The Fed Succession

[The Minsky Moment]

The Econ blogs have been all aflutter the last 2 weeks since Obama first floated Larry Summers as a possible successor to Bernanke.  The predominant reaction started out lukewarm and went down from there as people combed the record for Summers' prior monetary positions.  Interestingly, the anti-Summers position (and its usually flip side, pro Janet Yellen) appears to cross ideological boundaries, uniting the Krugmanites with the neo-monetarists.

As far as I can tell, no one has surfaced with a full-throated defense of Summers, which I suppose not surprising given the controversy that surrounds him.  Personally, I think Summers is terrific in a lot of ways, and yet I agree that he would be a much less than optimal Fed chair.

The opposition to Yellen, on the other hand, appears to arise from the following groups.
1)  Goldbugs
2)  Austrians
3)  Ignoramuses

As an example of the latter category, take this editorial from the reliably execrable New York Sun.  It is one of the worse pieces of editorial journalism I have every had the misfortune to read:  http://www.nysun.com/editorials/the-female-dollar/88357/

What is the world to make of the fact that as America approaches the 100th anniversary of the Fed the big question is whether the next chairman will be a woman? The Times headline is, "In Tug of War Over New Fed Leader, Some Gender Undertones." It characterizes the battle to succeed Ben Bernanke, who is widely expected to depart after his current term, as being between Mrs. Yellen, a former president of the San Francisco Federal Reserve Bank, and Lawrence Summers, an acolyte of Treasury Secretary Rubin. Or, as the Times puts it, "between the California girls and the Rubin boys."

Are we entering the era of the gender-backed dollar? We don't discount the issue of discrimination against women in America or the importance of cracking the glass ceilings. Your editor has spent a career cheering on high octane women. But what good is a gender-backed dollar going to do in an era of fiat money? The debate about the next Fed chairman has been conducted absent any attention to the question of whether America, or the world, is being well-served by a system in which the nation's money is convertible into nothing other than other pieces of fiat money.

We know how we are going to measure Mr. Bernanke's performance — by the value of the dollar entrusted to his care by the Congress. He may reclaim things between now and the end of his tenure in office, but as things now stand his tenure has been a disaster. The value of the dollar, at but a 1,333rd of an ounce of gold, is substantially less than half of the 568th of an ounce of gold it was valued at on the day Mr. Bernanke acceded to the chairmanship of the Fed. Would this record have been any better were he a woman? Where does that leave Governor Yellen?

The Times characterizes her as "one of three female friends, all former or current professors at the University of California, Berkeley, who have broken into the male-dominated business of advising presidents on economic policy." The other members of the triumvirate are Christina Romer, who headed President Obama's first Council of Economic Advisers, and Laura D'Andrea Tyson, who had the same post under President Clinton. None of them, in so far as we're aware, has made it her business to plump for an end to the system of fiat money.

. . .
As the 100th anniversary of the Fed approaches the Joint Economic Committee of the Congress has been nursing a bill to establish a Centennial Monetary Commission. The idea would be to make a formal assessment of the Fed as it commences its second century. It struck us as a terrific idea, but the prognosis it is given from the Web site govtrack.us is a 14% chance of getting out of committee and a 2% chance of being enacted. Maybe the Joint Economic Committee could expand its bill to take in the question of whether the collapse of the dollar follows from the fact that it has been managed for the past century by men. It could be that Thurber was onto something.

The Sun's grotesquely patronizing and inane invocation of gender in this context does inadvertantly highlight a pertinent fact: two of the most eminently qualified candidates for the job -- Yellen and Christy Romer -- happen to women.  Both more so than Summers who despite his unquestionable intelligence and broad experience is far from being an expert in monetary economics.  Of course it doesn't help that the Sun begins from the obviously false premise the the purpose of the Fed is to defend the value of the currency.  I suppose they are offended that a woman (of all genders) would not be as dazzled by the glint of gold as the mental midgets that populate their editorial board.

[Ed Anger]

HAIL PATARICHY

[Ideologue]

I'm not saying that we should put people in camps, but if we were going to start putting people into camps, a professed belief in "hard money" would be a good category to start with.

[Phillip V]

Bernanke and Obama are praying that shit doesn't happen until after their successors take over.

[sbr]

Anyone could say that about anyone.  Or do you have some particular "shit" in mind?

[CountDeMoney]

The Sun's grotesquely patronizing and inane invocation of gender in this context does inadvertantly highlight a pertinent fact: two of the most eminently qualified candidates for the job -- Yellen and Christy Romer -- happen to women.  Both more so than Summers who despite his unquestionable intelligence and broad experience is far from being an expert in monetary economics.  Of course it doesn't help that the Sun begins from the obviously false premise the the purpose of the Fed is to defend the value of the currency.  I suppose they are offended that a woman (of all genders) would not be as dazzled by the glint of gold as the mental midgets that populate their editorial board.

But it's not a traditional gender role, MM.  DERFETUS GIVES IT 

[Grallon]

For the longest time I thought the Federal Reserve was a federal agency... Why isn't it the case?  I mean as screwed as a bureaucratic agency can be - it's always preferable to a private organization when it comes to a strategic role like monetary regulation no?




G.

[Admiral Yi]

For the longest time I thought the Federal Reserve was a federal agency... Why isn't it the case?  I mean as screwed as a bureaucratic agency can be - it's always preferable to a private organization when it comes to a strategic role like monetary regulation no?

The Fed's not a private organization.  It's a public organization with a public charter and a board appointed by the president.

It is, however, considered to be independent of the executive branch.  The rationale for this is to insulate the board from short-term political pressure to inflate away unemployment and/or inflate our way to growth.

[Ideologue]

For the longest time I thought the Federal Reserve was a federal agency... Why isn't it the case?  I mean as screwed as a bureaucratic agency can be - it's always preferable to a private organization when it comes to a strategic role like monetary regulation no?




G.

[Valmy]

Bernanke and Obama are praying that shit doesn't happen until after their successors take over.

As opposed to the previous 42 Presidents who prayed that everything would go wrong while they were in office.

[Phillip V]

Bernanke and Obama are praying that shit doesn't happen until after their successors take over.

As opposed to the previous 42 Presidents who prayed that everything would go wrong while they were in office.

Be more specific.

[Razgovory]

Bernanke and Obama are praying that shit doesn't happen until after their successors take over.

As opposed to the previous 42 Presidents who prayed that everything would go wrong while they were in office.

Be more specific.

James Buchanan prayed that everything would go wrong, but he's pretty much the only one who did.

[jimmy olsen]

Bernanke and Obama are praying that shit doesn't happen until after their successors take over.

As opposed to the previous 42 Presidents who prayed that everything would go wrong while they were in office.

Be more specific.

James Buchanan prayed that everything would go wrong, but he's pretty much the only one who did.

There are some that disagree with that assessment Good Sir. 

http://books.google.co.kr/books?id=CHUxm1szwE0C&redir_esc=y

[Valmy]

Did you just reference a book published in 1866?

[jimmy olsen]

Did you just reference a book published in 1866?

Take a look at who wrote that book.