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Subject:  Stiglitz on Yellen vs. Summers Date:  9/7/2013  2:52 AM
Author:  ItsGoingUp Number:  433328 of 455820

Joseph Stiglitz gets down to brass tacks on why Janet Yellen would be a better choice for Fed chair than Larry Summers:
http://opinionator.blogs.nytimes.com/2013/09/06/why-janet-ye...

Read it yourself, as it's a fine piece of writing. A few choice excerpts (bolding is mine)...
The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers....

The Fed has responsibilities both in regulation and macroeconomic management. Regulatory failures were at the core of America’s crisis. As a Treasury Department official during the Clinton administration, Mr. Summers supported banking deregulation, including the repeal of the Glass-Steagall Act, which was pivotal in America’s financial crisis. His great “achievement” as secretary of the Treasury, from 1999 to 2001, was passage of the law that ensured that derivatives would not be regulated — a decision that helped blow up the financial markets....

Regulatory failures have been at the center of previous crises as well. At Treasury in the 1990s, Mr. Summers encouraged countries to quickly liberalize their capital markets, to allow capital to flow in and out without restrictions..., and this more than anything else led to the Asian financial crisis. Few policies or actions have greater culpability for that Asian crisis and the global financial crisis of 2008 than the deregulatory policies that Mr. Summers advocated....

... To be fair, Mr. Summers has been involved in several crises. What matters, however, is not just “being there” during a crisis, but showing good judgment in its management....

Mr. Summers’s conduct and judgment in the crises was as flawed as his lack of commitment in that regard.... The performance of those in the Treasury who were responsible for managing the Asian crisis was, to say the least, disappointing — converting downturns into recessions and recessions into depressions....

Whoever succeeds Ben S. Bernanke as the Fed’s leader will have to make repeated judgment calls about when to raise or lower interest rates, the levers of monetary policy.

Two elements enter into these judgments. The first is forecasting. Wrong forecasts lead to wrong policies. Without a good sense of direction of where the economy is going, one can’t take appropriate policies. Ms. Yellen has a superb record in forecasting where the economy is going — the best, according to The Wall Street Journal, of anyone at the Fed. As I noted earlier, Mr. Summers’s leaves something to be desired....

The second element of Fed policy making is risk assessment: if one steps on the brakes too hard, one risks excessively high unemployment; too gently, one risks inflation. Ms. Yellen has shown herself to be not only excellent in forecasting, but balanced....

One needs someone who knows how to build consensus, not someone who excels in bullying, who knows how to listen to and respect the views of others....

One might say that the country is fortunate to have two candidates who ... are “brilliant scholars with extensive experience in public service.” But brilliance is not the only determinant of performance. Values, judgment and personality matter, too.


-IGU-
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