Obama’s Next Big Blunder

08/02/2013 10:00

by Evaldo Albuquerque

During a recent TV interview, President Obama made an intriguing comment about Federal Reserve Chairman Ben Bernanke. He said: "He's already stayed a lot longer than he wanted or he was supposed to."

Bernanke’s term is coming to an end in January, so he still has six more months to go as the Fed chief. But Obama’s comment suggests Bernanke can’t wait to leave the Fed.

And I can’t really blame him. He wants to leave before the s*** hits the fan.  I believe the Fed’s current monetary policies will end in disaster.
With Bernanke leaving in January, someone else will have to clean up the mess.

There are two main candidates for the job: Larry Summers and Janet Yellen.

According to multiple sources, President Obama has a preference … and it may surprise you. These multiple sources have reported that Obama is leaning toward choosing Larry Summers.

That’s surprising because many believe Janet Yellen, the Fed’s current vice chairman, is the best option because she’s been involved in all major recent monetary policies. But I won’t be taken aback if Obama picks Summers. He’s perfectly qualified for the job.

A History of Incompetence

If you have a terrible track record of predicting the economy and like to favor big banks at the expense of everyone else, then you’ve got a good shot at becoming the Fed chief.  Because that’s precisely what the Fed does. It punishes savers and helps make bankers rich. And it fails to predict all major economic developments. That’s why Obama is considering Summers.

He served as the president’s chief economic adviser during the Great Recession and was the chief architect of Obama’s disastrous economic stimulus plan. This suggests he doesn’t understand much about how economies really work.  When he was president of Harvard, he gambled with the university’s operating fund, placing billions of dollars in risky investments. The university’s endowment ended up suffering a loss of $2 billion.

And back in 2005, at the Federal Reserve’s annual conference in Jackson Hole, Wyoming, he dismissed warnings from other economists about the housing bubble.

When it comes to financial regulation, his track record is also terrible. In the 1990s, he fought against regulation of derivatives, which is precisely what magnified the housing bubble and its collapse. In short, his track record is unblemished by success. That’s why, for Obama, he’s the perfect man for the job.

Flip a Coin

Still, Janet Yellen may get the job just because Obama is facing a lot of opposition. Almost no one wants Summers to become the next Fed chief.
If Obama chooses Yellen, what can you expect from her?  Well, much like Bernanke, she believes in enthusiastic money-printing and zero interest rates forever. With Yellen, we’ll just get more of the same.

Here’s a suggestion for Mr. Obama: Flip a coin.

Both candidates are terrible. Neither one will be able to avoid the disaster that Bernanke has set in motion with his super-easy money policy.

Summers has proven to be an incompetent economist with strong ties to Wall Street and the White House. That’s the recipe for bad policies.
And Yellen is Bernanke, version 2.0. She will keep printing money until we end up with another major bubble and collapse. That’s why Obama shouldn’t waste time trying to decide who will be the next Fed chief. Either way, we lose. Just flip a coin.