Bloomberg this morning has a review of the pros and cons of Marty Feldstein as Alan Greenspan’s successor. One thing they don’t touch on is what the implications might be of having someone at the head of the US Federal Reserve who is pretty much convinced the Euro can’t work.
“Marty has something of a tin ear for politics, and that would be a problem in the Fed chairman’s job,” says William Niskanen, who followed Feldstein as head of the President’s Council of Economic Advisers in 1984 and is now chairman of the Cato Institute, a free-market research group in Washington.
Feldstein finished second only to Ben Bernanke, chairman of the White House Council of Economic Advisers, when 104 financial professionals were asked last month to name Greenspan’s most likely successor. Bernanke got 38 percent of the vote and Feldstein 31 percent in the survey, which was conducted by Stone & McCarthy Research Associates, a Princeton, New Jersey, consulting company. No other candidate received more than 10 percent.
Here are extracts from the abstracts of two of Marty Feldstein’s papers on European monetary union:
EMU would be an economic liability. A single currency would cause at most small trade and investment gains but would raise average cyclical unemployment and would probably raise inflation, perpetuate structural unemployment, and increase the risk of protectionism. EMU is nevertheless being pursued in order to create a political union.
The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size fits all’ monetary policy is not suitable for Europe because cyclical and inflation conditions vary substantially among countries. Labor market policies during this first year will increase this problem in the future and may lead to more trade protectionism. The paper explores reasons why cyclical unemployment, structural unemployment, and inflation may all be higher in the future as a result of the single currency. Although some advocate the euro despite its economic problems because of its assumed favorable effects on European political cohesiveness, the paper argues that it is more likely to lead to political conflict within Europe and with the Unites States.