This is not good. Now, there are plenty of people who think QE is going to turn us into Zimbabwe or inflate the mother-of-all-bubbles or just bail out the banks, but none of those people should be running the Fed. The reality is QE has been a net positive, though it's not clear how much. For one, as Paul Krugman points out, the Fed's bond-buying signals that the Fed really doesn't intend to raise rates anytime soon. Of course, the Fed has said it won't anyways, but there's nothing to stop it from going back on its word if inflation ticks up. QE makes this promise to be irresponsible more credible.That's clear enough from the way interest rates and expectations of future interest rates jumped after the Fed said it might soon slow the pace of its bond-buying. For another, QE has reduced our indebtedness. Now, it's true that QE shortens the maturity of our debt -- a point Summers has worried about -- but the way it pushes down interest rates and pushes up growth are fiscal pluses. Joseph Gagnon, a senior fellow at the Peterson Institute and a former Fed official, estimates that QE might have reduced our debt-to-GDP ratio by 12 percentage points the past four years.
Monetary policy isn't exactly the sexiest topic, but the next Fed Chair is the most important economic decision Obama will make for the rest of his term. Whoever it is will face the tricky task of eventually exiting the Fed's unconventional policies without losing the recovery. The question is how eventual that eventually will be. Now, even with core inflation at an all-time low, there's a growing chorus calling on the Fed to tighten, and tighten now, to head off a potential bubble. We know Janet Yellen would ignore them, and focus on jobs.
Would somebody else focus even more on jobs? I've already said I think Christina Romer would be better, because she's more likely to fight to do more than the consensus-building Yellen -- which is the same argument for Summers. His infamous disregard for social niceties might make him more likely to push the committee in a more aggressive direction. But there's no evidence he would want to. His almost certainly strategic silence on most matters Fed-related means there aren't many tea leaves to read. But the ones we can read suggest he isn't quite as dovish as Yellen. And he might even buy into the bubble fears. That should be more than enough to disqualify him against someone who clearly has the right ideas and the right experience.
And besides, consensus-building might be underrated. Fed Chairs come and go, but the Fed is forever. (Sorry, Ron Paul). Getting the rest of the committee on board with a decision makes that decision more durable -- which makes it more credible, too. In other words, trying to browbeat the rest of the Fed into doing something might backfire. Yellen's familiarity with the rest of the committee could just as easily make her more likely to (quietly) cajole them in a more aggressive direction than anyone else could.
Of course, it doesn't hurt that Yellen would be a history-making pick as the first female Fed Chair. But that has nothing to do with why she should get the job. She should get the job, because she's the best person for it out of all the contenders.
Sometimes, things are simple.