After President Barack Obama all but fired U.S. Federal Reserve Chairman Ben Bernanke in a recent television interview, everyone's been trying to figure out who the president will name as the next Fed chief next year.
Of course, Money Morning has long been critical of the Bernanke-led Fed, and in particular its easy money policies of recent years — namely its zero interest rates and waves of quantitative easing (QE) that have added trillions to the Fed's balance sheet.
That debt, the asset bubbles it has created and the Fed's too-cozy relationship with the Big Banks, has prompted the experts at Money Morning to question whether the Federal Reserve should exist at all.
"I believe the Fed is outmoded and should be disbanded," said Money Morning Chief Investment Strategist Keith Fitz-Gerald, who recently wrote about whether the Fed is necessary. "It's a financial body that has outlived its usefulness and is merely causing us to lurch from crisis to crisis. Barring any change in the notion of what it's there to do, get rid of it."
Still, for the time being, we're stuck with the Federal Reserve. And the next Fed chief – whoever President Obama appoints in January — will be setting monetary policy for at least the next four years.
One thing's for sure: Anyone who dislikes how Bernanke has run the central bank probably won't be happy with the next Fed chairman either.
As confounding as it seems now, it was not the liberal Democrat President Obama, but Republican President George W. Bush who first appointed Bernanke to head the Federal Reserve in 2006.
That Obama re-appointed Bernanke in 2010 made sense, as they share a similar Keynesian economic philosophy. That is, they both think the best way to help a weak economy is through massive government spending no matter how much debt piles up.
So while Bernanke may be on his way out the door, you can bet that whoever President Obama chooses as the next Fed chief will be just as much of a Keynesian as Bernanke has been – and maybe more so.
Heaven help us.
The Five Most Likely Choices for Next Fed Chief
We asked two of our resident experts – Capital Wave Strategist Shah Gilani and Global Investing Specialist Martin Hutchinson — to weigh in on the five people most likely at the top of President Obama's list for next Fed chairman.
Here's what they said, candidate by candidate:
Shah says: Trim Tim would love the job, and he's lean and mean enough to put up a good behind-the-scenes fight for it. Will he get the nod? Yes he will — from the bankers and brokers whose backs he's scratched for far too long.
But from the Prez? Hope not, because he's young and his future ambitions will include mega-wealth, to which he will be entitled for using his offices as tools for entitling the banks and brokers he serves to mega riches, from which they would gladly siphon off some tens of millions to get the diminutive one to stand tall as a chairman or CEO of some vast infinity bonus pool.
Martin says: The ultimate bureaucrat, with few ideas of his own. He tends to get pushed around by stronger wills. When policy hits a wall, he sucks a thumb.
Shah says: Larry the Lame has about as much tact as a gigolo would have at a society women's old age home. He lives for the podium to pontificate… too bad he's always looking out at his audience to see if there are any hedge fund honchos he might consult for. Consult? Yeah… as in, pay me now and I'll make you richer if I get into any power slot anywhere, and then hire me after to thank me, deal? Oh yeah, he's done that deal.
Don't forget, Larry was once featured on the cover of Time as one of their three in the "Committee to Save the World." The other two: Robert Rubin and Alan Greenspan. And if you don't know how the three of them caused the credit crisis and the Great Recession, go stick your head back in the sand.
Martin says: The opposite of Geithner, too much will rather than too little. He has lots of knowledge of economic theory — pity most of it's wrong. FOMC meetings would be fun, with temper tantrums during press conferences. Still, there's a reasonable chance that when disasters arose, he'd figure a way out.
Shah says: My guess is that, as the current vice chair, Janet has a good chance at getting the nod. She's a mild-mannered bank boot licker who never met a printing press she didn't know how to operate.
Martin says: She basically takes the Tooth Fairy approach to monetary policy: The solution is always to print more money, whatever the problem is. Yellin is the most likely to land us in a true Weimar (hyperinflationary) situation.
Shah says: The truth about the former chair of Obama's Council of Economic Advisers is that she has made more predictions that were wrong in her career than a deaf and blind weatherman forecasting from a windowless studio. In other words, Christina would be perfect to run the Fed, since their predictions of where we are, where the economy is going, and whether the fog they laid over the country's future will ever lift have as much a chance of being right as I do of beating Tiger Woods at Augusta.
Martin says: She's moderately sensible by Obama administration standards, and might actually be slightly more "hawkish" than Bernanke. But she wouldn't change anything fundamental, and so would be four more years of the wrong answer.
Shah says: Roger Ferguson? Who's that? Oh that Roger… the former vice chair of the Fed from 1999 to 2006. No, he won't cut it, he's too pliable and too good at losing money for big institutions. Nice guy, for sure, I'm just not sure of his talents… as in, what talents?
Martin says: Ferguson is much the best candidate; we're very lucky that he's an African-American Democrat, so Obama might actually pick him (probably not though, as the president's advisors would likely veto him.) If picked, he could be the Paul Volcker of our times.
He resigned from the vice-chairman post in 2006 after Bernanke was appointed. I heard him speak in December 2005, at which time he objected strongly to the Fed ceasing to report M3, an evil legacy of the last days of Alan Greenspan's tenure. At least potentially, he's a hard-money monetarist who would get it right, and is tough enough to bear the PR pain of doing so.
Who Should Be the Next Fed Chair
We also asked our experts who they like to see as the next Fed chief, if they could do the picking:
- Shah says: The one man we need as the next Fed chairman will never get looked at because he's too independent, too smart, too honest, too much of a free market guy, and too dangerous to the status quo.
He's David Stockman, and if you haven't read his new book "The Great Deformation," you might want to read it on account of its magnificently clear historical perspective on how we got to where we are (at The Great Deformation), and what will happen to us if we don't curb the Fed's power and the crony capitalism it's manifested.
As Fed chairman, Stockman would shake, rattle, and roll this country back into its destiny. But I have a better chance of beating Tiger Woods' major wins record than Stockman does of being offered the job.
- Martin says: Given that President Obama is doing the choosing, Roger Ferguson is absolutely the best we can do, and better than we would do under the Bushes. In an ideal world, I'd pick Ron Paul.
What do you think of the slate of candidates for the next Fed chief? Who would you choose? Tell us in the comments section below!
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