In an interview on PBS, Obama has hinted that Ben Bernanke's time as chairman of the Federal Reserve will end in early 2014. Obama said, speaking of Bernanke, "he's already stayed a lot longer than he wanted or he was supposed to." This is about as strong an indication that you can get, without either Obama or Bernanke himself saying it directly.
I wrote about Bernanke's possible departure a short while ago. With Bernanke leaving, I think it means that Bernanke is in a mess and he knows it. Perhaps I am wrong about this, but I have trouble believing that Bernanke believes the things that are coming out of his own mouth. I just can't imagine he is that stupid.
Of course, it is possible that Obama wants Bernanke to go. Bernanke was originally put in as chairman by Bush, but that obviously doesn't mean much. Obama re-nominated him, which is an indication of just how different (not much at all) the two major parties really are. But is it possible that Obama wants someone who is even more of a Keynesian than Bernanke? Does Obama want someone even more dovish (on inflation) than Bernanke? Is this even possible?
There are very few people I can imagine who would be worse than Bernanke. Then again, I seem to say that about presidents and then their successor turns out to be as much of a disaster or worse than the one he is replacing.
One of the frontrunners being discussed by the media as the next chair of the Fed is Janet Yellen. Believe it or not, she might actually be worse than Bernanke. Her rhetoric is certainly worse. It is hard to imagine that policy would be worse, but I suppose the Fed could create $2 trillion in new money each year, instead of "just" $1 trillion. If Janet Yellen becomes the next head of the Fed, hold on to your hat. I think I would be changing in most of my Federal Reserve notes in exchange for precious metals or any other hard assets. Obama may as well choose the head of the Zimbabwe central bank.
Another name, that I am sure we will eventually hear, is Paul Krugman. He is another person who could rival Janet Yellen as being one of the most disastrous choices. Regardless of how powerful the Fed chair actually is, this would be a symbol that much more monetary inflation is coming.
I don't think Krugman would accept the job, even if offered. Krugman likes to have his cake and eat it too. If he replaced Bernanke, he would actually be held responsible for the policy. Whenever the economy turns sour now, he simply says that there was not enough government spending and not enough monetary inflation. If he was the one in charge of the policy of monetary inflation, then he would have nobody to pin the blame on. I think Krugman knows better than to get involved with the Fed. His lies would be harder to cover up.
There are other names being thrown around too, like Tim Geithner, but it is hard to predict what will happen. It might also depend on what happens with the economy between now and then. We must not forget that Paul Volcker, who stopped the monetary inflation and let interest rates rise, was appointed by Jimmy Carter. Despite appearances, the establishment has more of a say of who will run the Fed and what the policy will be, as opposed to the president. The president is just the face of the establishment.
When Jimmy Carter was in office, we had double-digit price inflation. We are nowhere near that now, at least as measured by the CPI figures. While things can change quickly, it is doubtful it will be anything close to that by the end of the year. For that reason, I expect that the next chair of the Federal Reserve will be as much of a disaster as the current one.