As you know, this month marks the 100th anniversary of the Federal Reserve. Today's update which is more of a no-holds-barred bashing, is from one of our all-time favorite writers, Bill Bonner.

Bill Bonner is the founder of Agora Inc. He also writes the irreverent daily e-letter Diary of a Rogue Economist, which he describes as a "heart-of-darkness journey into the twisted world of finance and economics."

Bill has been a steadfast defender of sound money and free markets during his 30 years in the financial publishing business. In Bill's article below, he eviscerates the mainstream media's "top three" candidates to replace Ben Bernanke as chairman of the Federal Reserve and offers us an unlikely alternative… – Wendy Bidwell

A Dark Horse Candidate to Replace Ben Bernanke

By Bill Bonner

Thursday, September 12, 2013

Cometh the hour, cometh the man.

Or the woman…

Ben Bernanke is leaving the Fed at the end of the year. He must shuffle off to some post where he will do less damage. The leading candidates to replace him are committed to continuing his policies, which consist of providing as much credit rope as you need to hang yourself.

People come to think what they need to think when they need to think it. When they approach the "end of their rope" phase of a financial catastrophe they need to believe that they have no choice but to play out a little more line.

Doubts give way to desperate faith. Reflection is abandoned for action. All of the announced candidates for Bernanke's job – Yellen, Summers and Kohn – are believers.

Of course, they couldn't have gotten anywhere near the top job if they doubted that central planning and price controls can work. After all, they're jockeying for the job of planning the entire US economy by controlling its most important price: the price of credit.

As to Yellen, Summers and Kohn, we would reject them all. Clearly, none has any idea what is coming his way or he wouldn't want the job. But this is a minority opinion. So let's keep an open mind and examine each of these candidates separately.

The Diplomat

Janet Yellen has three things going for her. According to Alan Blinder's recent piece in The Wall Street Journal, she (1) is a woman, (2) is a good diplomat and (3) has been around the Fed since 1990 and nothing bad has happened.

We offer a trio of replies. (1) There are roughly 120 million adult women in the US; womanhood is not a qualification for the job. (2) Diplomacy is irrelevant. (3) Having been around since 1990 is a disqualifier. Yellen was at the Fed as US total debt rose from about 230% of GDP to over 350%. If she had had her wits about her, she would have realized that the Fed was enabling a huge credit bubble that would one day burst. Yellen should be passed over.

The Insider

This third argument also disqualifies Don Kohn, a Fed insider for the last 40 years. The Washington Post describes Kohn as "the consummate Fed veteran" and Alan Greenspan's "right-hand man."

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Well, that pretty much eliminates him. When Alan Greenspan took over as Fed chairman, the US had a statutory debt limit of $2.8 trillion. Today, there is $16.8 trillion of US government debt – much of it accumulated during the 19 years while Alan Greenspan was in the chairman's seat, with Don Kohn on his right side.

When Greenspan took his post at the Fed a total of about $250 billion of US debt was in foreign hands; today it is $5.6 trillion. Greenspan, with Kohn as his sidekick, blew up the debt that later blew up the US economy.

Then, after Greenspan left the Fed in 2006, Kohn kept at it. From The Washington Post: "He was Bernanke's No. 2 during the financial crisis." As his oft-repeated public comments make clear, Greenspan had no idea what was going on. Evidently, neither did Kohn.

The Washington Post also says he has "credentials as a crisis manager." But the Fed reacted to the crisis like a crowd in a nightclub fire: It panicked.

Instead of allowing a credit crisis to smoke out the weakest debtors, it rushed in to save them all – offering them all more debt on better terms. Bankers who had made the biggest errors were left unpunished. Instead, they were rewarded with lower, Fed-guaranteed borrowing rates.

"You boys got yourself into a little trouble," said the Fed cop on the beat. "But here's a new Corvette… and a bottle of Jim Beam. Go have a good time."

The Genius

As to Larry Summers, what can we say that isn't already public record? That he blew up Harvard's endowment is well documented. That he is "brilliant" is also beyond dispute. But that is the problem. Even Summers believes it.

"Brilliance" is defined in a description of Summers that also appears in The Washington Post:

You can bring him up to speed on anything in 15 minutes. And if you can be interesting enough to keep his attention for half an hour, he will start throwing out hypotheses and what-ifs and suggesting connections you would never have thought of.

The brilliant man has a brain that spots "connections." These lead to "hypotheses" – visions of the future as it might be. As he becomes more brilliant, even God himself is dazzled. But in contrast to the deity, Summers is at an existential disadvantage: He has no idea what will happen next.

The wise man has an advantage over the brilliant man. Socrates himself pointed it out. Brilliant men think they know something. Socrates knew his limitations. He knew he know nothing.

Larry Summers Is No Socrates…

Let's be frank. The worst of these candidates is Larry Summers. That is why he is most likely to get the post.

Summers is so often described as "brilliant" that we are beginning to wonder about the word itself. Perhaps it's coming to mean something else.

Maybe "brilliant" is coming to mean "not quite bright," which would better describe Larry Summers. He is the Tom Friedman of the financial world – always sure of himself, always with an answer to every problem… and always mildly retarded.

The real problem with Summers is that he lacks modesty. He is so sure he knows what is going on he leaves no margin for error. Every problem has a solution, he thinks. And he has it!

Cast Your Vote for Bernanke's Replacement…

Normally, folks like you and me get no vote in the selection of Fed chairman. Not surprising, even though we're overwhelmingly affected by their monkeying with the economy.

But that ends today. Because you can vote for Helicopter Ben's replacement in this poll. Hurry up – because Obama could make an announcement on the next Fed chairman candidate any day now.

Hopefully, by using humor, we can make an important point and spread an even more important message. So go here to vote now.

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The Project to Restore America

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