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Why Summers Resigned
Howard Richman, 9/21/2010

My father predicted Larry Summers resignation as Obama's chief economic advisor after observing Summers' body language when he was interviewed by reporters after coming back from his trip to Beijjing earlier this month. Let's review the situation. Here's what I wrote on September 7:

When Lawrence Summers read the latest unemployment and GDP reports, he probably arrived at the same conclusion that my father, son and I did (Obama Did Create 3 million Jobs -- In China) -- that the rising trade deficit was killing the U.S. economic recovery. So on Saturday, he left for China to persuade the Chinese government to loosen its currency manipulations and other trade manipulations which maximize Chinese exports to the United States while minimizing Chinese imports from the United States.

Summers economic policy has failed and his last-ditch attempt to rescue it in China failed. So he is taking the dignified way out. The White House has a different story. Bloomberg reports:

Robert Gibbs, Obama’s chief spokesman, said today it “is not a surprise, that there will be people who have worked enormously hard over the past few years to make decisions to go back to doing” what they did before joining the administration....

“This is tough, the work that they do,” [President Obama] said in an hour-long town hall discussion on the economy broadcast on CNBC. “They’ve been at it for two years, and they’re going to have a whole range of decisions about family that will factor into this, as well.”...

Obama said yesterday he has “not made any determination about personnel.” He praised Summers and Geithner, as well as the rest of his economic advisers, saying that they “have done an outstanding job.”

Guess that means that Geithner will resign soon. If Obama picks Paul Krugman or Ralph Gomory to replace Summers, that will be a sign that he is planning to get tough with China. The result would be a prosperous economy for the rest of his term. If he picks another free-trade ideologue, that will be bad news for America's children.

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Comment by Larry Walker, Jr., 9/22/2010:

You we're (are) definitely right!

Comment by ff2017, 9/22/2010:

Huh?  I don't see the connection.  It's hard to be prosperous when you have a lot of debt and unfunded liabilities, regardless of how tough we are with China (incidently, holders of a significant amount of said debt as you well know).

Comment by Ben Gee, 9/23/2010:

If Krugman is picked to replace Summers, look for a trade war to develop. There will be no winners. If world trade collapse, the world will go into depression, not recession. Beside the US and China, Japan, S Korea, Taiwan that supply factors of production to China will suffer. Countries the supply raw materials and energy to China will suffer. The whole world will plunge into a deep freeze.

Response to this comment by Rdan, 9/23/2010:
And you take then on policy is???

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