Summer Is Over and Larry Summers Is Out Of The Running

Larry Summers officially fell on his sword over the weekend by removing his name for consideration to be the next Federal Reserve chairman. I'm sure this came as a relief to the White House (they probably orchestrated the move), who has more than enough on their plate right now with Syria and finding more money to fund the government at the end of September. It also sparked a huge overnight fall in the stock market.

So the question is, are we going to see a female dollar? I hope so, I think it could be a nice change to see what a female could do as chairperson of the Fed. I am of course referring to Janet Yellen, who is number two at the Fed. One thing I think about government and politics is that you can be completely incompetent and if you just stay around long enough, you get pushed up the food chain to the top job. The official name for this phenomenon is the Peter Principal. The Peter Principle is a proposition that states that the members of an organization where promotion is based on achievement, success, and merit will eventually be promoted beyond their level of ability. The principle is commonly phrased, "Employees tend to rise to their level of incompetence."

It remains to be seen whether or not Janet Yellen can do a good job. She is certainly going to inherit a disaster of a mess when Bernanke leaves in January 2014. Somewhere down the line we are going to see just how ineffective the policies of the Fed and this administration were in solving the economic downturn that we have all be experiencing the last five years.

Certainly spending trillions of dollars did not help the the average worker and the general economy, it did however help the stock market, which is more visible to everyone. But low interest rates helped crush what little savings folks had in the bank. It also destroyed the retirement of millions of Americans who are living on a fixed income. What remains to be seen is what's going to happen to all of these bond prices
when inflation rears its ugly head.

If Janet Yellen is elected, and that looks to be the way it's going now that Larry Summers is out of the picture, it's going to be interesting to see what she will do with the dollar. Whether she carries on with the continued debasement of this currency and eventually we see the US dollar lose its reserve status, are all questions we can only ponder about at this juncture.

To whoever becomes the next Fed chairman, I wish them good luck. They are going to need it.

Adam Hewison
President, INO.com
Co-Creator, MarketClub

13 thoughts on “Summer Is Over and Larry Summers Is Out Of The Running

  1. The right choice is Esther George, President of Federal Reserve Bank of Kansas City, who replaced her mentor and an honorable government servant in Paul Hoenig in 2010. As copied from Bloomberg in 2011 ...

    “The financial and economic landscape is changing in our region and around the world, and I am mindful of the challenges ahead,” George said in today’s statement.

    During Hoenig’s 20-year career as leader of the Kansas City Fed, he repeatedly urged the Federal Open Market Committee to tighten monetary policy to prevent inflation from accelerating and asset-price bubbles from emerging. He voted eight straight times last year against near-zero interest rates and, later, bond purchases backed by Chairman Ben S. Bernanke, tying former Governor Henry Wallich’s record in 1980 for most dissents in a single year.

    In congressional testimony July 26, Hoenig said the Fed shouldn’t subsidize investment banks by holding rates artificially low. “It is not the Federal Reserve’s job to pave the yield curve with guaranteed returns for any sector of the economy, and we should not be guaranteeing a return for Wall Street or any special interest group,” he said.

      1. I love your site, its informative and at the same time, a place to get things off your chest. Unfortunately, Esther George has about as much chance as being the next Fed Chairmen as the Jacksonville Jaguars do to win the Superbowl in 2014. Its too bad as I think Summers would also have been a good choice, but apparently Summers could see that certain members of Congress were going to thoroughly "vet" him out in public, and decided that he did not need that aggravation.

  2. ADAM, I wish you had included a plot, ( chart) of the value o f the U S Dollar with the commentary above. Then all of the viewers and commenters could have facts to discuss.
    Under whose presidency did the Dollar reach it's lowest value in the last 15 years?
    Have fun,

    1. scharr,

      Thanks for your feedback. It's on my to do list hope to get a finish sometime soon.

      Thanks for taking the time out of your day to contribute your view point and comments.

      Cheers,

      Adam
      Adam Hewison
      President, INO.com
      Co-Founder of MarketClub.com

    1. Graham,

      I think you could have gotten better odds on Stanley Fischer;-)

      Thanks for taking the time out of your day to contribute your view point and comments.

      Cheers,

      Adam
      Adam Hewison
      President, INO.com
      Co-Founder of MarketClub.com

  3. In accordance with Historical FED Chairmanship pattern, i think, Ben Bernanke may continue, and may get a long inning, just as Mr. Greenspan, simply because by and large, Mr. Ben Bernanke followed exactly, what government wants and fulfilling all " Temporary Survival Efforts", so government may not take any risk of basic or structural changes, at this critical stage. Also government may not want to prefer to take risk of any new or fresh policy maker, because situation is so fragile that even any negligible policy level factor may turn situation in a uncontrollable mode.

    1. Ray,

      I am keeping my fingers crossed for America, because we are all going to need it when you know what hits the fan.

      Thanks for taking the time out of your day to contribute your view point and comments.

      All the best,

      Adam
      Adam Hewison
      President, INO.com
      Co-Founder of MarketClub.com

  4. The fall was in the dollar, bonds and the equities enjoyed a boost. Wonder how long the euphoria will last. Ben Bernanke may be a candidate for continuing as FED Chair.

    1. AllenC,

      I think the chairman Bernanke wants out, and wants to get back into academia or speechmaking. It is a tough job, no matter who does it, every FED chairman makes mistakes even the revered Paul Voelker made some.

      Thanks for taking the time out of your day to contribute your view point .

      Cheers,

      Adam
      Adam Hewison
      President, INO.com
      Co-Founder of MarketClub.com

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