Wednesday, July 24, 2013

Thoughts on a Summers Fed?

I'm sort of withholding judgment. Summers has been blasted in the blogosphere lately for not getting enthusiastically on board the NGDP targeting bandwagon. However, he was an administration official which means that other things were in his bailiwick, and he's too smart for me to believe he is actually missing that point. I also think when it comes to "credible commitment" candidates, Summers has got that in spades. Still his dove credentials aren't as strong as others. Plus we'd have to hear a lot of bitching and moaning about his past controversies and I'm not sure that would be good in confirmation hearings or in the regular Congressional testimonies which are going to be important for Fed guidance.

So my first choice is Christine Romer. In addition to having a long-standing crush on her, she's got the dove credentials, the NGDP credentials, the fiscal policy credentials (like Bernanke, she'll keep pushing that to Congress), none of the baggage, and she's a break which will signal a regime change.

Yellen is all of that too except she exhibits more continuity so committing to a new policy regime will be tougher. So she's my second choice.

Larry Summers is my third choice.

Brad DeLong and Paul Krugman are tied for fourth, but I will not burden them with a higher ranking because I'm sure they have better things to do with their time.

One caveat - if Ron Paul would be around in the House, Larry Summers would probably move to first for me just because I would love to see those two together during testimony. This is not the social optimum, but it would be a private optimum for me.

What are your thoughts?


  1. I know, I know, it's the Daily Caller, so take it with a grain of salt, but this should be disqualifying if true:

    "Summers’ allies say he is the only one bold enough to stop inflation in its tracks, a feared outcome of quantitative easing, the Fed’s ongoing policy of expanding the money supply."

    I can't tell if this is just McCloskey making a mistake (her description of QE is a red flag) or if the whisper campaign pushing Summers is that he is going to stop inflation in its nonexistent tracks. Either way...yikes.

    Even more than the Harvard stuff or deregulation or any of the other host of reasons to oppose him as Fed chair, this would be the clearest sign that he isn't qualified.

  2. Summers has a history of bad judgment. The personality traits that would make it entertaining to see him tangle with Ron Paul make him completely unsuited for the job.

  3. Summers seems like a risky choice politically: since he has a lot of baggage, he would start out with more knee-jerk opposition than other potential nominees. I trust that if he were confirmed, he would be able to calm any fears among board members regarding his "partisan" or "off-putting" character. Krugman and DeLong -- if the White House were inclined to nominate people it sees as critics -- would have these problems to a much greater degree, due to their opining on current events and their platinum-coin advocacy.

    Between Romer and Yellen I'm not sure who is preferable. Yellen's reputation as a dove is longstanding and she probably has a better chance of getting through confirmation, since she hasn't been in the administration, nor taken stances on matters of partisan disagreement. I'm unconvinced that NGDP targeting will be the silver bullet its proponents say, which makes me nervous that Romer's entire success or failure may be judged on that policy's delivery of better employment. I will however be happy with either choice.

    Another possibility that I think is being overlooked is to pluck someone from a foreign central bank. That would seem to maximize the appearance of regime change and minimize the political difficulty, while allowing a choice between many candidates. Unfortunately, this practice will probably have to become widespread internationally before it is adopted here.

    1. "Another possibility that I think is being overlooked is to pluck someone from a foreign central bank."

      Carney (from Canada) has only just started at the Bank of England. Who else is there in the whole world that you think would be suitable?

    2. If it's possible to resurrect Hjalmar Schacht, then that's clearly the best option. Stephen Ingves of the Swedish central bank would be a fine choice, if he wants a change of scenery. Stanley Fischer of the Bank of Israel is available and could be confirmed uncontroversially, though I'm not sure he'd be a step up from Bernanke. I'm disappointed to see that neither the Swiss nor the Austrialian CB seem to have anyone suitable.

  4. Larry Summers's mouth has proved to be too much of a liability in public relations, even though he is intellectually brilliant and definitely more than competent as a civil servant. He's going to have to do a lot to overcome a widespread negative impression, and that's an extra (and unneeded) obstacle in America's quest to get her economy into a better situation.


All anonymous comments will be deleted. Consistent pseudonyms are fine.