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Where is all this "momentum" behind a Summers nomination coming from? It must be remembered that Obama got elected (twice) not just on the much hyped small donations, but with an awful lot of Wall Street money as well. That doesn't mean he's their creature - because ultimately  he will be judged on his economic record, and at the moment it is the Republican Congress which is the main obstacle - even if centrist Democrats could also be the obstacle if they had the swing vote.

Could Summers, ultimately, be more effective because no one would question his neo-liberal credentials, or would he try to lead Democrats down the wrong path again? The question is, is he capable of learning from his past mistakes, or will he be tempted to double down on them?

I care less about the "personality" of the Fed Chairman, and much more about what policies he will be able to implement. Obama, even if he has the right instincts, can do little. Bernanke has been relatively effective at bringing his Board with him in the teeth of rabid conservative opposition, would Yellen be able to do as much?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jul 28th, 2013 at 09:40:31 AM EST
I find it hard to imagine Larry on any other than a 'wrong' path. I'm with Drew on the Fed nomination. Yellen would be as good as it could get, but, for that very reason Summers is more likely.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 28th, 2013 at 10:07:56 AM EST
[ Parent ]
If he'd demonstrated some capacity for learning from his past mistakes, he could be forgiven.  Unfortunately, he hasn't done that.

It's not that Summers is stupid.  He's actually done some interesting stuff in his academic life.  (See, for example, his attack on Ed Prescott and Real Business Cycle theory in the '80s, or his and DeLong's work on Noise Traders vs Efficient Markets.)  But a lot of academics just suck at policy.  They're plagued by the notion -- not helped, in this case, by Summers's view of himself as having 60 IQ points on everybody this side of Keynes -- that their ideas are impossible to implement.  "The political system is too crude.  It's too hard."  And along with that, Summers is such a creature of Washington at this point that he's clearly more inclined to adhere to Village Law than to stick to what his work in his past life told him.

Extreme arrogance is also not a good thing in a Fed chair.  As Krugman pointed out about Summers, "Larry's extremely smart -- ask him and he'll tell you."  That's not good.  Barring a surprisingly strong recovery in the coming years, the next Fed chair(wo)man is going to need to build consensus towards more aggressive policy.  It's hard to do that with Summers running around calling everybody idiots.

And, again, Summers never admits being wrong, even when the evidence is overwhelming.  He denied the existence of the housing bubble and berated Ragharum Rajan for suggesting that "financial innovation" had made the world riskier.  He apparently attacked Krugman for suggesting Asian economies implement capital controls during the '90s crisis -- an idea so radical and outside-the-mainstream that it's now part of the IMF handbook; and an area of economics that Krugman pretty much founded, while Summers is a nobody.

He still thinks deregulation in the '90s was awesome.  He was ready to let the automakers collapse, which would've cost us the 2012 election.  He deliberately misrepresented to Obama the various stimulus proposals (he didn't even show Obama Romer's proposal in the original memo), and then made up the bullshit excuse that it would've been too hard to spend the extra $800bn.

It's a remarkably long list of bad calls, and the fact that he hasn't offered a mea culpa on any of them is disturbing.  

And this is all in addition to the fact that he's far less qualified than Yellen in terms of experience.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jul 28th, 2013 at 10:33:53 AM EST
[ Parent ]
Summers' ability to implement policy is a bad thing, because Summers is at best a neoliberal hack and at worst a slavering lunatic. Having an empty chair and the FOMC running the show would be superior to Summers.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 28th, 2013 at 10:34:07 AM EST
[ Parent ]
An empty chair and the k% rule would probably be superior to Summers.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jul 28th, 2013 at 10:48:40 AM EST
[ Parent ]
...adding:

And all the more frustrating with Summers is that his academic background is quite good.  And his background prior to becoming an academic is absolutely ridiculous.  His dad was an economist.  His uncles are Kenneth Arrow and Paul Samuelson -- and, whatever the merits of their ideas, they are nevertheless giants.  He studied at MIT under Robert Solow and Marty Feldstein.  His classmate was Krugman.

The guy's literally been surrounded by giants his entire life.  He was doing higher-level stats and math before he was old enough to drive.  He was tenured at Harvard when he was 27.

He probably has the most absurdly privileged background of any economist who has ever lived.  Most PhD candidates would cut their legs off for a background like that.

Yet he's never lived up to it.  And I think it's probably because he was never raised on the intuition, and he never had to really want it.  It's sort of like an athlete who's the son of an NFL Hall-of-Famer.  He's born with athletic abilities most guys could never dream of, skates by based on pure talent throughout his high school and college years.  And then he gets to the big stage and fails miserably, unable to live up to the hype.

Summers never got the central insight Keynes really meant by his quote about "the long run" -- that the task of macro is to make people's lives better and acknowledge that we aren't even close to having all the answers, and that if all we can do is say "Meh" during turbulence, then we might as well just go home.

It's great to be skeptical of the cries of vested interests.  It's great to think probabilistically.  But don't allow that skepticism and probabilistic thinking to become intellectually crippling.  That, I think, goes to the root of Summers's problems.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jul 28th, 2013 at 01:59:28 PM EST
[ Parent ]
Wednesday Obama went to the Hill for a closed door meeting with Democrats. I heard a report that he had defended Summers against the many Democrats who oppose his nomination. Ominous if true.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 1st, 2013 at 10:23:42 AM EST
[ Parent ]
... bought and paid for, but rather he's their creature as being a believer in their line that they got behind early to help him win his Senate seat.

It doesn't take any eerie prescience about State Senator Obama's Presidential prospects to back him in his run to win the nomination and then the election for Senator from Illinois ... having a pro-Wall Street Senator is quite reason enough.

Having him rise to the White House at a time when a more populist Democrat might have had a big financial sector CEO perp walk a week to placate white resentment in 2009 was a bonus.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jul 30th, 2013 at 01:43:33 PM EST
[ Parent ]
Having him rise to the White House at a time when a more populist Democrat might have had a big financial sector CEO perp walk a week to placate white resentment in 2009 was a bonus.

Regulatory forbearance was probably seen as implicitly promised by Obama in the regular conversations he had with his Wall Street backers. But in the bargain they also got legal forbearance. In for a penny, in for a pound. He would be far from the first politician to buy into supporting the money people all the way. So Wall Street gets unconditional love when what the country and the people need is for them to get tough love. Obama is no Roosevelt by any stretch of the imagination.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 30th, 2013 at 05:54:36 PM EST
[ Parent ]

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