Salient to Investors:

The Fed, ECB, and BoJ responded to economic shocks by casting off institutional dogma and broadening their missions. Adam Posen at the Peterson Institute for Intl Economics said unconventional policy will have to become conventional, as central banks act on a wide range of assets and directly in credit markets. Michael Gapen at Barclays cites a 60-day period in which Bernanke turned the Fed on its head and started thinking in an extremely unconventional world.

Greenspan said bold action by a central bank looks easier than it is. and there is an acute bias to staying with short-term policy which limits the range of action.

Sweden’s Riksbank, a pioneer of central bank innovation has lately struggled with providing more stimulus out of concern it might inflate a credit bubble. Robert Bergqvist at SEB says he has never seen as much criticism against the Riksbank, and the market believes the central bank will be unsuccessful in getting inflation back to 2 percent.

Hiromichi Shirakawa at Credit Suisse said Shirakawa was convinced that deflation stemmed from weak demand and external forces, not monetary policy, whereas Kuroda sees monetary policy as the way to get out of deflation.

John Ryding at RDQ Economics said Yellen is absolutely qualified as a macroeconomist dealing with monetary policy issues, but in terms of broader issues of flexibility in financial crisis, Larry Summers more than has the edge.

Summers’s record suggests he wouldn’t hesitate to engage the White House, Congress or the Treasury in policies as he needed them.

Julia Coronado at BNP Paribas said both Summers and Yellen are great academic economists, while Yellen believes deeply in the mission of the Fed and its independence.

Michael Bordo at Rutgers University said reputation comes from being credible for a long time, and in crisis periods, the essence of central banking is to act decisively and boldly.

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