Friday, January 22, 2010

Martin Feldstein for Federal Reserve Chairman

This may come to some of you as a shock: I hereby propose that Martin Feldstein be nominated by President Obama as the next Federal Reserve chairman. I am talking real economik here and not my ideal choices that have no chance of being nominated.

If it were up to me, I would choose either Joseph Salerno or Roger Garrison as the next Fedral Reserve chairman. They both understand money, the Federal Reserve and how the economy works. That said, neither has a chance of becoming Federal Reserve chairman, now. You need to be an insider, a member of the club to get the job. Both these men speak too much truth, too openly, to be allowed access to the inner workings of the club. It's important their names get out and more know who they are, but in the game of real economik, this is nowhere near their time.

Martin Feldstein is another story.

Feldstein is the George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research. From 1982 through 1984, He was Chairman of the Council of Economic Advisers and President Reagan's chief economic adviser. He served as President of the American Economic Association in 2004. He is a Trustee of the Council on Foreign Relations, a member of the Trilateral Commission and the Group of 30. This my friends is an insider.

But, he is an insider with a difference. I think he truly understands the advantages of a free market society, and although he knows that he can only push free market concepts so far within "the club", he is the closest thing free market supporters could have as an advocate of free markets inside those behind the scene discussions.

Further, he truly watches the economy and watches the right data points. Long term EPJ readers know that my favorite "trick question" is to ask mainstream economists what the money supply growth is. It's something you would think most economists would know, especially if they were advising the government. Most don't have a clue. Even Phillip Swagel.

Swagel was Assistant Secretary for Economic Policy under Henry Paulson at the Treasury Department from December 2006 to January 2009.

He served as chief of staff at the White House Council of Economic Advisers from July 2002 to February 2005, and was a senior economist at the Council from August 2000 to July 2001.

Swagel was also previously an economist at the Federal Reserve Board and the International Monetary Fund.

When I asked him in May of 2009, if he knew what the money supply growth was in the summer of 2008 just before the market went into panic mode, he had no idea that Bernanke had stopped printing money that summer. And yet during that period he was Hank Paulsons' topic economic adviser at Treasury.

Two years ago in San Francisco, I also had the opportunity to ask Feldstein my favorite trick question. I was waiting for him to fumble the question after I asked, but he nailed M2 money growth to the decimal. The man monitors the numbers.

And, as I have pointed out a number of times, Feldstein has been warning that a double-dip recession is a very likely possibility, further evidence of his careful study of the numbers.

Again, Feldstein is an insider and a Keynesian, but he understands the importance of free markets better than most mainstream economists, and although he is not necessarily a physically imposing man, I don't see him as the type that would have been intimidated by former Treasury Secretary Hank Paulson the way I think Ben Bernanke was. If Feldstein was Fed chair, I doubt very seriously that we would have had TARP bailouts and a dozen other credit facilities made available to the banking elite.

Feldstein would have protected the elite, but it would not have been the rush of the pigs to the trough. There would have been no pig fest

In the coming critical times, with the likelihood that there will be enormous pressure for the Fed to inflate to absorb a huge portion of the Treasury debt that will be issued, it will take a knowledgeable man, who won't be easily intimidated, to protect us against severe inflation, that man is Feldstein.

I hereby call on President Barack Obama to withdraw the nomination of Ben Bernanke for Federal Reserve chairman, and replace the Bernanke nomination with that of Martin Feldstein.


  1. Wenzel,

    Ehhhhhhhhhhhhhhhhh... I don't know about this whole "giving sanction to the system" strategy...

  2. How about Gerry O'Driscoll?

  3. I too love Salerno and Garrison. Read Garrison's "Capital base Macro" as a contra to the claptrap in standard Macro. However, regarding, especially Salerno, their vocal call for mass inflation that hasn't happened (yet), I wonder whether we Austrian's need to reassess our automatic acceptance of the neoclassical notion of the money multiplier? To be sure, not all Austrians have been suggesting immediate mass inflation: You, Mish & Shostak come to mind. Do you have any thoughts on this slight divide amongst our lot?


    I don't know if you saw that piece by Feldman...

    He was warning that gold could go to 2000 or 500..

    Feldstein is kind of bearish on gold but recommending it nonetheless.

    But I've used to think that I liked my poison straight up because it makes it easier to call the poisoner out, but now I wonder...

    I wouldn't go so far as to endorse any of these guys though.

  5. sorry, that should be

    "I used to think I like..."