Larry Summers for fed chair?

Trading Discussion News and Economy
1

Well it looks like Bernanke’s second term ends January 2014 so who’s gonna be his successor? Well if you listen to The Wall street Journal it’s gonna be Janet Yellen, butmaybe WSJ should stop predicting politics, there not very good at it. It seems Yellin allthough amply qualified is also quite a bit dovish and with our (US) economy growing we need someone a bit more hawkish who will raise interest rates when the time is right. That leaves the dummy we all know and hate Timothy Geithner and Larry Summers.

Geithner maintains that he has no interest in the job.

I didn’t know to much about Summers so I did a little research.

Amongst his many accolades he…

Staffed the Council of Economic Advisors during the Reagan administration
leading eonomic advisor for the Dukakis campaign
Chief Economist for The World Bank 91
Secretary of the Treasurey from 99-01 under Clinton
Director of the White House United States National Economic Council under obama
27th president of Harvard University 01-06

There has been some controversy in his life. Remarks he made about women in engineering and science as well as some financial conflict of interest stuff led to him stepping down from his Harvard Presidency

Before that a very bad joke led him to step down as chief economist at The World Bank. The bad joke was a memo that made remarks along the lines that it made more sense economically to export pollution to under developed nations

Basically he suggested that “dirty industry” should move to less developed countries. He sited three reasons.

  1. health care was cheaper
  2. these countries were “under polluted” compared to more developed countries
  3. the desire for a clean environment is directly related to the income of the people

He maintains that these remarks were “jokes” I guess it doesn’t matter. Basically it cost him his job. Officially he stepped down.

One other noteworthy thing about Summers. During the Clinton years he advised against regulating derivatives and his stance was basically that these highly sophisticated institutions have protections in place against risk and fraud never once considering that the institutions themselves might be fraudulent and doing shady things. I guess history has taught us that this was a mistake.

At the end of the day do I think Larry Summers is a good choice? He certainly has pedigree. Both parents won Nobel Prizes for Economics. He has education, he has experience, but at the end of the day I really don’t know. I guess only time will tell…

2

the other thing I wanted to mention was that Geithner would be a bad choice because of all this irs controversy. As a result Geithner would face an ugly confirmation hearing.

I have never been much into fundamentals but I am trying to keep an eye on things and I do enjoy politics. I know when Bernanke speaks the markets move.

When he poop’s people are like omg he ate corn buy corn! no just kidding but seriously his position has a huge infuence in forex and every other market so will his successor.

3

Larry Summers is not in the Fed at the moment - he writes on the FT at the moment so it might be interesting following that column to see what he thinks (as long as it isn’t ghost written).

4

more and more people are echoing the rumor. Maybe it’s true. IDK but I do know he put the kabosh on regulating derivatives (with Greenspan) That turned out to be a terrible idea. I don’t think he is a good choice just interesting to hear the chatter.

5

The only decision that they need to make essentially is when they need to raise interest rates. So its largely going to be data dependent I think - a different chair might postpone raising interest rates a few months, but that is all.

6

I bet for Janet Yellen.

  1. She is as dove as Bernanke;
  2. If something under her authority goes wrong anyone could say like “what else you expected from a woman?”