An Urban's Rural View

Equity investors hate uncertainty, so it made sense that stocks soared when Larry Summers took himself out of the running for the chairmanship of the Federal Reserve Board.

Rising interest rates torment equity investors as much as they do farmers, and Summers' views on the interest-rate-related decisions facing the Fed were unknown. In the absence of information the stock market had assumed the worst -- that as chairman Summers would push to wind down the Fed's massive bond purchases, which have kept interest rates low. Summers' withdrawal ended the uncertainty and buoyed hopes that the job would go to a known advocate of the purchases, Fed Vice Chair Janet Yellen.

Unsurprisingly, since we're talking about the stock market, the thread between this conjecture about Summer's inclinations and reality is tenuous. While he hadn't spoken out, there's reason to doubt he and Yellen differ much on the issue. His record suggests that for him, as for Yellen, unemployment would be as big a concern as inflation and his bias would be for stimulative policies. In short, he's a Keynesian and a Democrat.

Which makes it all the more interesting that despite being one of the most capable economists of his generation and President Obama's favorite for the job, he was forced out of the race by senatorial Democrats. The lack of votes for him in a senate controlled by Democrats doomed him.

It was not, to be sure, his views on bond purchases that turned the Dems against him. It was his support, while serving as Bill Clinton's treasury secretary, for financial deregulation. It was his ties to Wall Street. It was his supposed disrespect for women.

In years past Senate Democrats would have swallowed hard and confirmed him anyway, whether out of friendship with the president and the majority leader, fear of them or feelings of party solidarity. Their willingness to defy Barack Obama and Harry Reid this time suggests a lack of all three.

It's in this breakdown of Democratic Party discipline that the real significance of Summers' downfall lies. For years, it's been the Republican Party that seemed in disarray, its relatively centrist leaders unable to deliver its most fervent ideologues. We've seen this again and again in the GOP-controlled House's farm-bill bungling.

Do the Democrats now have similar issues? The anti-Summers rebellion and the failure of congressional Democrats to support the Syria strike suggest so. Perhaps we've returned to the days when Will Rogers could say, "I am not a member of an organized party. I'm a Democrat."

Or perhaps these incidents are aberrations. Maybe it's too early to judge. Certainly the problems seem more pervasive on the other side of the aisle.

But both parties have fewer centrists these days and those they have are under pressure from the parties' fringes. Increasingly their biggest fear is a primary-election challenger claiming greater ideological purity.

"Things fall apart," the poet William Butler Yeats wrote. "The center cannot hold." In American politics, the centrifugal pressure strengthens with each passing day.

Want to know more about the Federal Reserve policies that will determine future interest rate movements? Sign up for the Ag Summit, December 9-11 in Chicago. Richard Fisher, the president of the Dallas Federal Reserve, is our leadoff speaker.

The theme of this year's event, put on by DTN/The Progressive Farmer, is Ag's New Playbook: Tactics to Tame Volatility. Details and registration at http://tiny.cc/…

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