Skip to comments.Obama’s Choice: Summers or Yellen? (Yield Curve Higher Than When QE Started)
Posted on 07/26/2013 4:58:02 PM PDT by whitedog57
Federal Reserve Chairman Ben Bernanke may be stepping down when his term expires in January. If that happens, President Obama gets to nominate his successor. The leading candidates are Fed Vice Chair Janet Yellen and former Treasury Secretary Larry Summers.
Both Yellen and Summers are from elite, liberal universities (University of California at Berkeley and Harvard University, respectively). Both are similar to Bernanke in terms of policies. Yellen is quiet and Summers is well, Summers quite opinionated.
It is doubtful that other respected candidates like Jeff Lacker at the Richmond Fed or Thomas M. Hoenig from the Kansas City Fed (now at the FDIC) will be seriously considered. Too bad because both of these people are tremendous. But both Yellen and Summers are good fits for the Obama Administration.
But will it matter?
Quantitative easing began in December 2008. As of today, about 4 1/2 years after QE began, the 30 year Treasury is around 87 basis points higher than where it started. The 10 year Treasury is about 31 basis points higher. In other words, the yield curve from 5 years and out are higher, but lower for short-maturity Treasuries.
Since December 16, 2008, The Feds balance sheet has expanded enormously to accomodate lower rates which have risen.
The good news is the S&P 500 (green) has skyrocketed under QE while house prices (as measured by FNCs 30 metro repeat sales index in white) have recently started to rise again since March 2012.
Both the M1 Money Multplier and M2 Money Velocity remain low by historic standards. I would like to hear what Yellen and/or Summers have to say about getting the multiplier and velocity back to previous levels without causing rampant inflation.
So, Obamas choice will likely boil down to who will be the least vocal
and that would likely be Yellen.
How long will the markets continue to swallow this endless gusher of Baraqqi/Bernanke/Lew minibucks?
how come you never hear the media whine about diversity at the federal reserve?
Yellen is female. Summers is male plus was involved in controversy during his time as Harvard President. Appointing the first female Fed Chairman would be a “historic” moment for the media to gush about and bash Republicans for being anti women. I’d say the odds are well in favor of a Yellen appointment no matter what her qualifications.
A female even if she has to remove her shoes to count to 22
Summers. More likely to keep the presses running full steam.
Because its a jewish only club. No goy allowed.
Yup, I say yellen. The less qualified the better.
WHAT DIFFERENCE DOES IT MAKE?