Whomever is the next FED chair is painted into a corner by Bernanke's actions and has the Wall Street syndicate pointing a gun at them if they don't get their way. The words and actions of Yellen and Summers can give us clues about their thoughts, but still, they will be reacting to whatever crisis hits after Bernanke's bubble pops.
1. I couldn't find a link to it, but Summers has given plenty of speeches since the financial crisis. At one conference in 2011, he was asked about the threshold that an economy can have for debt (household, consumer, public, external). Summers did not think there was a threshold in 2011. Check out the Americna historic debt levels and compare them to levels in 2011. He saw upside. Message: FED can expand its balance sheet to push credit out for growth. Let's blow up government debt. The FIRE economy built on debt bubbles will continue.
2. Summers is a believer in the idea that in a depressed economy at the zero bound (where we are now due to ZIRP) government fiscal policy can have a huge positive effect on stabilizing the economy (link). Brad DeLong contributed to that one, which is interesting since DeLong recently said "Bernanke defines what the market is". Message: government stimulus programs in ZIRP = growth.
3. Speaking at the CFR in 2009, he wanted to give the FED more powers. The government cannot be an actor in this but should be a free safety (NFL analogy). Quote: "We do not want to be owners; we want to be stewards to structural soundness and nothing more. And that is why we will work to transfer government holdings into private hands as soon as possible." (link http://www.cfr.org/world/prepared-remarks-lawrence-h-summers-director-national-economic-council/p19618) Message: Did you see DeLong's quote with the prior paper? It's about power. Let me decide who are the winners and losers. Let me cut deals for government assets to private hands. I'll take assets to the tar pits and let the hyenas bite off what they want for what they want to spend (resurrect PPIP), leaving a rotting carcass behind for Americans.
In short, I suspect a FED chair Larry Summers to expand the FED balance sheet to absorb new trillion dollar deficits in the next downturn and to print money even more if the foreign purchasers disappear from the Treasury market. The debt party will go on, inflation be damned, dollar be damned. Similar to my last post on Summers $50 bil print in '99 bubble for Y2K, when the hell is anyone at a major media outlet going to bring this stuff up?
|Is it inappropriate to sleep at meetings? Aspies gotta aspy.|