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Why Larry Summers Should Decline to Become Fed Chair if Asked

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The Exchange

By Axel Merk

Who will succeed Bernanke may affect the value of everything you either own or owe, even the value of the U.S. dollar itself. Aside from current Fed Vice Chair Janet Yellen, former Treasury Secretary Larry Summers has been in the news as someone who wants the job.

Summers’ biggest asset is that he is extremely smart; his biggest liability may be that he knows it and lets others know it, too. Without a doubt, he might want to check 'Fed Chair' off his bucket list. He certainly would have the backbone to push through unpopular policies. After all, it's the Fed's role to spoil the party, to "take away the punch bowl" when we feel good about economic prospects.

But Summers, while smart and well connected, is not an expert on monetary policy. His dissertation was written on tax policy. Indeed, his policies are driven by political ideology, not economic theory. I suspect most would agree that Summers is a highly political person. And that's where the crux lies: being Fed chair ought to be an apolitical role.

Every President may allow politics to play a role in nominating a Fed Chair, but in this case, Summers may want to consider his own role: currently, Summers has free access to President Obama, as evidenced in part by an extensive visitor log to the White House. Should he become Fed Chair, he would need to show restraint in meddling with politics. Add to that Summers’ own statements that the impact of monetary policy is limited in the context of today’s challenges, and that fiscal policy is where action must take place. We have to conclude that Summers can exert far more influence on policies in his current role than he could as Fed Chair.

Mr. Summers, do you only want to be offered the job so you can turn it down?

Axel Merk is President and CIO of Merk Investments, Manager of the Merk Funds. Follow twitter.com/AxelMerk