any Fed head would be in a position to take decisions based upon John or Jane Doe, your average Joe in the US.
Ben Bernanke’s time at the head of the Federal Reserve is up early 2014 (January 31st) and now the plethora of discussions as to who would be the positive successor is underway in every media, political, social and financial circle. I wonder if some people’s ears are burning right now.
Current thinking shows that there are two horses in the running at the moment: Janet Yellen and Larry Summers. Although, if we are very honest either will probably do very much (or have the possibility of doing so) with regard to giving the economy an overhaul and backtracking on the Bernanke-printing spree. It certainly isn’t going to be about-turn and things getting better. Both have positive and negative sides.
- Some say Summers will be the best choice for the media since he fights with most people around and so there’ll be clashes galore to report on.
- Summers is considered be ‘no-holds barred’ when he criticizes and is seen by some as ‘a bull in a china shop’.
- He is clearly attributed with being one of the causes of the financial crisis in 2008 and the financial meltdown through his promotion of financial deregulation.
- However, some believe that because he has already gone through such a crisis he would be in a position to deal with any financial crisis that might come along in the future.
- Summers is a paid adviser to financial firms today (including Citigroup, which was bailed out in the wake of the meltdown). As such, some state that he would be lacking in impartiality and how he would be able to regulate those financial institutions if he were at the head of the Federal Reserve.
- He is known as the ‘Washington-to-Wall-Street revolving door’. Although Obama defended him when he was dubbed this just a few days ago.
- Summers is more known at the White House and so Obama may feel more at ease appointing him.
- Yellen would be the academic choice with her background and she would be the first woman at the head of the Federal Reserve, plus her apparent calm manner and attitude (although forceful).
- But on the downside Yellen has been the Vice-Chairwoman of the Federal Reserve and so she has been working alongside Bernanke since 2010.
- She has shaped (along with Bernanke) the economy that we have created today in the stimulation of economic activity, or lack thereof, and as such perhaps the financial markets would not be too shaken up by her appointment at the head of the Fed as it would mean business as usual.
- Yellen has always been pro-inflation (she told Greenspan that a ‘little was good’ in 1996) and has maintained prices increasing at around 2% per year.
- But, some analysts are worried that she might not be concerned enough with inflation and that might mean that it gets out of control and sends the US hurtling downwards in helter-skelter fashion.
- Obama is considered to be rather mediocre in terms of appointing women to positions of power and this might be the chance to turn that around and improve that image.
When we look back, some might say that when Ben Bernanke came along people forgot the failings of Alan Greenspan when he had his stint at the head of the Fed (1987-2006). Perhaps, some might be saying that the next successor will just have to try to do worse (yes more suffering; but suffering makes a better world according to Candide). Would it be possible to do worse than Ben Bernanke and his Quantitative Easing? Some might say that he did worse than Alan Greenspan who maintained interest rates so artificially low that Wall Street borrowed too much and Main Street spent too much running us into debt after debt after debt until the national debt became our only problem. Now, Bernanke has started Quantitative Easingand the printing presses have been rolling for far too long (or the fact that they ever even started) means that tapering is nigh-on impossible today or in the future. People that are worried that QE will taper at some time in the near future and that listen when we are told that the US economy is making gains, should have nothing to worry about except the fact that we probably never left the Great Recession (officially 2008-2012). Bernanke should think back to when Greenspan once said “The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake”. Is there a trail blazing behind Bernanke?
Whoever gets nominated, the seat will be hot and open to fire.
Obama is expected to announce who will be taking over from ben Bernanke by the fall. That’s Sunday September 22nd 2013 at precisely 20:44 UT, Mr. President. But remember that symbolically the Autumn Equinox is the last day that night and day are of equal length before night takes over. Get ready to get your flashlights outs, guys! It’s going to go very dark out there!
So, who would you vote for head of the Fed?
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