President Barack Obama has signalled over recent days that he wants a shift towards a hard money stance at the Fed, calling for a new chairman willing to "keep our dollar sound" and ensure financial stability. "Let's also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let's make sure that we're not creating new bubbles."

The comments have been taken as a desire to move beyond the era of quantitative easing (QE) under current chairman Ben Bernanke, who steps down in January and is already a lame duck.

They come amid leaks that Mr Obama has narrowed his choice to Professor Summers, a titanic figure in US finance with a hot temper to match.


Prof Summers, a former Treasury Secretary, is a "General Theory" Keynesian who sees fiscal stimulus as the only effective way to fight slumps once interest rates reach zero. Yet the Fed has no role in fiscal policy. Budgetary matters belong to the Treasury and Congress.

He has been disdainful of monetary stimulus, the Fed's sole domain, questioning whether QE does much good. He wrote last year that it distorts investment, worsens inequality, and stokes "asset bubbles" without helping the real economy.

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