Larry Summers Withdraws from Fed Consideration [pdf] • Hacker News Board

Re: Larry Summers Withdraws from Fed Consideration [pdf]

#31

Post by jessaustin » Mon, Sep 16, 2013, 4:25 AM UTC

Prof. Harry Lewis has long been an attentive critic of Summers, paying particular attention to his roles in hushing up Harvard's corruption in Russia: http://harry-lewis.blogspot.com/2013/09/larry-summers-and-et... and in some really terrible investments: http://harry-lewis.blogspot.com/2013/08/end-of-summers-updat...

Both his apparent tolerance of corrupt self-dealing and his reckless investment philosophy should have disqualified Summers from ever holding any top governmental financial office, but I guess we should count ourselves fortunate that his intemperate sexist commentary, or something anyway, has disqualified him from holding any more top offices.

Re: Larry Summers Withdraws from Fed Consideration [pdf]

#32

Post by spikels » Mon, Sep 16, 2013, 5:53 AM UTC

This was a political decision. Larry Summers is one of the sharpest and most productive economists around and would have been as qualified as any Fed Chairmen in history. However he has tended to speak his mind too freely for a job requiring the approval of our timid politicians. I'm sure they will find someone almost as good to fill the spot and he will be fine making millions on Wall St rather than helping formulate our monetary policy.

Re: Larry Summers Withdraws from Fed Consideration [pdf]

#33

Post by zurn » Mon, Sep 16, 2013, 7:53 AM UTC

spikels wrote: post #32

This was a political decision. Larry Summers is one of the sharpest and most productive economists around and would have been as qualified as any Fed Chairmen in history. However he has tended to speak his mind too freely for a job requiring the approval of our timid politicians. I'm sure they will find someone almost as good to fill the spot and he will be fine making millions on Wall St rather than helping formulat…

> However he has tended to speak his mind too freely for a job requiring the approval of our timid politicians.

Krugman thinks the problem with Summers would have been too much timidity: "Summers, on the other hand, while he often expresses unconventional views when not in office, has a strong tendency to revert to conventionality when in office." ... "So the apparent decision to appoint Summers is a strong anti-regime-shift signal on Obama’s part." (http://krugman.blogs.nytimes.com/2013/09/03/summers-the-shif...)

Re: Larry Summers Withdraws from Fed Consideration [pdf]

#34

Post by yummyfajitas » Mon, Sep 16, 2013, 10:47 AM UTC

DanielBMarkham wrote: post #22

onebaddude wrote: post #20

Earlier quoted context omitted.

>I'd be interested in some supporting documentation for your claim. No offense, but it starts with having an understanding of what a derivative is and how they are used. There is nothing sinister about them in any fashion, nor were they the "cause" of anything. The mainstream, as usual, has it wrong. At the base level, excessive risk was the problem, and because derivatives employ leverage, that risk is amplified.

I'm going to have to categorize that as being non-responsive. Let's assume I know what a derivative is. We can go from there. The specific accusation made in the mainstream press was that by the time the instruments were sliced and diced a dozen times, risk was not made clearly visible to derivative purchasers, and that the buying and selling of derivatives got way ahead of the banks' ability to track the risk inside…

Consider a plain vanilla housing package. Payoff = homeowner_payments.sum().

Now consider the least risky tranch of a CDO. Payoff = min(homeowner_payments.sum(), 0.7 x MAX_HOMEOWNER_PAYMENT).

Is it unclear that if homeowner_payments.sum() goes way down, you lose money? Of course not. For every derivative on the market, computing your gains/losses given a specific scenario is straightforward.

The only difficulty is computing the probability of each scenario, but derivatives don't change that calculation at all.

Re: Larry Summers Withdraws from Fed Consideration [pdf]

#35

Post by mathattack » Mon, Sep 16, 2013, 1:07 PM UTC

spikels wrote: post #32

This was a political decision. Larry Summers is one of the sharpest and most productive economists around and would have been as qualified as any Fed Chairmen in history. However he has tended to speak his mind too freely for a job requiring the approval of our timid politicians. I'm sure they will find someone almost as good to fill the spot and he will be fine making millions on Wall St rather than helping formulat…

It's a political decision, but sometimes this is how the political process works best. For better or worse our political process pushes towards extreme edges during the primaries as candidates have to play to the base. Getting appointed officials through congressional approval forces the people actually doing the work to be closer to the center of the country's political thought.