Bernanke's successor gets leeway
The most interesting thing about the Federal Reserve Board's Open Market Committee meeting last week was not the widely expected announcement that it would keep interest rates low amidst signs of an improving economy. Rather, it was the vagueness of the committee's statement saying the Fed would hold interest rates low for an extended, indefinite period and tighten or loosen its monetary actions.
All that leeway suggests the Fed might be ensuring options are left open for a successor to Ben Bernanke, who likely won't seek reappointment as Fed chairman.
Potential candidates for replacing Bernanke include Fed board vice chairman Janet L. Yellen, former Fed board vice chairmen Alan S. Blinder, a Princeton professor, and Roger W. Ferguson Jr., who served under Presidents Clinton and Bush and is CEO of the Teachers Insurance and Annuity Association-College Retirement Equities Fund; and former Treasury Secretaries Timothy Geithner, who served from 2009 until January and is a distinguished fellow at the Council on Foreign Relations, and Lawrence H. Summers, who served from 1999 to 2001 and is current Harvard University president emeritus.
Yellen seems the most likely replacement if Bernanke steps down as expected.
Under well-known former Chairman Alan Greenspan and his successor Bernanke, the Fed has tried repeatedly to inspire business confidence by means of asset booms. But these “wealth effects” were financed not by savings but by the printing of more and more synthetic money. Continuation of this path risks eventual monetary collapse, yet pulling out now would not be without damage to the stock market and currency.
“At some point, there's a levitational problem,” said Nouriel Roubini, a respected New York University economics professor. When things come back to Earth, he said, the economy will suffer depression rather than a recession.
The Fed's ultra loose monetary policies under Bernanke led noted economist Ralph Benko to comment in Forbes: “Whether one supports it or opposes it, the gold standard no longer is seen by most serious thinkers as fringe.”
The attitude of the Fed's next chairman in dealing with these issues will be critical.
Not surprisingly, all five potential candidates are Keynesian monetary stimulators. Yellen, probably the most enthusiastic, studied at Yale University under professor James Tobin, who believed strongly that governments could mitigate recessions. Yellen and her husband, George Akerlof, worked together at the University of California at Berkley to highlight flaws in the economic theory that free markets operate efficiently and that governments are costly.
Like the other potential contenders, Yellen is a leading protagonist of central banking control. She believes fervently that a few theorists can fix the price of money better than the millions of active participants in the national and international markets.
These thoughts represent levels of academic arrogance that are hard to accept, particularly in light of the evidence.
John Browne, a former member of Britain's Parliament, is financial and economics columnist for Trib Total Media. Email him at firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Rossi: Just wait until Ben comes back
- Bell’s last-second TD lifts Steelers over Chargers
- Steelers defense displays resiliency in victory over Chargers
- Steelers notebook: Receiver Bryant inactive for game vs. Chargers
- Home invader shot, killed in Mt. Washington
- Pa. Supreme Court ‘disturbed by content’ of emails attributed to justice
- Penguins notebook: Left wing rotation puts Perron with Malkin
- WCCC fraternity helps fallen Ligonier officer’s family
- Pitt running out of options to slow down Georgia Tech offense
- Looking toward home opener, Penguins work to end scoring drought
- Ellwood City Area School District avoids strike set for Tuesday