Paul Krugman For The Fed

The case for Ben Bernanke’s reappointment was weak to start with, weakened with his hearings, and is now held together by string and some phone calls from the White House.  Bernanke is an airline pilot who pulled off a miraculous landing, but didn’t do his preflight checks and doesn’t show any sign of being more careful in the future – thank him if you want, but why would you fly with him again (or the airline that keeps him on)?

The support for Bernanke in the Senate hangs by a thread – with Harry Reid providing a message of support, albeit lukewarm, after the markets close.  The White House is telling people that if Bernanke is not reconfirmed there will be chaos in the markets and the economic recovery will be derailed.  This is incorrect.

The danger here is uncertainty – the markets fear a prolonged policy vacuum.  Fortunately, there is a way to address this.  Ben Bernanke should withdraw and the president should nominate Paul Krugman to take his place.

Paul Krugman is an expert on monetary policy – he wrote the classic paper on balance of payments crises (and probably could have got the Nobel Prize just for that), his work on Japan in the 1990s shaped everyone’s thinking of how to handle potential deflation, and his assessment of the crisis and needed response in fall 2008 was right on the money. 

Krugman is known to many academics as a trade theorist and as a pioneering modeler of growth with increasing returns.  But just because Keynes wrote eloquently on Indian currency reform did not prevent him from also understanding what had gone wrong with the world economy – and how to substantially fix it.

Krugman also has exactly the paper trail that you would like to see from any potential Fed chair.  He has written pointedly and with complete clarity about all the leading policy issues of the day. 

There is no question where he stands, for example, on “too big to fail” financial institutions: he’s opposed and would push for fundamental financial reform and tough oversight. 

Big banks, without doubt, would be appalled.  But the “Greenspan fallacy” was always that no one else could do his job and even considering an alternative would be destabilizing.  Look at the mess that got us into.

What the markets really care about is what the Fed does, with regard to both interest rates and regulation.  What we need is a Fed chair who can be trusted to nuture the recovery  – find me the business person who is opposed to that – without allowing too big to fail institutions to remain so big and so dangerous that they can destabilize the system.

And don’t think that Krugman can’t raise interest rates if he really sees inflation coming – even if the danger, for example, is not picked up by conventional measures.  He is tough minded, not afraid to take stands long before they are fashionable, and confident that others will soon come to their senses.

Would he be a “populist” choice?  Absolutely not.  He would be a popular choice, no doubt, but he is also many technocrats’ favorite thinker and a person whose credentials and proven policy opinions speak for themselves.  No one would question the independence of the Fed with him at the helm.

Would Krugman be opposed by the Republicans?  Yes, potentially.  And there could be quite a fight in the Senate – entirely of the Republicans making.  But if they oppose his appointment – despite his qualifications and in the face of our weak economy – what signal would that send about their priorities?

The president said on Thursday he is (finally) willing to fight the big banks.  He’s an effective fighter and, with enough support, he can win.  But is any part of his agenda at this point really advanced by winning the reappointment of Ben Bernanke?

By Simon Johnson

165 responses to “Paul Krugman For The Fed

  1. And I predict Simon Johnson gets to see just how very dysfunctional the US Government has become if indeed Bernake’s bid fails. Which it well should.

    If it does, I just about guarantee you that Obama, in a million years would never pick Paul Krugman as Fed Chairman.

    Obama has proven himself to be just another pro-business at all expense DLC puke. If Bernakee goes down, which I doubt he will as the Senate is also full of corporate sellout DLC pukes, but if he does go down Obama will just appoint another pro-GS, pro-Wall St, anti consumer DLC puke to replace him.

    Mark my words

    Too big to fail simply means too big for Barry and Manny, not to mention Mitch and John to give up those bribes, I mean, campaign contribution.

    Ever. Just Watch…

  2. I suppose that would get him to stop flapping his hack yap about health racketeering.

    Who knows, at the Fed he might even be marginally better than any likely candidate.

    But I think “marginally better” is far too radical for this gang.

  3. Hm, come again? Krugman at the FED?
    Do you want to see the Right storm the White House?
    While an avid reader of Krugman’s, I think few economists are as divisive as he is.
    He has too many sides which are unacceptable for half of the country, or even more – just think of his sympathy for the French!

  4. ….the latest seems to be the 60 votes needed to confirm Mr. Bernanke for a 2nd term: http://snipurl.com/u5yz2 :

    “Mr. Reid’s statement, issued after the markets closed, was intended to signal that Democrats, backed by some Republicans, could come up with the 60 votes necessary to break a deadlock and reconfirm Mr. Bernanke.”

    David Wessel (econ journalist for WSJ) says that Lawrence Summers is another name being floated around for a possible replacement at the Federal Reserve if Mr. Bernanke fails—who is floating that name around, Mr. Geithner, President Obama or Goldman Sachs (?)

    Mr. Krugman would be an excellent alternative but he needs to be given the chance to prove his case more often in his media appearances with George Stupidnopolous (ABC’s This Week with….)

  5. Krugman has become far too partisan in his attitude as he has aged. He takes every opportunity to blame anything on past, present, and future Republicans. The concept of compromise does not exist in his fantasy world of how people should behave (which is generally along the line of a classic liberal Democrat). If he were nominated, Republicans would likely block any movement, but I expect the administration would never allow that situation to occur.

    There are some Fed governors (Hoenig and Yellen) who at least have demonstrated some better thinking. It might also be time to really more beyond the traditional and embrace some real change.

  6. maynardGkeynes

    “Lawrence Summers is another name being floated around for a possible replacement at the Federal Reserve”

    Scare tactic.

  7. Martin Fetherston

    Of course the Republicans would violently oppose a Krugman nomination, given his decade-long opposition to the Bush tax cuts. And besides, they oppose everything.

  8. Krugman is like many people with a PhD: he knows one area extremely well, but lacks essential knowledge in other areas. Yet, because he is an intellectual egoist, he speaks with the confident voice of authority on what he doesn’t know, which is potentially dangerous for all of us. He needs to check his ego at the door and do more research before he develops an opinion.

    For example, his op ed in the NY Times last week about the banks’ objections to the proposed financial crisis tax was way off the mark. You can bet I’d be outraged too, if I were a conservatively run bank with the same assessed liabilities as Goldman Sachs, as there is only a very thin connection between liabilities and the extent to which a bank churns those liabilities in high-risk activities. Such a thing would be obvious to anyone with real-world experience, yet Krugman embarrasses himself with his lack of knowledge in an op ed. It doesn’t give me a lot of confidence.

    More on the tax here:

    http://ragingcapitalist.blogspot.com/2010/01/obamas-financial-crisis-fee-sounds-so.html

  9. I can appreciate that Mr Krugman is a departure from the failure that is Ben Bernanke, and would be far better than Larry Summers.

    To be honest though my hopes for a replacement are a little different. I’d like to see someone who recognizes the financial oligarchy responsible for this debacle. Maybe someone who is a member of the CBO and not too long ago used to be the chief economist of the IMF.

    I wonder where we can find a guy like that?

  10. Great joke, SJ, I almost broke something laughing at the ‘Paul Krugman’ punchline.

    Yr kidding, right? Krugman has been writing for the New York Times for years and I can’t recall him ever using the terms ‘energy’ or ‘crude oil’ in a sentence.

    Not even once.

    Seeing as how we are enjoying a long running ENERGY crisis rather than a CREDIT crisis, some insight into the connections between energy and energy prices and the rest of the industrial economy would help, don’t you think?

    If Bernanke goes the Fed’s money laundry will likely close, particularly if some interest rate hawk like ‘Honest’ John Taylor is promoted. If William ‘I bleed Goldman- Sachs’ Dudley is elevated from his current NY Fed post, the games might continue awhile longer … and the markets not collapse overnight. Janet Yellen is honest and capable but also an energy illiterate.

    But, collapse they will, regardless of who is in charge of the increasingly enfeebled Fed as economists fail to acknowledge the centrality of oil energy to all of our economic ambitions.

  11. Krugman in exchange for Bernanke? Expel the devil with Beelzebub. Don’t you see that the play on the same team?

  12. Simon,

    “He would be a popular choice, no doubt, but he is also many technocrats’ favorite thinker and a person whose credentials and proven policy opinions speak for themselves.”

    Popular? Krugman has been openly insulting 40% of the electorate for years via his public platform.

    I’m all for it, just for the spectacle.

    Cheers,
    Carson

  13. I’d love to see this happen but Krugman himself has noted that he prefers working from the outside.

    Still, you never know if someone will accept or refuse until they have an invite in hand.

  14. Doc at the Radar Station

    Another good analogy with regards to Ben Bernanke:

    Foreign Policy Honors the Captain of the Titanic for Getting Most Passengers Safely Into Lifeboats

    http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=12&year=2009&base_name=foreign_policy_honors_the_capt

  15. Right. You want the guy who wrote the following drivel to be in charge of the Fed?

    http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

    Key excerpt:

    “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

  16. The danger here is uncertainty – the markets fear a prolonged policy vacuum.

    Can we please stop pandering to the market psyche?
    Market participants are supposed to be grown up men and women, able to control emotions and deal with a bit of uncertainty. Why do we have to treat “the markets” continuously as a child on verge of a nervous breakdown?

    Say, the Fed Chairman does not get appointed for 6 months. So what? Like there were critical decisions to be made in the next 6 months that the Board and the FOMC could not deal on their own, without a designated chair?

  17. Considering that Krugman himself doesn’t want the job, is this wise?

  18. Put the 82 year old Volcker in there-to get the freaking truth just once. Maybe he’ll live to 100, and save the country from the corporates.

  19. The Bernanke nomination process has degenerated into a bad season of American Idol.

    Ben has chosen the worst songs and peformed them badly, but the Simon (BO) keeps bringing him back anyway.

    Krugman is where he belongs. He’s brilliant, but he lost my vote with his nationalization stance.

    The markets will adjust, not collapse if Bernanke is replaced, with any one of his likely replacements, except Summers.

  20. ” But if they oppose his appointment – despite his qualifications and in the face of our weak economy – what signal would that send about their priorities?”

    Wake up – signal to whom?

    The underlying problem is that the Republicans have discovered and nutured a large reservoir of stupid people who are angry and afraid of what’s going on in the US economy. The looter party knows how to poltically manipulate and activate them.

    The real tangible sign of that, is how costly US healthcare is, how the existing system works against many of these people, and yet they remain ignorant about the situation and resistant to reforms that would favor them.

    The last thing Republicans want is any real or apparent successes by Obama and the Dems going into Nov., 2010.

    You can depend on them to be already looking for ways to make the Supreme Court “corporations” ruling work for them in the coming months.

    Obama and the Dems better wake up to the fact that they are dealing with a hard core foe, not with some normal “honorable oppostion”.

  21. “Bernanke is an airline pilot who pulled off a miraculous landing …”

    Uh, what? What proof is there that Bernanke ‘pulled off a miraculous landing?’ The dude has had no idea what to do this entire time and has simply been grasping at straws.

    America is doing OK now because of all the good stuff happening outside the world of banking and econ, not because of anything going on inside that world. Sometimes I wonder if you economists have any idea as to what makes America great. It’s certainly not banking and econ. I know that.

  22. Your critique of bernanke presumably extends to his predecessor, Greenspan, so your critique must be of their loose monetary policy and their stoking up the housing and financial bubbles.

    Surely Krugman would just offer more of the same, would he know when to shout stop? Given his fiscal stance I doubt he’s the right man. Video below of some of Bernanke’s predictions vs those of Peter Schiff.

  23. Krugman is far too openly partisan for the position. I doubt he’d want it anyway. I’d like to see Janet Yellen take over. Really I’d like to see Volker, but I’m afraid his age is too much an issue.

  24. I also think Krugman would be hard-pressed to maintain his independence under pressure from his old colleague, Lawrence Summers.

  25. There is no question where he stands, for example, on “too big to fail” financial institutions: he’s opposed

    With due respect, Prof. Johnson, what are you talking about?

    “As I’ve written repeatedly, I don’t think that too-big-to-fail is at the heart of our financial problems.”

    He is not kidding; he has specifically argued, repeatedly, that Too Big To Fail is simply not a problem.

  26. precisely correct Steve

    I have interviewed Johnson, but we did not really address this

    I have called him again to see if he would do another interview, fails to return my calls

    unfortunate

    would certainly like to hear from you, and discuss this

  27. Why not Elizabeth Warren? The last thing we need is another member of the old boiz club, even if Krugman is one of the nicer members.

  28. Yes!

    If we can find such a person, he would definitely be the one.

    Who wrote that great Atlantic piece? Maybe he’s available.

  29. No Simon, I disagree. We need some people outside the Fed to keep the people on the inside on the right path. I think Krugman’s criticisms are the exact fulcrum needed to let us know that maybe there are other scientific methods of handling our economy.

    As for him being on the left, there is nothing wrong with that. Greenspan was on the right(no fault capitalism)and at least he admitted he was wrong. Bernanke also admits that he didn’t see it coming, but at least he knows where the bodies are buried and which houses are on fire.

    What gets my goat are the so-called expert congressmen and women economist that smiled and approved of Greenspan’s non-answers during committee hearings. Maybe, if your looking for hero’s to serve as your FED chairman, look at Brooksley Born or Sen. Bryon Dorgan. These two public servants actually warned the entire government what was coming.

  30. RA writes:

    Obama and the Dems better wake up to the fact that they are dealing with a hard core foe, not with some normal “honorable oppostion”.

    This frame isn’t even wrong. Anybody who was sentient during the Clinton administration already knows this.

    The Dems are totally awake and they are doing exactly what they want. Both legacy parties form a single system that is no longer responsive to the electorate. Obama is consolidating Bush’s authoritarian gains, normalizing a higher NAIRU, and shoveling as much money to the FIRE guys as he can (which is why he’s setting up the commission on “entitlement reform”; only Nixon can go to China).

    Soon, the Ds will hand the ball to the Rs, and the Rs will deal with any of the unrest that comes from no job, loss of homes, death from lack of health care, and other matters of concern to peasants.

  31. Your first mistake was quoting someone working for WSJ. Your second mistake was giving them the label journalist.

  32. That would be like Godzilla vs. King Kong in a cage match of egos.

  33. The woman is educated in bankruptcy and consumer law. I like Elizabeth Warren, but she would have absolutely no clue what she is doing. Remember the old British expression “horses for courses”.

  34. Beg to differ. Prof. Krugman doesn’t understand completely how the actually monetary system works based on national accounting, or if he does he is not letting on because it is in conflict with mainstream Neoliberal and New Keynesian economic theoretical assumptions, which are non-empirical and wrong. There is no money multiplier, and the is post august 15, 1971. The US is now using a non-convertible floating fx currency and mainstream economic theory hasn’t yet recognized this.

    Prof. William K. Black of the University of Missouri (KC) is the man to get the central bank and banking system back in shape, and he is not afraid to do what it will take. He understands both financial regulation and the relationship of monetary policy and fiscal policy to managing non-government net financial assets in order to balance nominal aggregate demand with real output potential, thereby achieving and maintaining full employment with price stability.

  35. You seem to confuse a rhetorical device with a position. Krugman was not advocating for a housing bubble, which seems to be your complaint. The only thing he was advocating was that the conventional wisdom on the economy was excessively optimistic.

    I think you need to tune your postulate detector.

  36. krugman is a non-starter. he may be a brilliant economist but he is better known these days as a political hack. it’s a role he really enjoys as well.

  37. Krugman is absolutely right about the huge but minimally regulated shadow banking system is one of the main problems.

    It is the unregulated shadow banking system that froze the global credit market, sucked out all the liquidity from the financial system and trigger the crisis of 2008. The shadow banking system is much larger than the commercial banking system and it is minimally regulated!

    Here is a interesting recount of what happened during the Lehman collapse.

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aLhi.S5xkemY

    Krugman should not be the Fed Chairman. Continuity at the Fed with Bernanke is critical to the fragile healing process currently under way. We are not out of the woods. Even Simon admits we’ve recovered thus far is a credit to Bernanke. We need him to get us the rest of the way.

    Furthermore, while Bernanke could have done more to prevent the current crisis, it is his predecessor Greenspan that sets the misguided ideology at the Fed that lead to today’s crisis. Simon is being grossly disingenuous by blaming Bernanke for the crisis. Simon is a distraction to fixing the root problems in our financial system.

  38. I’m sorry, but this is the worst revisionism I’ve ever heard. No self respecting economist should ever under any circumstances lend credence to a bubble of any sorts; esp. a future central banker.

    Not only that, Krugman is a partisan of the highest order, which is why I like him. The problem is that the Fed chair needs to be highly independent. This alone disqualifies him immediately. That one point is the one of the few things Bernanke has going for him.

  39. I agree, Prof. Black would be a good choice. I think Bill Poole would be a smart choice as well.

    The other issue that no one wants to speak of is the entire organizational structure of the NYFED. At the end of the day these guys are the ones overseeing day to day happenings in the banking system. Heads need to roll over there too.

  40. That may be the case. I think that’s supported by the fact that he was explicitly talking about bridging a gap while business investment was still low. I really don’t think he was thinking about creating the biggest housing bubble in history, letting it go on for years, subprime lending getting out of control, etc.

    However, it’s still a damning quote for any confirmation hearing.

  41. Krugman has been writing for the New York Times for years and I can’t recall him ever using the terms ‘energy’ or ‘crude oil’ in a sentence.

    Not even once.

    I just did a LexisNexis search and found 50 columns over the past 5 years that contained the word “energy”

  42. Whatever happens, the result will be political. Obama has disaster courting him if Bernanke’s nomination fails confirmation and he has a long period where the Vice Chairman is running the Federal Reserve Board. Get BB to withdraw in other words. That said, if he is brave enough and ruthless enough putting off the confirmation of a new Fed Chairman to mid summer could give him time to dragoon a set of financial laws that would be a populist wet dream. Let the Republican’s go insane over a Krugman nomination to the point they get blamed for the morass.

    On the other hand,if Bernanke’s confirmation is hanging by a thread , and he is politically forced to keep Bernanke, Obama will need to instill absolute party obediance. Obviously, Senator’s up for re-election are now running helter skelter to save their personal hides.His presidency succeeds or fails on the outcome of his newly declared populist stance. Well, he has done the deed and cannot back off now without political disaster for himself and his party. His party minions in Congress must go along or else. Now is when we see if Rahm Emanuel is a political Irgunist that can win or just scatter the party to the winds.

    At all costs, Obama needs to create a semblance of a ” national government” in the British sense to survive. Failing that, he must make the Republicans commit political suicide by forcing them to oppose everything to the point the swing voters turn against them. I see both as very tall order’s in the context of legislative dysfunction we all observe.

    Obama is an effective leader now or his presidency fails. He made the populist choice to pander to the rabble from a Hamiltonian perspective. Obama makes that framework succeed or else.

    It is always politics first in a democracy. That is democracy’s weakness. American’s are fond of hating politics which is tatamount to hating democracy.

    As big a political mess as we have seen in a long time is brewing.

  43. The problem is that he wouldn’t want to have that job. He likes being in the peanut gallery getting his thoughts out in public. Going to the Fed for Krugman would be like joining a cloistered order.

    If Elliot Spitzer didn’t have his sordid sexual history, I’d consider him. He’s got a total grasp of what’s been going on and where we should go. I’ve been listening to him on the Dylan Ratigan show and can’t tell you how good it feels to have someone finally tell me what’s actually been going on between the Fed and the Too Big to Jail’s in plain language that a kitchen counter economist like me can understand.

  44. Paul Krugman would would be a terrible choice.

    Not because he lacks the wisdom or foresight (he doesn’t) but because he tends to call things like he sees them — and rather too bluntly, at that. What we need is someone who would listen to Krugman, and then apply a veneer of tact in repeating Krugman’s views. The goal isn’t being correct, it’s getting enough others to agree one is correct so they are willing to follow one’s lead.

  45. Oh and BTW, the CPI formula we use to see if inflation is in check is a big joke. England factors household expenses in their formula, like energy and food. Guess what? They see big inflation coming right at them. We just do a smoke and mirrors thing to make “inflation” go away. The CPI here used to measure things like energy used, food and medicine in the given household. We need to get back to doing that and stop calling these “volatile” not-to-counted factors in our cost of living. It’s what people have to buy and that other stuff really isn’t.

  46. >> He’s an effective fighter

    Evidence, please?

    Carolyn Kay
    MakeThemAccountable.com

  47. Grandma was confused too

    It’s terrifying to just hear people think Krugman should be a candidate. On the other hand it may not be such a bad idea. The Keynesian elite group can accelerate the process of bankrupting the country. I think it may have to come to that for the majority of the population to realize that you can not print money to prosperity.

  48. um, how exactly is the federal reserve supposed to regulate energy policy?

    are they supposed to print oil or something?

  49. Simon Johnson for Fed chairman!!

  50. Summers? Nooooooooooooooooooooooooooooo!!!!

  51. Nemo, I disagree – Krugman has agreed that financial sector moral hazard is a big problem, but not THE singular problem. It is exactly the point I’ve been arguing till I’m blue.

    I absolutely concur with SJ on Krugman’s appointment. In fact, it would be a brilliant move. It would send exactly the correct signals regarding monetary policy (and price levels), which would give Obama the leverage he needs to go after the TBTF banks.

    Indeed, if I were Obama, I would make TWO appointments in the same speech:

    1) Krugman to chair the Fed

    2) Volker to chair a commission to rewrite financial regulations, with the _public_ commitment that whatever the Volker Commission came up with would be proposed as law with minimal modification.

    The two appointments should be linked.

    At the end of the speech, he should announce that Summers and Geithner have decided to spend more time with their families.

    Then he should announce that he’ll agree to a trimmed down health care bill that hits fiscal goals, but in exchange he’s going to propose the mother of all infrastructure investment and energy bills.

    That’s what he should do, but he won’t.

  52. Right. So what you’re saying Krugman thinks blowing a bubble was a good idea, but they just didn’t do it quite right. Gotcha!

  53. Oh that’s rich! So was Krugman using satire here? I guess I can just ignore whatever he says now because I can’t tell the difference between when he’s stating fact and just joking around. Krugman is a Keynesian of the highest order whose position on bubble economics is EXACTLY the same as Greenspan. Sorry if the truth hurts.

  54. Wrong.
    There’s plenty of difference between Democrats and Republicans.
    Unfortunately, part of it is Dems not knowing how to fight like the Republicans do.

  55. I, for one, am a big fan of Krugman’s economic and political analysis. However, like he himself has said in the past, he lack the temperament for a job of this nature. He certainly has the understanding of issues and intellectual capacity, but lacks the people skills and is too derisive at times towards others who disagree with him. Having said that, there’s nobody better out there in terms of analyzing and explaining economics to a variety of audiences.

  56. The right choice is Dean Baker. http://en.wikipedia.org/wiki/Dean_Baker

    Baker predicted the housing bubble’s burst & virtually everything else plaguing our economy. Also, he has proposed clear, simple, circumspect progressive solutions that will work. Research his articles in Truthout & elsewhere.

    Krugman tries to talk progressive economics. But his talk mutters when his “liberal” (Clintonian) politics press his conscience. Witness, E.G., his defenses of the current health care non-reforms.

  57. Dean Baker & Marshall Auerback are infinitely more qualitied & knowledgable than Bernanke on the economy & monetary policy. Both called the bubble months before it burst. Seems like if you’re looking for someone to run the banking & financial systems you would want someone who truly understands & knows what’s REALLY happening in a very complex system.

    Bernanke has proven he doesn’t.

  58. I don’t understand the fracas, here. You sit in the Comfy Chair, the phone rings, tells you to print X number of dollars, you type the number in, press ‘enter’, I mean, we’re not exactly splitting the atom here, are we?

    This country goes another trillion ‘in the hole’ every year. Every YEAR. Church it up any way you want, the Fed and the Treasury basically regulate the rate at which those T-bills get printed and sold, and that’s how they keep the ball rolling. If Bernanke said ‘screw YOU, I won’t do it, I’m not printing another dollar’, into the phone receiver, and hung up on the folks wanting more money, he’d get canned. The Big Money Machine…

  59. Krugman??
    Nobel Economist who recently advocated passing the Senate Health Care Give away as better than nothing.

    “Better than nothing thinking” as demonstrated by Krugman’s position statement on health care reform is what we do not need for common Americans.

    Anyone who is a proponent of this piece of crap of legislation deserves to be marginalize and not put in a position for consideration to control monetary policy of the United States.

  60. Simon van Norden

    Simon;

    We were both students of Paul Krugman. Paul was on my dissertation committee and probably yours too. I don’t share your view that Krugman would be a good choice for Fed Chair.

    The problem is not lack of insight, intellectual capacity, etc.; I have no doubt that Paul would be among the most qualified on such scores. However, Paul Krugman brings with him a very high opportunity cost. He is already making a very large contribution to the policy debate in many fora. Chairmanship of the FRB brings power and constraints. I trust Paul’s judgement on this one; he feels he can make more of a contribution from the outside than from the inside.

    Furthermore, if you want someone to shake up the Fed system and the economists it contains, you need someone with managerial experience who knows how to turn around corporate culture. Remind me; what has Paul run in his career?

    Remember DeLong’s Maxim:
    1) Paul Krugman is always right.
    2) When doubting Krugman, refer to rule #1.

    Paul argues he’s not the man for the job. Refer to rule #1.

  61. Krugman for Treasury Secretary; Volker or SJ as Fed Chairman.

    Treasury Secretaries in recent times have all been from the inside: Wall St’s man in government. An outsider is needed, to run the Treasury for the benefit of the American electorate, rather than the gilded few.

    Come to think of it, why not have an entire Administration that actually considered the benefit of all Americans, rather than just corporations and their owners? I know, a dream.

  62. This is exactly right. The only other person I would add to the list is Rahm Emmanuel. He thinks that progressives have no where to go but to the Democrats. This was not the point in Obama’s election. People wanted a change and this means a return progressive policies. Instead, Obama has promoted more of the same by appointing a number of Goldman Sach type elites and these men are killing his presidency. If Obama were to dismiss them it would be the sea change that people wanted when they voted for him.

  63. PK, unfortunately, does not understand why we cannot recover until there is sufficient debt destruction. He would increase total debt by increased deficits… that would be the most ruinous possible long-term course that we could follow.

  64. Krugman, please, please take it ife ever offered!

  65. michele color me shocked

    No, no, not Krugman.

    Yellen.

    Yellen.

    Scream it from the top of the towers.

    Yellen.

  66. Donald from Hawaii

    sily things: “We are not out of the woods. Even Simon admits we’ve recovered thus far is a credit to Bernanke.”

    To be honest, silly things, I’m at a loss regarding how you managed to get over there, when Simon is clearly over here:

    Simon Johnson: “Bernanke is an airline pilot who pulled off a miraculous landing, but didn’t do his preflight checks and doesn’t show any sign of being more careful in the future – thank him if you want, but why would you fly with him again (or the airline that keeps him on)?”

  67. chesapeakeguy

    Yes, nominate someone who has done nothing like Krugman to this post! An academic who eptimomizes the old adage that “those who don’t do, teach”! Another (ahem) Nobel Laureate awarded that based on his political leanings and nothing else (sound familiar, Obama worshippers?). Again, by all means, instill Krugman there so the bankrupting of the country can be expedited and completed!

  68. Morgan Warstler

    Ron Paul for The Fed. If not him, Paul Volker.

  69. One addendum – if Krugman proves too controversial, can I suggest Michael Woodford?

    http://www.columbia.edu/~mw2230/

  70. First, Bernanke was not in the pilot seat during the subprime mess. Greenspan was. Granted, Bernanke was a member of the crew in the cockpit.

    Greenspan caused the crash. Bernanke is in the process of making the miraculous landing of the plane. Bernanke has done a great job but the plane has not landed. To switch horses mid race when unemployment is at 10% is monumentally callus!

    Here is a compilation of more balance views from different sources:

    http://www.calculatedriskblog.com/2010/01/more-on-bernanke.html

  71. Dr. Strangelove. It would be like leaving Slim Pickens alone with the nuclear football.

  72. HayNonnyMoose

    If Krugman is too controversial :-)

    OK, then Cesar Chavez LOL

  73. What “fragile healing process” are you talking about. Haven’t gross amputations already been amply demonstrated?

    Our most hallowed institutions failed. This is no time for a gentle, healing hand. This is time for the chisel and the saw, just as FDR did (at least until the deficit whiners sidetracked him and we fell back into the doldrums).

  74. LOL. This would absolutely never happen. Our center-right president would never nominate someone like Krugman, and the far-Right already knows who he is from watching O’Reilly and Glenn Beck and only know him in those terms. America is too dumb for Krugman.

  75. Krugman too partisan? Maybe. But that doesn’t make him wrong, just problematic in the approval process.

    Remember, it’s not liberal, it’s what happened.

    …and oh yes. Time for another viewing of Lemmy in “Eat the Rich.”

  76. Krugman for The Fed is just the radical left’s wet dream. It will never happen. Krugman has too much of a liberal, going on full communist, track record of opinion in the NY Times, which itself would be qualify for an USSR Pravda award.

    If Obama nominated Krugman, you can expect a political blow back that will cement the Democrat party image as anti-business for decades, and watch the Democrats loose both houses of Congress in 2010.

  77. Never heard of you Simon. But I’ve repeatedly emailed Krugman on what a Nazi moron he is, so what does that make you? End the FED, NOW!

  78. The word typical comes to mind with Mr. YukYuk, Steve from Virginia. Shoot from the hip, and blanks at that, and by the time anyone finds out the truth it will not matter because the lynching was yesterday. Steve, you realize your credibility is now only good at Fox. They may be hiring old boy. Along with typical comes no longer funny so I don’t have to worry about breaking something.

  79. Paul Krugman would be a fantastic replacement for Bernanke! After reading MANY New York Times columns of his, I think he really has the interests of people like me in Victor, Montana in mind. He has strong convictions, is intelligent, a fine communicator and has pragmatic solutions regarding health care reform and overhauling our economic system where the big banks get bigger and the working class suffers.

  80. Donald from Hawaii

    You’re offering up a straw man here. There are very few, if any, “conservatively run bank[s] with the same assessed liabilities as Goldman Sachs[.]” For those financial institutions that do have that same assessed liability level, then I’d counter-offer to you my own opinion that based upon that evidence, they obviously haven’t been conservatively run.

    You want examples of conservative financial institutions, well, we have two of them based right here in Honolulu, Bankoh Corp. (Bank of Hawaii) and Bancwest Corp. (First Hawaiian Bank, Bank of the West).

    Suffice to say that they both have been rated very highly, and both are very healthy. Not surprisingly, their respective toxic asset ratios of under 3% were positively miniscule compared to the “too big to fail” institutions like Bank of America and J.P. Morgan Chase, both of which had numbers in the mid-to-high 20 percentiles. Bank of Hawaii was recently named by Forbes magazine as the top performing bank in the country, and its nonperforming loans are only 1.2 % of those outstanding.

  81. It’s a sad day when the only historically proven method of pulling us out of a financial crisis is labeled as some sort of communist plot.

    No tax cut ever reversed a financial disaster, only jobs and government spending has ever done that. No bailout for the top 1% of the economic elite ever boosted demand in the economy, causing growth. Only jobs and government spending have ever done that.

    You disagree? Give me a single historical reference. On the other hand, J. M. Keynes and F.D.R. stopped the Depression. The only hitch in that plan was when conservatives began whining about deficits (sound familiar?) and F.D.R. stupidly listened. Only then did we get lucky (??) and WWII pulled us out of the doldrums with — get this — further deficit spending.

    Try not to label historically proven solutions with some Tea Bagger expletive, especially when there is zero historically-proven counter-measure.

  82. Paul Krugman is a brilliant man. But Mr. Johnson, we need more than a pilot to fly the plane. What happens if some of the staff on board are also seasoned hjackers ? Paul Krugman is better swimming freely in the sea than getting choked up in a well with frogs.

  83. LOL (though it’s almost too true to be funny)

  84. Let’s see. I’ve now seen Krugman referred to as a Nazi and a Communist. You people do realize that those descriptions are polar opposites on the political spectrum? Right?

    Which of you is the fool?

  85. my god, what a disaster this would be. You really have no idea what you are talking about Simon. Krugman’s simple nomination would cause a market crash and another run on the banking system. My understanding is that Obama doesn’t think much of Krugman and believes he’s naive. While Obama’s recent moves have obviously not been market friendly and he’s got a lot of questionable policies, if this is his believe about Paul, he’s on the money.

  86. I was one of those who believed it might be a good idea to have a few of the people who were intimately involved in creating (or standing by) the financial mess to be the same ones that had to fix it. But I’ve changed my mind. Bernacke, Geithner, etc. appear to be willing to fix it (at taxpapyer’s expense). But they don’t appear to remotely interesting in preventing it from happening again. Like Allen Greenspan, all these folks deeply believe in laissez-faire capitalism and that “the market will correct itself.” Yes, like Keynes, I believe that too. When we’re all dead.

    Bernacke was made FED chair in Feb 2006. He kept rates ridiculously low and did NOTHING to put the breaks on bank practices — or even shed a little light on what they were doing. So here’s the analogy: There are a bunch of kids playing w/ matches. Fire Chief Bernacke thinks it’s best to leave them alone — they’ll figure out that playing w/ matches is dangerous. The kids light matches and start to burn down the house. Bernacke saves the house from being completely destroyed. In this scenario, would anyone re-elect Bernacke as Fire Chief? NO!!!

  87. Couldn’t agree more. Summers would simply argue that the only cure for unemployment would be to fire all women – they don’t really have the innate aptitude for work, after all.

  88. As you said:

    “…Krugman himself has noted that he prefers working from the outside.”

    That would be a primary recommendation.

  89. what you all do not understand is….big global american corporations now run congress,the fed,and the presidency….they are all pushing jobs,money
    business out of this country because asia is the future for them….there is no one in this country to fight for the middle class…this country is slowly dying and no one realizes this…we all standby
    and watch the destruction of our economy and our democracy while big business is quickly leaving the country…whithin 5 years there will be anarchy here…because the people are complacent and we will pay for it…goodby America close the door behind you !

  90. Well, you do realize that the financial markets have NO effect on our GDP, our employment or our market demand, right? You do know that, right?

    The stock market only reflects the preferences of those who OWN companies (stockholders). Our financial well-being is not determined by that measure. It is determined by how much stuff people want to buy — you know — the middle-class, buying groceries and clothes?

    A Fed Chairman needs to understand that. Greenspan, Summers, Geitner and Bernanke thought that somehow the stockmarket would produce jobs if they pushed enough graft and corruption into it — notice how well that worked out?

  91. Charlton Price

    Block that Metaphor! As the New Yorker used to say.
    Far more important to the nation that Krugman be free to assess and critique the situation than to be in a management job where he would be subject to the slings and arrows of the Repug Goon Squad (talk about Block That Metaphor!). Besides, he is said, wisely, not to be interested.

  92. A much better idea would be to ABOLISH this reckless institution.

  93. Here’s an idea. Let’s contract the job to India.

  94. Sounds like a fantastic idea. You would be hard pressed to find someone more qualified than Krugman, but even more importantly, you’d be hard pressed to find someone who could use the power of Fed Chairman more effectively than him. Krugman’s understanding of the way the economy works would make him a perfect pick to rule over interest rates, and having him replace Bernanke would be a revolution our financial system sorely needs.

  95. One other thing…

    I used to be a banker — roughly 20 years ago. In Energy. I watched Continential Illinois and all the Texas banks go under/get acquired. My takeaway from 20 years ago (when I was just a pup): Banking will have routine “blowups” because there isn’t good oversight/they tend to monitor themselves (and they all drink the same Kool Aid). And this was my takeaway even before we repealed Glass-Steagall and passed the Commodity Futures Modernization Act. Bankers are rewarded for making loans, trades, etc. — even if they are taking on huge amounts of risk. Bankers are not rewarded for being risk-averse. (Funny, huh? Do you remember when we used to think of a banker as a “boring banker” with a 9-5 job. Today’s banker is really more like a used car salesman or the guy who peddles “Girls Gone Wild” on late night TV.)

  96. Paul Krugman was my choice for treasury secretary. I agree with everything in this article. My only hesitation would be that I would greatly miss his twice weekly column in the NY Times.

  97. To suggest that Paul Krugman is a Nazi moron is an incredibly moronish thing to do. Your comment reflects very poorly on you and adds absolutely nothing to the discussion. Reflect on what you want people to think about you before you make such a thoughtless remark.

  98. I was in the land development business for years, had a hotshot Economics degree from a top 5 university. I had a boss that told me something the helped me a lot. He said, “Always remember bankers are stupid. To justify their job, they MUST make deals.”

    That advise never steered me wrong. Their deals are more complicated, but their thinking hasn’t changed.

  99. Krugman never said that too-big-to-fail is not a problem. He correctly points out in his blog that it was not the only problem behind the current recession/finanacial crisis, and there are other important areas where reform is needed.

  100. That Krugman would face GOP opposition is a given. But given the corporatist bent of many Democrats in the Senate wouldn’t he also face some scrutiny from the Democrats in the majority party? Not that he couldn’t win them over, but you have to admit, especially after the SCOTUS decision this week, those Senators – of both parties – will be under pressure by their corporate overlords to scuttle any nomination which would do damage to their respective businesses – IF Bernake doesn’t survive his own re-nomination fight.

  101. Anonymous, you are essentially correct. Comment here largely fails to see that the congress, the fed, and the presidency (you left out the courts) are now indeed under the compete control of the major corporations. To assume that it makes the slightest difference who gets to be the Fed chairperson is simply naive. I would also agree that we are doing nothing about it, other than collecting injustices here on the web.

  102. The rationale is right on the money. It would be one of the most impressive moves Obama could make right now. It would reflect an understanding to many that he appreciates the distinction between Main St and Wall St. And most important the economy will work better.

    If Obama really believes that Bernanke is crucial to the economic recovery, it strikes me he is still listening way too much to the banks.

  103. You want to make a guy who specialized in international trade and has written a column for the NYT for the last 10 years…and who’s a hard-core political hack – FED CHAIRMAN?

    This is super escape velocity double secret retardation. “The Baseline Scenario”: ignore permanently.

  104. So, you’re pro-health racketeering then? Maybe you’re a wealthy insurance executive- must be nice…

  105. Amen, everybody’s acting as if the markets will drop when Obama farts. Seems to me this is is really an indicator that the markets are no longer in touch with reality.

    The Board and the FOMAC are certainly more than capable of stepping in, and we should all have learned by now that having “Maestros” running the Fed didn’t work out very well at all.

  106. Silly things: “First, Bernanke was not in the pilot seat during the subprime mess. Greenspan was. Granted, Bernanke was a member of the crew in the cockpit.”

    Indeed Bernanke was part of the crew!! From the minutes of the meetings it is clear the Bernanke agreed with Greedscam’s almost ZIRP ALL the time.

    Secondly, from the many speeches Bernanke gave over the years while the crisis was evolving, it has become clear that he really has a very limited vision of the financial-economic landscape. In one speech he attacked economists worrying about people taking on too much debt as lunatics: Yes he said, people take on huge mortgages, but no need to worry, as on the other side of their balance sheet sits a million dollar house. The whole notion of cash flow, i.e. debt servicing abilities out of stagnant wages was and is complete absent from his ‘thinking’.

    As the saying goes: When the wise man pointed to the moon, the fools looked at his finger.
    Just to be clear: when some people explained their great concern re unsustainable debt loads, Bernanke et al. smiled at the bubbling balance sheets.

    Silly, did you read Bernanke’s speech of Jan. 3rd? In which he denied almost ZIRP to have played a role? In which he said: more regulation would have prevented it (who did you say was supposed to be the regulator at that time?).

    That dishonest speech has been lamented by almost everybody.

    Even Prof. Taylor, from the Taylor rule, opined that Bernanke abused his rule, and that off course the FED’s almost ZIRP — with Bernanke NEVER a dissenting crew member at that time — was a very important contributing factor (securitization being another factor).

    As I read somewhere: Bernanke is like the captain of the Titanic, who gets rewarded for his failure, only because he disembarked some folks into the life boats (while leaving most on the sinking ship).

    You seem to worry about the market:
    If the Dow and S&P can not handle the replacement of the intellectually rather limited figure, then it just shows them for what they are: not long-term investment measures, but just microsecond computer trades.

    Silly, after rethinking, you have to agree that Bernanke has proven himself incapable of the job.
    Let’s — finally — get some change we can believe in.

  107. Amen, this whole Wall St is “America” meme is downright idiotic. The government’s role is to regulate the markets and ensure a level, fair market free of fraud. It was the last eight years where apparently the government was too “friendly” to the markets that together, regulators, and markets, created a massive disaster.

  108. FYI

    You can vote for who you think should be the next Fed Chair (should Bernanke not be confirmed) at CalculatedRisk (www.calculatedriskblog).

  109. I expect on point responses from Baseline Scenario comments. I wrote:

    Both legacy parties form a single system that is no longer responsive to the electorate.

    In response, RA burbles:

    There’s plenty of difference between Democrats and Republicans.

    Sure, if you say so. Ds and Rs being “different” does not preclude them from being parts of “a single system.” Nor does their being “different” make either legacy party responsive to the electorate.

    As I said, RA isn’t even wrong.

  110. Please people, could you at least read the article before you comment on the “key excerpt”?

    The point of the article is that “business forecasters are under enormous pressure to be cheerleaders” and “the administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed. Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble.”

    This is the context within which the “Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” line is written. Krugman is saying that Greenspan and the Bush Administration need to create a bubble to justify their policies, and not because the bubble is a good idea.

  111. John Simonson

    No, not satire. Danno explained it better than I did. You misunderstood Krugman’s point.

  112. Carol,

    Let’s be clear on what we disagree on. Because of your perception of what Bernanke did and didn’t do while working under Greenspan’s Fed, you feel that is sufficient reason to not to renominate him. I strongly disagree. Many have expressed their views on Bernanke. The following will give you a more balanced view.

    http://www.calculatedriskblog.com/2010/01/more-on-bernanke.html

    To be objective, shouldn’t you first ask yourself why your view out weights everything else?

  113. Might as well appoint Maureen Dowd or Rachel Maddow, if you just want some commie celebutard with a 100% ass-backwards misunderstanding of economics.

  114. Wait, we need a new Fed head, and your proposal solves that problem, but leaves us needing a new Treasury secretary…

  115. I think Krugman would be a good selection to lead the Fed. My other choice would be Elizabeth Warren.

  116. Contrary to my previous response, if Simon feels fully confident that Paul could do the job, I certainly can be convinced that he is a more than adequate replacement for Bernanke, who, at this point is beginning to look more and more like the puppet master’s (Greenspan) puppet, even after Greenspan has changed his tune. Hard to understand. I do guarantee that Paul would be a true anti-Bernanke.

  117. Mike from CT: “What we need is someone who would listen to Krugman, and then apply a veneer of tact in repeating Krugman’s views.”

    Absolutely correct. Krugman is too big a treasure to be forced to suffocate at the Fed. Let him continue to make his wise recommendations, and let the Fed chair seriously consider them.

    Go Janet Yellen.

  118. Bernanke? Independent? Surely, you must be joking!!

  119. Let’s see.

    Simon Johnson nominated Paul Krugman.

    Dean Baker nominated Simon Johnson and Joe Stiglitz.

    I’ll bet that Brad DeLong nominates Dean Baker and Nouriel Roubini.

    And that Nouriel Roubini nominates Brad DeLong and Paul Krugman.

    And Joe Stiglitz nominates Brad DeLong and Simon Johnson.

    And Paul Krugman nominates Simon Johnson and Dean Baker.

    The lesson here is that (a) apparently no one wants the job, and (b) that they are willing to sacrifice their friends to avoid it.

  120. Why does Simon write about things that will absolutely never come to pass?

    Here is what will never happen:

    1. Krugman as Fed chief
    2. Goldman broken up
    3. Health care of any substance passed
    4. Cap and trade passed
    5. Migrating the economy to one of greater equality

    Enough already.

  121. No, I oppose corporate tyranny, and therefore I’ve long said Kill the Bill.

    It’s partisan hacks like Krugman and yourself who only objected when it was Republicans selling us out.

    You love the sellout itself. You support the tyranny itself.

  122. Reinhard Stompe

    Krugman the next Fed chairman ? Is this supposed to be a jike ??
    Krugman was one of the pundits who never saw it coming and to this day apparently doesnt understand what has happenend as he clearly admitted in his pamphlet Why Did We not See The Economic Crisis Coming …
    Paul Volcker is the only one who has the guts to apply the necessary changes in this corrupt administration.

  123. Silly things: “Because of your perception of what Bernanke did and didn’t do while working under Greenspan’s Fed, you feel that is sufficient reason to not to renominate him.”

    Ho, ho, it is not just my perception.
    It is clear, objectively, from the minutes of the meetings of the crisis-brewing years, released by Bernanke. You may call it the ‘Greenspan Fed’, but when from those minutus it is clear that Bernanke agreed with Greenspan on ALL occasions, it is not just the ‘master’ Greenspan, but ALSO 100% the pupil Bernanke.

  124. Silly things: ” The following will give you a more balanced view.

    http://www.calculatedriskblog.com/2010/01/more-on-bernanke.html

    I read it, and also read the following on Calculated Risk. You may have missed it:

    “Bernanke definitely supported policies that contributed to the crisis, and he failed to see the problems coming.___ Silly, here you read it at Calculated Risk you referred to !!!___

    However once Bernanke started to understand the problem, he was very effective at providing liquidity for the markets.___ That was NOT the main problem, and he has overdone it___

    But since his renomination, he hasn’t done himself any favors. He has admitted the Fed failed as a regulator, but he hasn’t explained why – or outlined a clear path forward. And Bernanke keeps saying really dumb things, like claiming incorrectly to have an exploding adjustable rate mortgage. That was an ignorant remark considering his position as Fed Chairman and the plight of so many Americans. And quoting a bank robber in testimony to Congress when addressing the long term deficit (suggesting Congress steal from middle class Americans? ____ Calculated Risk refers to Bernanke’s testimony, quoting a bank robber and saying that Congress should reduce social security!!____),

    and this right after he claimed he wouldn’t comment on areas outside of the Fed’s authority. Dumb. ___ DUMB indeed._____

    I definitely think we could do better. ”
    and I, and plenty of others, think so too.

    Silly things: To be objective, shouldn’t you first ask yourself why your view out weights everything else?”

    What do you mean with ‘everything else’?

    Also, could you please place the presented facts in a new, relevant context, or present new facts?

  125. StatsGuy, all excellent suggestions. But to replace Bernanke, I would substitute your choice of Krugman with Thomas Koenig, current president of the Fed Reserve Bank of Kansas City. Hoenig has a healthy perspective on debt, leverage and addressing TBTF financial firms. (http://www.kc.frb.org/)

  126. Krugman is possibly the last person in this country who should NOT hold the position of Fed chairman. Krugman is a seething left-winger who picks and chooses statistics, takes them out of their context to support whatever it is he currently babbling about. We call that “lying with facts.”
    Krugman is a master of manipulation. The man is incapable of making an honest, BALANCED assessment of a situation. He is, in other words, a politician. Politics should have no place in Federal Reserve activities.

  127. Krugman is very much attached to the left political side and that’s not good. His goal would be to “equalize everyone down” if possible. Countries with the fewest Mercedes are also the countries with the most poor (inequality is stronger in the more “socialist” countries, with the exception of the small and disciplined Nordic tribes that run Norway with western support).

    The FED is a private bank therefore it has to be audited – this would never happen with Bernanke or Krugman as they believe that the government and the Fed should just do whatever they want, as long as they are governmed by democrats.

    Paul Volcker is neutralized and weak.

    A good candidate would be Nouriel Roubini who is at the political center and more popular worldwide by both sides.

    By the way, a Nobel Price in economics means just a lot of theoretical homework, not actual results. You can’t have results if half the U.S. is pissed off with the arrogance of both political parties and then they see a hard leftist running the Fed. The economy can’t be run by university theoretical speculators and by lawyers at Congress. Lawyers do not understand basic economics.

    Yes, Krugman never saw it coming because he has little contact with the real society – and a lot of contact with the Socialists at Very Expensive Universities.

  128. That is, between the two opposing sides (Krugman on the one side and Peter Schiff on the other side), I would propose Nouriel Roubini – the Center.

    We do not need Socialists of Universities that charge 50,000 annual tuition. Who are they kidding? “Luxurious Socialists”… yeah, I’ve seen that in my 30 years in Europe as well…

  129. This is a good start:

    Johnson nominates Krugman, Krugman can then nominate Kwak and then Kwak can nominate Johnson. A perfect circle …

  130. Another option I heard was David Walker. Well, he’s an excellent accountant but not a politician. He would not be able to do anything at the end.

    That’s why I think Nouriel Roubini would be a good choice: he understands politics, he’s widely respected, and politically he is at the center.

    (and he saw the bubble coming – Krugman saw nothing coming even when they were asking him directly)

  131. Krugman would be an improvement over that troika Greenspan, Summers and Rubin

  132. If you like Summers then Roubini would be an excellent choice. Were you aware that Dr. Summers, until his appointment by the president was a part owner of Roubini’s company and was also on its board of advisors where he (Summers) pulled in six figures?

    http://online.wsj.com/public/resources/documents/disclosure-LSummers04032009.pdf

  133. I’m well aware of Koenig’s views, but he has (essentially) advocated backwards-looking inflation rate targeting, instead of forwards-looking price level (of nominal GDP level) targeting. These views were instrumental in the Fed’s delayed (moralistic, but ultimately doomed) monetary response in October 08 (which has been described by James Hamilton). Plosser is worse. Hoenig is a known inflation hawk, but right now if we combine money-supply-shrinking regulation with monetary hawkishness, we’ll end up destroying the economy and crippling the reform.

    Hoenig, however, would make an excellent Treasury Secretary… So, Woodford for Fed Chair, Hoenig for Treasury Secretary, and Volcker (yes, with a C) to run a commission to propose new legislation.

    Will we get it? Well, Obama is currently solidifying behind Bernanke (as SJ notes), and the Dems spent this morning spinning the loss in Mass to suggest that Mass dems aren’t really opposed to Obama’s policies, and arguing that Obama has in fact been an agent of real change. In some areas, yes, but these are being obscured by unemployment.

  134. A Krugman confirmation hearing would be the GOP’s Fed version of the Bork hearings. As a columnist he is not untouchable but not as likely to attract outright smears as a nominee.

  135. @ChuckWhite

    While Stan Lippman’s comments are inappropriate, I don’t think the totalitarian regimes of the Nazis and the Communists (certainly the Soviet version) are nearly as far apart as you might think. I would say they were nearly polar opposites of polar opposites.

  136. Here’s Paul Krugman’s recommendation from 2002.

    “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

    http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

    God help us all if that flaming nitwit Paul Krugman was appointed as the Fed Chairman.

  137. For the record, Krugman is probably somewhat Peak-Oil-aware. He has alluded to it indirectly in his column more than once. At least he is much more likely to realize new angles re what’s going on than blinkered ideologues like Bernanke, whose performance over the past year has been no better than most other possible chairmen’s performance would have been. Shoveling fuel on a dying fire doesn’t take much cleverness.

  138. Carol,

    OK, I’ll spell it out for you.

    1. Notice the link I posted contains both for and against argument of the renomination of Bernanke?

    2. Notice everything you wrote only contains argument against Bernanke?

    3. Notice even after you read the link I posted, you only cherry pick the bits that supported your view and ignored everything else?

    4. Notice you’ve never put together any meaningful argument for why those reasons that supported the renomination of Bernanke are wrong?

    5. Life isn’t black and white. Given a complex issue, A dead give away of someone who is bias with a narrow world view is if she only cherry pick evidences that supported her view point.

    6. You seem to be looking for some sort of self righteous justice and irrationally ignoring all other considerations. The tone in your reply amply demonstrated this mentality.

    The facts and considerations for both for and against the renomination of Bernanke are already well presented by multiple thoughtful folks in the link I posted. Just for you, the only thing I will add is life isn’t black and white.

  139. Silly: “…the only thing I will add is life isn’t black and white.”

    Some aspects are: integrity is a digital quality, as are some others.

    Either Bernanke is renominated or he isn’t. One can not be half renominated, nor half reconfirmed.
    The way you argue, no person could ever on any job in any place be fired. I just disagree. Bye

  140. You are out of your mind. Krugman at one time was a respected economist. Now he is a shameless partisan shill. Bernanke, conversely, is a scholar that has demonstrated no political bias; he is simply the fall guy even though there is nothing he could have done since his appointment that would have altered the outcome of our current economic state.

  141. Nicely taken, out-of-context. The professor was saying that Alan Greenspan needed a housing bubble:

    “Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble.”

    He was NOT saying that Fed policy should be based on Mr G’s irrational exuberance, simply pointing that the Fed’s policies were irrational in themselves.

  142. “But if they oppose his appointment – despite his qualifications and in the face of our weak economy – what signal would that send about their priorities?”

    Um… the same signal that Republicans send out via every form of broadcast media all the time – and for which they never seem to pay a price politically?

  143. If the markets will fail because of one incompetent and corrupt man might lose his job, then it’s time to let them fail.

  144. Folks,
    this debate is folly. Krugman would never bog himself down in a bureaucratic swamp such as being Fed boss. Nor would he waste time with right wing hillbillies in hearings.
    His contribution to the dialogue is best done with his pen. President Obama listens closely to him as he, too, is an open minded intellectual.
    The Sec’y of the Treasury is the real boss and main corporatist lackey; let’s replace him!

  145. lets try a goy for once and break the stranglehold of the 2%

  146. Reid and McConnell supporting Bernanke, this is the bipartisanship only a corrupt, cowardly establishment gov can deliver. HAHA! Hope the voters rip the Bernanke ayes faces off in the next election (figuratively speaking of course).

    Note: Only lameduck Senators Dodd and dude from NH are out guaranteeing Bernanke appt and McConnell and Reid (kamakazi move?).

    This vote is really a poll – are senators with the status quo or not. The act itself is but meaningless in that fed policy will not change, whoever sits in the chair. Did it change from Greenspan to Bernanke? Does Obama look like he’s truly up for the challenge in changing the FED’s policy? Can he, really? NO. NO. NO. Theatre. Oh and of course Geithner and Summers (and Romer and Shapiro, etc) remain. Nothing to see here.

  147. Gasoline going to $4.00 per gallon also took billions out of the economy and sent them to Oil Companies and Middle Easter countries that don’t purchase American product and exacerbate the trade deficits that are the main trouble with the economy.

  148. I could not agree more with a Krugman nomination. What the Fed needs is more independence from, not collusion with, Wall Street. Major League Baseball made the SAME mistake when it did away with an independent Commissioner’s office…replacing it with a puppet office managed by one of the owners. The result was an ineffectual response to the festering steroid problem and a thorough destruction of the record book. Greenspan grew TOO close to Wall Street and was, in-turn, blind to the festering problems in the financial markets…

  149. It’s pretty hilarious (and not a little ironic) when the likes of Geithner point to the potential for markets to react negatively to this or that event – i.e., Obama’s recent decision to FINALLY address the need for new, strict regulation on banks’ size and activity, or the reappointment of Bernanke. After all, what’s a few hundred point drop when compared to the thousands it dropped starting in ’07 due to the failures of Bernanke, Geithner, et al?

  150. Well, I was following the comments in this dialog as well as reading the link provided.

    I’m undecided on Bernake, but I am certain that this round of conversation has been won by sillythings.
    very objective and informative.

  151. You are stupid!

  152. BRUCE E. WOYCH

    What we need is a special committee to choose a commision, to establish a standard, for selecting a candidate, to open a hearing, on who is left that is not currupted, jaded or brain dead. It should be headed by a rank and file SEC novice and a search team from a Swiss Bank after being awarded another trophy replica of a nobel prize. After this we should put it to a vote in Massachusetts and we should all watch the results on Fox News.

    Where is Eliot Spitzer when we need Him? At least he knows who is doing what and where and to whom!

  153. Ron Paul for Fed chair.

  154. This whole article misses the most salient point – How will obama be able to appoint ANYBODY new at this point. The republicans will almost certainly fillibuster ANYONE nominated – simply on principal – remember their GOAL is to stop the presidency and regain their power and with the current senate rules they can do that – and are.

    If you want uncertainty – see how the markets react after that…

  155. You guys are idiots. Yeah, Paul Krugman for Fed Chair, the guy who keeps having to move the goal posts with respect to his economic predictions. Not a chance that the market won’t tank after that brilliant announcement.

    And then this line: “his work on Japan in the 1990s shaped everyone’s thinking of how to handle potential deflation”

    Does anyone here honestly know anything about Japan? Ever heard of the lost decade?

    Please, go speak to people that aren’t less that 30 years old and have done this stuff for a living. This children’s groupthink forum is a joke.

  156. The other thing you idiots don’t seem to understand about Bernake is that he completely capitulated to everything that you could have wanted. He totally financed your liberal spending spree that has resulted in zip, nada, zilch, zero economic recovery (read: JOBS). I don’t know how you could do better than they guy that completely sold out the Fed to get renominated. Oh, right, Krugman…the nobel prize winning fool, I forgot.

  157. Uhm… from what I’ve read, doesn’t the Fed Chairman have to be one of the seven of the Board of Governors at the Fed? If so, how in the heck could Krugman ever be nominated? If anyone takes the job, it’ll have to be one of the governors. I’m pretty sure that’s a law.

  158. You’re O.K. Danno, thanks for clarification.

  159. Krugman? Really?! Let’s be honest. Krugman is a silly choice. He’s a smart man but he’s also an ideologue who stands no chance of being confirmed. Furthermore, he does not have any administrative or corporate experience whatsoever. Surely there are more qualified candidates. On another note, that Wall Street lackey Geithner has to go.

  160. Krugman? You’ve got to be kidding me. That guy is a Keynesian shill and given the slightest amount of real power would blossom into an economic fascist.

    How about instead of detached intellectuals living in fantasy worlds we get an Austrian economist in there to start unwinding our corrupt fractional reserve banking system?

  161. Simon Johnson, I agree with you, except for one very important matter: What would we do without Paul K’s column in the NY Times? How could we have gotten through the Bush years without it?

  162. If Krugman for Fed, might as well try Raul Castro for President as well.

  163. Paul Krugman would be a disaster as Fed Chairman. He plays fast and loose with the facts, publicly and privately. I generally respect your opinions, Simon, but on this one, you are way off.