Nobel Prize Laureate and "The New York Times" columnist Paul Krugman wrote in his blog "The Conscience of a Liberal" yesterday that Governor of the Bank of Israel Prof. Stanley Fischer would indeed be highly qualified to become the next Fed chairman, alongside other candidates, but that the argument that Fischer might have a leg up in the confirmation process, because he has been a highly successful governor of the Bank of Israel who worked well with Netanyahu, is fantasy.
Krugman was responding to "The Washington Post" blogger Dylan Matthews, who the previous day wrote a blog entitled "Stan Fischer saved Israel’s economy. Can he save America’s?" that Fischer was a plausible successor to Federal Reserve Board Chairman Ben S. Bernanke, who is expected to step down when his term ends in 2014. Matthews said that the answer was "yes", and that Fischer's time in Israel could be a favorable factor.
Krugman writes in response, "I think this is fantasizing; Matthews is failing to face up to the deep monetary craziness of the modern GOP". He says that Republicans will not support a Keynesian like Fischer. In other words, the Republicans would torpedo Fischer's nomination as Fed chairman should President Barack Obama nominate him.
"You have to bear in mind that the party’s intellectual leaders are people who have spent the past four years expecting hyperinflation any day now," says Krugman. "Two years ago they lectured Ben Bernanke on how terrible it is to “debase” your currency. And of course the utter failure of their predictions hasn’t changed their minds a bit."
Krugman continues, "So here comes Stan Fischer, who says, 'I still think Keynesian economics is extremely important, and if anybody didn’t think so, this crisis should have made them rethink,' which is actually a double insult - both praise for Keynes and the suggestion that one should rethink one’s views in the face of experience, which are both anathema to the Ryanoids.
"And as head of the Bank of Israel, his signature achievement was a large debasement - sorry, depreciation - of the currency, which insulated the nation from the crisis and was achieved through huge purchases of foreign exchange: this is actually a form of quantitative easing (as well as a bit of currency war); it’s exactly the kind of thing the GOP goes wild about when Bernanke does it."
Krugman concludes, "But doesn’t Fischer’s success play a role? Hey, that’s evidence-based thinking, which is part of what they’re fighting. I guess my point is that Obama should go for someone good - Stanley Fischer, [Federal Reserve Board Vice Chairwoman] Janet Yellen, [Professor of Economics at the University of California, Berkeley] Christina Romer, or someone else to be named - and not even try to appease the crazies."
Published by Globes [online], Israel business news - www.globes-online.com - on February 18, 2013
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