Tags: El-Erian | Summers | Yellen | Fed

Pimco's El-Erian: Yellen-Summers Debate Threatens Economy

By    |   Tuesday, 06 August 2013 12:13 PM

Who should replace Ben Bernanke as chairman of the Federal Reserve: Janet Yellen, vice chairman of the Fed, or former Treasury Secretary Larry Summers?

It's a popular debate among economists and other pundits.

It's also becoming silly and threatening the nation's economic well-being, warns Mohamed El-Erian, Pimco's CEO and co-chief investment officer, in an editorial for The Washington Post.

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The debate, he says, is abandoning constructive issues, such as candidates’ academic backgrounds, economic thinking and experience. Commentary has turned to "a form of negative campaigning replete with sophisticated mudslinging."

El-Erian calls accusations that Yellen lacks "gravitas" and that Summers is too "prickly" irrelevant, silly and unconstructive.

Selection of the Fed chairman is a technocratic appointment, not a political race or popularity contest. Yet editorial pages and the blogosphere are filled with opinion pieces, endorsements and even popularity polls backing Yellen or Summers.

The public debate has degenerated into negative attacks, with articles linking Summers to deregulation and accusing Yellen of being too close to Bernanke.

"If this continues," El-Erian cautions, "there is a material risk that exaggerations and tangents could undermine the country by raising unwarranted questions about leadership, particularly when the next Fed chair may need to calm panicky financial markets, take controversial steps, persuade foreign central banks to cooperate or suddenly lead the private sector in a new direction."

The longer the debate continues, the greater the risk grows, he adds.

"This is particularly distressing as, primarily because of political polarization on Capitol Hill, there are no other entities that are both able and willing to take on the enormous policymaking burdens that the Fed has been carrying virtually on its own."

In an example of the increasingly heated debate over replacing Bernanke, New York Times columnist Paul Krugman called the New York Sun's criticism of Yellen "raw misogyny."

The Sun editorial, which complained that liberal Democrats are pushing for Yellen because of her gender at the expense of monetary policy, warned of inflation if the dollar became "gender-backed."

Krugman also criticized accusations that Yellen lacks "gravitas." A man with Yellen's extensive academic and policymaking experience would not be accused of lacking gravitas, he said.

"Sorry, but it’s hard to escape the conclusion that gravitas, in this context, mainly means possessing a Y chromosome."

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Who should replace Ben Bernanke as chairman of the Federal Reserve: Janet Yellen, vice chairman of the Fed, or former Treasury Secretary Larry Summers?
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2013-13-06
Tuesday, 06 August 2013 12:13 PM
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