Andrew Ross Sorkin posted this intriguing piece at Dealbook yesterday regarding the two most important job vacancies in the USA. Timothy Geithner is out as Treasury Secretary this year and it’s rumored that Ben Bernanke doesn’t want to stick around following 2013. That means there are some huge decisions to be made in the next 12 months.
Who Is Qualified to Run the Fed?
This is a very difficult job to fill. Fed Chair is essentially the most important banker in the world. So it has always baffled me how so many Fed Chiefs end up running the Fed despite virtually no banking experience. But perhaps I am being too demanding. After all, banking is really just a business of risk management so anyone with a very solid background in finance, economics and risk management should fill the role rather well. Who has proven time and time again that they not only understand the economic machine far better than most others while proving to be a superior manager of economic risks?
I would nominate Robert Shiller of Yale University. Shiller isn’t in the Monetary Realism paradigm completely, but he’s not far off either as far as most mainstream economists go. But more importantly, Shiller has proven an exceptionally good manager of economic risks. After all, he predicted the two biggest US bubbles of the last 75 years (the Nasdaq bubble and the housing bubble). He has an acute understanding of human psychology and how the market place relates to the macroeconomy. Being the Fed chief is, in large part, about managing economic risks and knowing when certain policies could create imbalances or destabilize the economy in dangerous ways. In my opinion, Shiller is the perfect blend of someone who can be quickly confirmed, has the credentials, the experience and the proven track record to run the FOMC. I doubt he’d want to, but if I were President I’d fly to Yale yesterday and tell him that his country needs him sorely.
Who is Qualified to Run the Treasury?
I was originally going to nominate two people here, but I don’t think that’s necessary. I would nominate Professor James Galbraith of the University of Texas. Like his father, professor Galbraith has proven that his understanding of the macroeconomy is superior to most other mainstream economists. He has consistently identified the problems plaging the nation during this financial crisis and correctly identified the weakness of monetary policy in the early stages. Plus, anyone who can fit this line – “I come to bury Milton, not to praise him” – into a speech on the economy needs to be in charge of something in our government full of weak spined people who get overrun by banking lobbyists left and right. Galbraith is sympathetic to MMT and in my email communications with him he has expressed a sympathetic view of Monetary Realism. Like me, he has rejected MMT’s Job Guarantee as being a potentially inefficient approach to government spending, but has proven that his core understanding of the monetary machine is far superior to most neoclassical economists. Most importantly, Galbraith understands government budgeting. He understands that the US Treasury isn’t “running out of money” and that the true constraint for the nation is inflation. Who better to run the Treasury than a guy who actually understands how the nation’s finances work?
What do you think?