The Federal Reserve (FED) is the bank of all banks within the United States. It serves as the lender of last resort to banks within the nation, influences interest rates, controls the supply of money in the economy, and much more. The decisions the FED makes, let alone the topics they discuss in their meetings, have a huge impact on not just the American economy, but the entire global economic system.
Since 2006, the FED chairman has been this guy. Ben Bernanke. Or as I like to think of him; Captain Picard with a badass beard.
Why does this all matter? The reason why who becomes the next FED chairman is so crucial is because of the policies they will choose to enact. In response to the financial crisis of 2008, Bernanke decided to employ an operation called Quantitative Easing (QE), where the FED pumped money into the economy by continuously buying bonds. However, since the economy has steadily improved over the past several months, Bernanke is looking to draw down QE.
Enter the potential candidates. The first contender is Janet Yelen.
Janet Yellen is currently the vice chairwoman at the FED. So she’s Bernanke’s right hand woman. Because of her experience in central banking and her familiarity with the rest of members of the FED, she is seen as the front-runner for the position. Many believe that she will represent a continuation of Bernanke’s ideas and policies and thus think that Yellen is a safe bet candidate. Of course she would make everyone feel safe. I mean look at her. If I ever ran into this woman, I can be positive that she would bake me cookies with milk and then tuck me into bed.
On the other hand is Larry Summers.
Larry Summers is a widely acclaimed economist. His past positions include serving as Secretary of Treasury under Bill Clinton, the National Economic Council under Barack Obama in 2009, and as chief economist at the World Bank; not to mention President of Harvard. The most important factor, however, is that President Obama adores him. When several media outlets discussed how Summers is impulsive, has trouble working with others, and has a history of being misogynistic with female coworkers (smooth), President Obama made a statement in his defense. Summers is also seen as a person who tends to think outside the box and is experienced when it comes to dealing with crises. He not only served in the National Economic Council in 2009 after the economy tanked in 2008, but he was also the Treasury Secretary during the late 90s when Asia was in the midst of a financial crisis and Russia and Mexico had a currency crisis. These experiences would serve crucial at a time when the US economy is susceptible to the threat of a deepening crisis in Europe and to economic uncertainties across the world. Many believe that based on Summers’ track record, it might be possible for Summers to scrap or reform Bernanke’s current policies and come up with new FED actions.
In my opinion, Janet Yellen seems to be the more logical choice. She has an ample amount of experience working in the FED and has most likely earned the respect of other FED members. Though I don’t doubt Summers’ intellectual capabilities, it is important to point out that Summers’ actions as Treasury Secretary under President Clinton paved the path for financial deregulation which many state is the reason the 2008 crash occurred. So far, President Obama has said that he still has not made up his mind about the decision. Only time will tell and if you’ve been following the news lately, you will know that Obama has a lot on his plate right now.
“In fact, the world needs more nerds.”