At first glance, one might think that the president of the United States — arguably the most powerful person in the free world — is the most influential force on economic growth. Recent history has proven otherwise. From Alan Greenspan to Ben Bernanke, it’s become evident that — to paraphrase from an old advertising slogan from the 1970s — when the Fed chairman speaks, people listen.
Since Bernanke’s May 22 Congressional testimony, the S&P 500 Index corrected from its all-time high of 1,687 to a low of 1,560 on June 23. Ten-year Treasury yields also rose about 100 basis points to a high of 2.7 percent, and spreads on corporate bonds widened sharply. Less than a month later, Bernanke relieved the mayhem by stating that monetary easing was likely to continue for some time, which resulted in the financial markets stabilizing and reducing volatility. The S&P 500 soared back to its May highs.
[CLICK HERE to read the article, "Taper talks: Changes in the Fed's monetary policy, or even talk about change, may stir up the markets," at Fidelity.com, July 21, 2013.]
[CLICK HERE to read the article, "It's time to stop listening to Bernanke," at Marketwatch.com, July 26, 2013.]
So now the big debate is over who will take over this immensely powerful position — the power to move markets, influence global monetary policy, sink ships and leap over tall buildings in a single bound. Or the like.
There is (largely Republican) support for former Secretary of the Treasury Larry Summers, an aggressive voice who tends to oppose quantitative easing. There is (largely Democratic) support for Janet Yellen, a 20-year Federal bank veteran and recognized consensus builder. She appears to be a proponent for aggressive Fed intervention to help improve unemployment levels, even if that means allowing inflation to increase above target.
[CLICK HERE to read the article, "Right now, Larry Summers is the front-runner for Fed chair," at WashtingtonPost.com, July 23, 2013.]
[CLICK HERE to read the article, "Senate Dems push White House to appoint Janet Yellen (and not Larry Summers) to the Fed," at WashtingtonPost.com, July 26, 2013.]
[CLICK HERE to read the article, "Does the Fed Chair Need to Be a Great Manager, or Just a Great Economist?" at Harvard Business Review, July 25, 2013.]
Bernanke’s tour of duty will end early next year. It appears, however, that the debate for his replacement will continue for quite some time. The White House has indicated that it will not name a new chairman of the Federal Reserve until the fall, giving us the rest of the summer to review pundit pros and cons over who is the best candidate for economic superman (or woman) for the next four-year term.
[CLICK HERE to read about current board members at "About the Fed," at FederalReserve.gov, September 12, 2012.]
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