Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
i know I'm missing something here, but "Thank God for Janet Yellen" would have been my title. I agree that the current events are not how democracy should work, but Themosticles was banished and Socrates was condemned, so Sir Winston was correct that it's the worst form of government , except for all the others. Most would agree that policies should focus on growth, since austerity hasn't seemed to work too well abroad.
"We need more public infrastructure investment, but we also need to reduce regulatory barriers that hold back private infrastructure. We need more investment in education but also increases in accountability for those who provide it. We need more investment in the basic science behind renewable energy technologies, but in the medium term we need to take advantage of the remarkable natural gas resources that have recently become available to the United States. We need to ensure that government has the tools to work effectively in the information age but also to ensure that public policy promotes entrepreneurship."
I think regulation usually only comes when a significant problem (polluted environments, adulterated food, ineffective or harmful pharmaceuticals) requires it. Underpay teachers, and many of the brightest will leave. Blame them for society's ills and more leave. Underfund basic research (check out this year's Nobel winners, please) while doing more fracking? This guy was President of Harvard, right? The last sentence contains at least 4 points for buzz word Bingo, but not very much substance.
Reply to @STB65: I feel like the old hamburger ad: "Where's the beef?" I found the Summers article succinct and to the point. As far as Yellen and Summers go, they appear to be two peas in the same pod fiscally and fundamentally. At least the currently available press reports would suggest both favor expansionary policies over sharp spending reductions (a view you appear to share). They are not far out-of-line with what Nobel Prize winning economist Paul Krugman's been advocating - I think convincingly - from his pulpit at the NY Times and elsewhere - albeit not as extreme. All three seem to take aim at the arguments from the right that we are wrecking the economy through borrowing and saddling our kids with enormous debt burdens they will somehow have to repay during their miserable lifetimes. I believe nothing is farther from the truth when the overall picture is viewed in context.
As Summers and Krugman have pointed out in the past, national debt has significance primarily in relation to inflation. GDP, and overall growth and size of the economy. Here the picture is more sanguine, though growth slowed precipitously due to the '07-'08 global financial collapse. In addition, if our debt were that oppressive, one would expect the dollar to weaken visa vie other currencies. It has not. In fact, the dollar has strengthened in recent years vs these other currencies. Also, unsustainable debt load tends to drive up inflation as more of a given currency enters the economy creating a situation where the greater supply of currency (in this case dollars) chases fewer and fewer goods and services. In fact, the opposite has been the case in the United States in recent years. Inflation in the U.S. has been running low - some think alarmingly so. (See my post re: anticipated 2014 Social Security COLA increase.)
There are stark differences between Summers and Yellen, but primarily in terms of style and public perception. Rightly or wrongly Summers has appeared obstinate and abrasive to deal with in his various public roles. The flaws are probably exaggerated, but certainly cast doubt over his ability to chair an organization like the Fed. His departure from Harvard amid allegations he is intolerant or dismissive of women in academia (which he helped foment) likely sealed his fate in terms of achieving Chairmanship at the Fed - which by all accounts he greatly coveted. But let's not throw the baby out with the bath water. I find his arguments in the linked article convincing and articulate. My only beef would be he doesn't go into greater depth.
Reply to @scott: "Harvard would learn just how risky the derivatives were in 2008 when financial markets imploded. The value of the swaps was linked to benchmark interest rates, which were slashed in the midst of the global credit crisis to near zero percent to prop up banks."
The first link (the only current one) is an interesting read. But, let's think about this a moment. The investments Summers participated in got squeezed by the '08 train wreck. What didn't? Money market funds were on the verge of failing until the Fed propped them up. Housing prices plunged by half nearly overnight. Lehman failed. Oppenheimer's "Core Bond Fund" lost 50%. On and on ... (I should know. My Dodge & Cox Global fund took over a 50% haircut at the time:-). So ... need to cut Larry a little slack here me thinks!
Reader alert - The second and third articles linked above are dated 2009 and likewise address issues related to the 2008 global financial collapse.
Reply to @hank: "Your first link (the only current one) is an interesting read. But, let's think about this. ... The investments Summers participated in got squeezed by the '08 train wreck. What didn't? "
Um, so the person who was going to be the Fed chair who made a large (and bad) bet on interest rates that got Harvard in trouble in 2008 can be explained away because everything went down in 2008?
That's sort of a so-so "whocouldaknown" excuse for someone who - up until a month or so ago - was going to be the person in charge of a whole lot of economic dials and levers...
So, we have an outgoing Fed chair who assured that "subprime is contained", an incoming Fed chair that said "“I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened" and a potential frontrunner whose bad bet on interest rates caused problems at Harvard in 2008. Yellen will be more of the same and I think the least objectionable of the choices offered.
Beyond that, it's an example of how institutions continue to reach for increasingly exotic instruments and you have situations like this, or the Illinois Teachers Pension Fund. "“If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank,” Rosenthal said." http://news.medill.northwestern.edu/chicago/news.aspx?id=166746
"Reader alert - The second and third articles linked above are dated 2009 and likewise address issues related to the 2008 global financial collapse."
Reply to @scott: Don't believe anyone here's promoting Summers for Fed Chair. I'm not. I am saying: before we impugn his intelligence or investing acumen, let's look at the circumstances under which the Harvard Endowment lost 27% in 2008. The link below shows that the average university endowment lost 23% in that year - so the Harvard endowment trailed the average by 4%. Sounds like they leaned left when they should've leaned right. Happens to the best.
I believe the intent of davidrmoran's post was to applaud Summer's macro-economic views. People will disagree sharply on that. In fact, doesn't it relate to the current Congressional stand-still? I enjoy the dialogue, but am not sure why we're discussing Summers' fitness to be Fed Chair. I've already indicated I don't think he was fit for the job - not because he's dumb about money, but because he doesn't appear to work well with others within an organization and exudes a certain "smugness" that seems to invite criticism and controversy.
Thanks for the links. They are valid. Just wanted readers to be aware of their proximity to the financial events of 2008. Regards
Hank's pretty spot on - Summers has an arrogance that you can feel and has made a lot of enemies. Yellen hasn't. I really don't see much of a change at the Fed from Uncle Ben.
Comments
I agree that the current events are not how democracy should work, but Themosticles was banished and Socrates was condemned, so Sir Winston was correct that it's the worst form of government , except for all the others.
Most would agree that policies should focus on growth, since austerity hasn't seemed to work too well abroad.
"We need more public infrastructure investment, but we also need to reduce regulatory barriers that hold back private infrastructure. We need more investment in education but also increases in accountability for those who provide it. We need more investment in the basic science behind renewable energy technologies, but in the medium term we need to take advantage of the remarkable natural gas resources that have recently become available to the United States. We need to ensure that government has the tools to work effectively in the information age but also to ensure that public policy promotes entrepreneurship."
I think regulation usually only comes when a significant problem (polluted environments, adulterated food, ineffective or harmful pharmaceuticals) requires it.
Underpay teachers, and many of the brightest will leave. Blame them for society's ills and more leave.
Underfund basic research (check out this year's Nobel winners, please) while doing more fracking? This guy was President of Harvard, right?
The last sentence contains at least 4 points for buzz word Bingo, but not very much substance.
As Summers and Krugman have pointed out in the past, national debt has significance primarily in relation to inflation. GDP, and overall growth and size of the economy. Here the picture is more sanguine, though growth slowed precipitously due to the '07-'08 global financial collapse. In addition, if our debt were that oppressive, one would expect the dollar to weaken visa vie other currencies. It has not. In fact, the dollar has strengthened in recent years vs these other currencies. Also, unsustainable debt load tends to drive up inflation as more of a given currency enters the economy creating a situation where the greater supply of currency (in this case dollars) chases fewer and fewer goods and services. In fact, the opposite has been the case in the United States in recent years. Inflation in the U.S. has been running low - some think alarmingly so. (See my post re: anticipated 2014 Social Security COLA increase.)
There are stark differences between Summers and Yellen, but primarily in terms of style and public perception. Rightly or wrongly Summers has appeared obstinate and abrasive to deal with in his various public roles. The flaws are probably exaggerated, but certainly cast doubt over his ability to chair an organization like the Fed. His departure from Harvard amid allegations he is intolerant or dismissive of women in academia (which he helped foment) likely sealed his fate in terms of achieving Chairmanship at the Fed - which by all accounts he greatly coveted. But let's not throw the baby out with the bath water. I find his arguments in the linked article convincing and articulate. My only beef would be he doesn't go into greater depth.
http://www.bloomberg.com/news/2013-08-29/summers-schooled-by-rates-at-harvard-now-wants-job-setting-them.html
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHQ2Xh55jI.Q
Harvard Swaps Are So Toxic Even Summers Won’t Explain (Update3)
http://blogs.reuters.com/felix-salmon/2009/11/29/how-larry-summers-lost-harvard-18-billion/
The first link (the only current one) is an interesting read. But, let's think about this a moment. The investments Summers participated in got squeezed by the '08 train wreck. What didn't? Money market funds were on the verge of failing until the Fed propped them up. Housing prices plunged by half nearly overnight. Lehman failed. Oppenheimer's "Core Bond Fund" lost 50%. On and on ... (I should know. My Dodge & Cox Global fund took over a 50% haircut at the time:-). So ... need to cut Larry a little slack here me thinks!
Reader alert - The second and third articles linked above are dated 2009 and likewise address issues related to the 2008 global financial collapse.
Um, so the person who was going to be the Fed chair who made a large (and bad) bet on interest rates that got Harvard in trouble in 2008 can be explained away because everything went down in 2008?
That's sort of a so-so "whocouldaknown" excuse for someone who - up until a month or so ago - was going to be the person in charge of a whole lot of economic dials and levers...
So, we have an outgoing Fed chair who assured that "subprime is contained", an incoming Fed chair that said "“I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened" and a potential frontrunner whose bad bet on interest rates caused problems at Harvard in 2008. Yellen will be more of the same and I think the least objectionable of the choices offered.
Beyond that, it's an example of how institutions continue to reach for increasingly exotic instruments and you have situations like this, or the Illinois Teachers Pension Fund. "“If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank,” Rosenthal said." http://news.medill.northwestern.edu/chicago/news.aspx?id=166746
"Reader alert - The second and third articles linked above are dated 2009 and likewise address issues related to the 2008 global financial collapse."
Why the need for an alert?
Oh, and can't forget:
http://en.wikipedia.org/wiki/Lawrence_Summers#Summers.27s_role_in_the_deregulation_of_derivatives_contracts
http://abcnews.go.com/blogs/politics/2010/04/clinton-rubin-and-summers-gave-me-wrong-advice-on-derivatives-and-i-was-wrong-to-take-it/
I believe the intent of davidrmoran's post was to applaud Summer's macro-economic views. People will disagree sharply on that. In fact, doesn't it relate to the current Congressional stand-still? I enjoy the dialogue, but am not sure why we're discussing Summers' fitness to be Fed Chair. I've already indicated I don't think he was fit for the job - not because he's dumb about money, but because he doesn't appear to work well with others within an organization and exudes a certain "smugness" that seems to invite criticism and controversy.
Thanks for the links. They are valid. Just wanted readers to be aware of their proximity to the financial events of 2008. Regards
http://ccuri.files.wordpress.com/2011/04/endowments_and_the_financial_crisis.pdf
Hank's pretty spot on - Summers has an arrogance that you can feel and has made a lot of enemies. Yellen hasn't. I really don't see much of a change at the Fed from Uncle Ben.
rono