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Bernanke Won’t Come to Obama’s Rescue

Written by Gary North on June 19, 2012

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.

Continue Reading on www.marketwatch.com

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10 thoughts on “Bernanke Won’t Come to Obama’s Rescue

  1. From what I have read is that the Fed is going to print up more money soon. Can we say if they do there will be hyper inflation?

  2. No. The FED tripled the monetary base from 2007 to 2008, and there has been little inflation as a result. That's because banks have been keeping all that new money on reserve with the Fed, instead of loaning it into circulation.

  3. Bill McCroskey says:

    The FED is can't do anything to create jobs or anything else to 'fix' the economy. Interest rates just barely above 0 percent ….what's next … "if you'll borrow money from us (FED) we'll pay you ??"
    Rules, regulations, permits, then more permits more red tape …. why would any one want to start a business (and thus create jobs) in this country ??

  4. "playing politics in an election year taints the reputation of the Chairman of the Board of Governors" Please tell me it "taint" so! Are they not automatically "tainted"? After all we are talking the FEDs.

  5. surely it taint so?

  6. You've heard of professional painters? The FED is made up of professional Tainters, Gary.

  7. No inflation? Have you not been buying anything in last few years? You are right that the banks have been hoarding money but that has only limited hyper-inflation.

  8. AD Roberts says:

    Gary you are dreaming. Bernanke is going to do something. He is in it too thick with our Muslim president. And as to the comsumer price index falling, I like to know how. Oh, that's right. The took the things it takes to live OUT OF THE INDEX. Things like fuel and food.

    The whole thing has been so badly juggled and twisted that none of it makes any sense. And people continue to put incumbants back in office.

    Forget the Harvard lawyers. Forget all lawyers. We need more plumbers and people who actually know how to work for a living.

  9. AD Roberts says:

    The inflation he is talking about is the OFFICIAL price index. That is the one that excludes food and energy since they are TOO VOLATILE. That is politician speak for "I don't want to have to answer for the real inflation." It also means that a great many people who income and wages are tied to the index are shafted. That would include most retirees.

    But Obama will continue to claim that the index went down. He would even cut social security if he could. All the while, the cost of food and gasoline will continue to go up. And electricity will go up as a result of Obama's EPA regulations on coal fired power plants. It still won't be included in the index. So it is no big deal to him.

    By the way, he did do something to drive the cost of gas down for a few short months. But the long term will be a hefty price increase that will not stop, JUST AFTER THE ELECTIONS. What did he do? He slapped the oil producers in the face with changes in the petrodollar.

  10. Texas Chris says:

    The plight of the FED is the plight of Man.

    God created Man, and man thumbs his nose at God more often than not, trying to control a reality he cannot comprehend.

    Congress created the FED, and the FED thumbs its nose at Congress, trying to control an economy it cannot understand.