“Unequal weights are an abomination to the Lord, and false scales are not good.” – Prov 20:23
Ben Bernanke is stepping down as Federal Reserve Chairman, and soon the president will announce his nominee for a replacement. Frequent readers will know that I am ardently opposed to central banking and fiat currencies (or, non-“sound money” currencies) because they are the means by which the rich oppress the poor, the means by which the rich appropriate the labor of the poor for their own purposes. But, the odds that we will revert to a gold standard in the next few months are strikingly small, so we will have a new Fed Chairman.
The odds-on favorite for the new chairman is apparently Janet Yellen; somewhat of a Bernanke clone. However, there is growing indication that the president is trying to find a way to nominate his old pal Larry Summers. Of the two I’d prefer Summers, not because I think he’d do a good job, but because of the two he is the least convinced that printing $85,000,000,000 a month to monetize federal deficit spending and mortgage-backed-securities will actually result in a better economy.
We’ll get back to the Fed’s current conundrum in a moment, but first I want to take a shot at deflating the one of the pro-Yellen arguments.
Back in 2003 Rush Limbaugh had a short stint on Monday Night Football. He was fired for (rightly in my mind) indicating that Donovan McNabb was overrated as a QB, and that the media needed him to succeed so they could push the “see, whites are wrong, blacks can make good quarterbacks” narrative. Of course, by 2003 it was a tired narrative. People who thought the issue still needed to be pressed were clearly not interested in football, only social engineering. Had Warren Moon, Doug Williams, and Randall Cunningham already been forgotten?
The fact is that black quarterbacks can be great (Moon), or good (Culpepper), or mediocre (McNabb), or just plain busts (JaMarcus Russell). That we have seen all of these and are able to rate them is somewhat of a realization of Martin Luther King Jr.’s “not by the color of their skin, but by the content of their character” [or in this case talent] missive. Furthermore, it is fair warning to any NFL team out there: don’t pick a QB based on color, only talent, potential, capabilities – the things you need to win games (which is the point).
I’d make a similar argument when it comes to the presidency (or high profile jobs like the Fed Chairman). When Barack Obama was elected in 2008 (crushing John McCain) there were quite a few who indicated that they supported him because he’s black. Now, I think it is likely overblown – they were folks who probably would have voted Obama anyway. But the issue was noted by liberals during the primary, with none other than Elizabeth Edwards (RIP) lamenting that John Edwards couldn’t compete with a black man and a woman, regardless of his policies. (I think there were other reasons he couldn’t compete, but I also think that Hillary Clinton was the most capable of the three and probably should have been the nominee.)
I bring this up to note that when you vote for (or support) somebody for reasons other than their capabilities, you necessarily diminish your effectiveness. When a feature unrelated to potential success is given weight in the equation, it naturally deweights other features that are related to potential success.
Here there is not Greek and Jew, circumcised and uncircumcised, barbarian, Scythian, slave, free; but Christ is all, and in all. – Col 3:11
So what about Yellen? Honestly, I hear far too often the argument that she should be hired “because she’s a woman and we’ve never had a female Fed Chairman.” I grimace at the notion. The Chairman of the Fed is far too important a position to base on factors unrelated to success (e.g., gender). Now, folks have made plenty of arguments for Yellen based on her resume, and good for them. These are the right arguments to make. But it always seems to come back to “and it’s time for us to have a woman in this job.” This can be a two-edged sword.
Back during the 2008 election I remember seeing a number of bloggers talking about how they hoped and prayed that Obama would do a good job because if he didn’t white folks would say (wrongly) that a black man has no business being president. The latter notion is insidious, but if it is a legitimate fear then by all means, don’t elect a less-than-capable candidate just because he’s black. That won’t help the cause at all. (For the record, I don’t think Obama won the presidency because he’s black. He won the nomination because he out-campaigned Hillary Clinton and convinced the liberal throngs that he could make something near to socialism work … much like Bill Clinton did years before. Then he won the general election because no Republican stood a chance after George W. Bush. Nor do I think he’s a bad president because he’s black – he’s a bad president because he’s not a good leader and does not have good policies.)
I argue that the same is true of Yellen. We’ve seen plenty of white men be horrendous failures as Fed Chairmen (see Bernanke and Greenspan, to name just a few). If Summers gets the job and falls flat it will be nothing new. But what of Yellen? Will she face far too much pressure to succeed as the first female (lest the “good-ole-boy” network chime in with “I told you so”)? Yellen is a grown-up, to be sure, and I’m confident she could deal with such pressure. But dealing out a bad policy setup to a less-than-optimal Fed Chairman is no recipe for success.
I hear the counter-argument, I honestly do: “If we never give a formerly-pushed-aside class a shot then they’ll never get a shot.” The point is fair enough, but does anyone think that in 2013 this is the case with the Fed Chairman position? That somehow the country or the powers that be don’t believe a woman can do the job and that’s why there’s never been a woman in that post? I trow not.
Whoever the next Fed Chairman is faces extremely difficult challenges. The Fed is printing $85,000,000,000 a month to buy up treasuries and MBS, and the effect has apparently already worn off. Treasury yields and mortgage rates have been rising for several months now (NOT what the Fed wants). The next chair has a real pickle on their hands. Do they keep printing and watch rates continue to tick up? Do they stop printing and watch rates ramp up even more dramatically? Do they print even more and risk spooking the market, driving rates up in the process?
We know what Yellen will do: print more. We don’t quite know what Summers will do, but he might print less. Neither one will have an easy go of it. Extricating the central bank from a print-like-crazy strategy is tough to do. Nobody likes it when the punch bowl is taken away.