August 2, 2013

The Chairman of the Federal Reserve Board serves a four year term. The current occupant of the position, Ben Bernanke, has held the post for two terms. His current one ends January 31, 2014. Once he steps down, not of his own choosing, history will be made.

President Barack Obama, who has made more history with his election, appointments, his failing economic programs, healthcare and other transformational events, will appoint one Janet Yellen to be the next Chairman (er, Chairwoman) of the FED. Another historical first as she will be the first woman to hold the post. To Obama, that's all the qualifications you need to hold a top post.

Now as of this writing Obama hasn't officially given Yellen the nod, but with Lawrence Summers being the only other top candidate for the job, why give it to him since he has already occupied the post of Treasury Secretary (under Bill Clinton). It's a woman's turn. After all, Obama all but promised his base while campaigning for a second term that more women will be put into top positions in the government.

But wait a minute! The Federal Reserve Board is not a government department and does not answer to the government. The Progressives, big Bankers and Socialists made sure of that when they created the Monster 100 years ago.  It prints money, sets economic policies and controls interest rates all without Congressional oversight or approval.

Currently, Ms. Yellen holds the position of Vice Chair at the Fed. She suffers from one big sin. And although Liberals are fond of quickly forgiving the sins of their own (while condemning the sins of the right forever), Yellen's sin will warrant no mercy from the left: Being right!

Underlying the debate between Yellen and a Summers nomination is the dispute over how the Fed has done its job.

Conservatives think it has been reckless in expanding the money supply. Liberals say it deserves credit for keeping a severe recession from being much worse.

Liberals prefer Yellen, who has been tabbed a "dove" on inflation, favoring easy money. Conservatives are apt to prefer Summers, who leans the opposite way. Bentley University economist Scott Sumner says he has been "unable to turn up a single instance of Summers criticizing policy as being too tight over the past five years."

Also playing a role are all those Sandra Fluke followers whose attitudes about the desirability of giving this powerful job to a woman for the first time is the sure guarantee Yellen gets the job. The New York Times reports that Christina Romer, who served on Obama's Council of Economic Advisers, views "the choice of the next leader of the Fed as a test of the administration's commitment to inclusiveness."

A Wall Street Journal editorial, meanwhile, dismissed Yellen as the darling of "the Democratic Party's gender liberals." Summers, a white male, appeals to those who resent preferences based on race or sex. He wins bonus points for daring, as president of Harvard, to suggest that females are less likely than men to be exceptionally good at math.

It's an article of faith among conservatives that efforts to promote diversity are at war with the principles of meritocracy. But the alleged conflict is absent this time. There is a powerful case to be made for Yellen strictly on how she's done her job.

Her notable achievement has been to assess the dangers faced by the Fed and to distinguish the real from the bogus. Since the financial meltdown of 2008, Bernanke's critics have been haunted by the specter of inflation. Yellen has seen it for the illusion it is.

By 2009, conservative economists were warning that an explosion in prices was on the way. Last year GOP presidential candidates agreed that Bernanke was, in Newt Gingrich's words, "the most inflationary" Fed chairman ever. But the claims have proved baseless again and again.

Since Bernanke took over in 2006, the Consumer Price Index has risen at an average annual rate of 2.3 percent -- which, according to economist Mark Perry of the conservative American Enterprise Institute, gives him the best anti-inflation record of any Fed chairman in the past 40 years. In May, prices were up just 1.8 percent from a year before.

The problem with the U.S. economy in recent years has not been inflation but persistent weakness and unemployment. Nominal GDP, Sumner notes, has grown at the worst pace since Herbert Hoover was president.

Not everyone saw what was coming. This week, a news story in the Wall Street Journal compared hundreds of predictions made since 2009 by Fed officials. "The most accurate forecasts overall came from Yellen," the Journal found. "The least accurate forecasts came from central bank 'hawks,' those who feared Fed policies would trigger rising inflation."

One of the former hawks admits being wrong. Narayana Kocherlakota, head of the Federal Reserve Bank of Minneapolis, said last year, "Inflation is not coming in as hot as I expected. You have to learn from the data."

As every investor knows, past performance is no guarantee of future results. Just because Yellen had the foresight to push monetary expansion doesn't mean she's the person to rein it in when conditions change. But her ability to grasp realities that baffled other experts suggests she has a deeper comprehension of how the modern economy works.

What became clear last fall, as Republicans mocked polls that showed Mitt Romney trailing, is that the important divide in modern debates is not between the right and the left. It's between the people who follow dogma and the people who follow evidence. Yellen is one of the latter. Liberals might not be forgiving of her and conservatives will still be skeptical.

As for me, I would nominate neither Yellen, nor Summers and go ahead and start the process of ending the Fed. The Fed is unconstitutional anyway. Then, I would spend the rest of my term dodging bullets fired from the "guns" of the global elite bankers who make up the Tri-Lateral Commission and the Bilderberg Group.

We believe that the Constitution of the United States speaks for itself. There is no need to rewrite, change or reinterpret it to suit the fancies of special interest groups or protected classes.