It’s too late for the Federal Reserve to goose the economy upward in order to give Obama an edge in the November election.
It turns out that the FED has not intervened often in the past to do anything to affect the outcome of a Presidential election.
Arthur Burns probably did in 1972 to help Nixon. But that was an exception. His reputation suffered.
It turns out that playing politics in an election year taints the reputation of the Chairman of the Board of Governors. The FED is supposed to be above politics. That’s what all the civics textbooks say. That’s what all the economics textbooks say, too.
The FED really is above politics. This is another way of saying that the FED can and does thumb its noise at Congress, the President, and the voters.
In no other area of life do textbooks openly praise an institution for being above politics. While the textbooks do not say what this means — that the FED runs the economy for the sake of the biggest banks, and the government does nothing about this — this really is what it means.
Recent studies reveal that there has not been a statistically verifiable connection between FED policies in the year prior to a Presidential election. The FED does what it wants. The incumbent President fends for himself.
This surely was true of Jimmy Carter, who hit a brick wall built by Paul Volcker’s tighter-money policies, beginning in late 1979. Carter faced a recession in 1980.
This year, the FED has been in deflation mode. It brought down the adjusted monetary base, which is the key indicator of Federal Reserve policy. You can monitor this on my Website, www.GaryNorth.com, in the department, Federal Reserve Charts. Or just type Federal Reserve charts into Google and click. This will take you to my site’s department. You can monitor the adjusted monetary base there.
The reason why the consumer price index fell in May is because of Federal Reserve policy February to May. This policy is slowing the economy. It is the right policy.
The FED has begun to reverse it in recent weeks, but this will not be in time to affect the outcome in November. The lag time is longer than five months.
On the disconnect between FED policy and Presidential elections, click the link.