This morning we pointed out something odd.
Larry Summers is in the “running” to be the next Fed Chief, but we don’t know anything about his views with respect to current monetary policy. And since monetary policy is what the Fed does, this is a pretty big deal.
Sure we know that he’s sceptical of the effectiveness of QE at this point, but so are a lot of people, and QE is just one tool in the Fed’s arsenal.
In a tweet, Dan Greenhaus of BTIG boils it down to one big question mark.
To repeat, does anyone even know Larry Summers’ views on monetary policy in general or at the ZLB specifically? Seriously.
— Dan Greenhaus (@DanBTIG) July 30, 2013
This is the crucial question: What does Larry Summers think the Fed can or should do when rates are at zero.
We don’t know! And since rates probably won’t come off zero for a while, this is a biggie.
Over at Wonkblog, reporter Neil Irwin says Summers’ reluctance to talk on this issue is part of a deliberate strategy:
What Summers is trying to do is to create a situation in which conservative senators view him as a tough, no-nonsense central banker who will maintain the integrity of the dollar against those dirty hippies who want to debase the currency. Simultaneously, he wants liberals to view him as someone who will do whatever he can to try to strengthen job creation and find creative ways to improve growth.
Is monetary policy right now too tight, too loose, or just right? Is the Fed’s strategy of setting thresholds for the unemployment or inflation rates that would trigger interest rate increases a wise one? His silence on these topics, in theory, at least, allows him to have it both ways.
In the meantime, he’s getting hammered for not being a blank slate, while his primary “opponent” Janet Yellen is portrayed (correctly) as one of the leading thinkers on the matter.
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