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Obama and Bernanke engaged in destructive, economic magic tricks to save their jobs?

By: RealQuiet (Diary)  |  September 26th, 2012 at 01:28 AM  | 

RESIZE: AAA

Via Battleground Watch:

Stanford PhD candidate in Political Science Lucas Puente tweeted the below graph out just now.  The left Y-axis is the S&P 500 and the right Y-axis is the Intrade % chance Obama gets re-elected.  Superimposed in the graph are the two major events where central bankers (the US Federal Reserve and the European Central Bank) pumped liquidity into the market.  Basically the major US and European Central Banks are artificially inflating the asset prices in securities markets like the S&P 500.  Although they are doing this to ease credit crunches globally and hopefully stimulate economic growth it has the “coincidental” benefit of creating a “wealth effect” among US voters whose 401ks and investments are seeing a precipitous rise in value thanks to these central bank actions.  Suddenly pocketbook issues don’t weight as heavily on American’s minds as they did a month ago and voters view on Obama’s handling on the economy improves along with it?   Hmmmmmmm

Of course, you’re seeing the impact at the grocery store and gas station even more now.  Making 401(k)s and other investments look more than what they are really worth is a pretty dastardly attempt to fool the American public.  Screwing the working masses by decreasing their cash even further on their monthly budgets to save your jobs is the epitome of selfish, criminal, Machiavellianism.

Charles Plosser poured some cold water in a dissenting statement that brought the markets back to reality.  No doubt he got an angry call from Bernanke and from people in Chicago.

COMMENTS

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  • Dave_A

    Once again…

    If you are for a ‘strong dollar’ you are betting against the economic interests of the majority of the population.

    It’s not about government debt, it’s about personal debt.

    The US population is so loaded down with debt, that all economic policy must favor debtors – any anti-debt/anti-credit monetary policy will crush the private sector before it trims a penny of government spending.

    • tjphilly

      What?? It’s ALL about gov’t debt. Hyper-inflate the dollar, thereby weakening it and you can now pay off that 16 tril with a mere 8 tril in lower valued dollars. As the goofy guy with the bow-tie says for the copier company..”It’s really not that complicated”.

      • Dave_A

        Actually, it’s not at all about government debt.

        It’s about the collective personal and corporate debt… Which dwarfs the government’s…

        In a society where no one saves, inflation is mandatory unless you want a depression. There’s no room in-between.

        Also, the government has alot more breathing room, so they’re going to be the last ones broken by deflation, if anyone’s stupid enough to adopt tight-money policy…. It would strangle the citizenry before the government had to cut a single program.

        • bbjaylive

          Dave_A, I don’t understand how you manage to stay on this site, talking about what most of RS thinks is Keynesian economics, when it’s actually Monetarism.

          But then you talk about private debt, which NO conservative economist seems to care to talk about and I certainly don’t think Milton Friedman thought that it was that important, especially in the GD.

          I have to ask, as well as monetarism, have you looked at the work of Steve Keen and MMT? They actually reject the money multiplier theory, which I know you espouse. In fact it is fascinating that you completely dismiss the government debt, a position I take too, actually I think there should be bigger deficits, and via MMT, I see QE as nothing more than an asset swap which doesn’t increase the money supply and won’t do anything for the economy. But I do advocate fiscal stimulus to have bigger deficits whether through a FICA suspension and/or investing in infrastructure and scientific research, which I’m pretty sure you don’t advocate.

          I just don’t get how you get away with it, without a warning from the mods. There are many threads about how the US is bankrupt or on the road to Greece. I know that isn’t true and I’m pretty sure you know that isn’t true either.

          Does monetarism REALLY mean that you only cut spending when the economy is back to full recovery. Wouldn’t that be in line with the Keynesian position?

  • Dave_A

    BTW, the notion that Bernake wants to get Obama re-elected is absurd.

    The man is simply doing his job.

    The correlation between a better economy and our chances of losing, is an unfortunate fact of incumbency.

  • tjphilly

    Of course the fact that Mitt would fire him on day 1 has nothing to do with it.

    • Dave_A

      No, Mitt will not.

      Mitt understands finance well enough to NOT do something that stupid… Just like Bush kept Greenspan, Romney will keep Bush’s FED Chief…

  • commonsenseobserver

    I think I understand your point. That’s why there are two important things to point out.
    1) Because of cheap money, the rising cost of living will erode the value of savings and investments.
    2) Obama wants to raise taxes on saving and investment, whether it’s on capital gains or dead people’s estates. Romney wants to help middle-class families to keep more of what they earn, encouraging them to save, invest, and enjoy.

    • Dave_A

      People themselves don’t want to save, and investments are generally helped by inflation.

      During the best of times, under Bush, the savings rate fell below 2%. It barely reaches 5% now…

      People want to store their wealth in property, not money – which means that if you increase the value of money, you hurt the wealth of everyone who has stored their worth in property.

      If you go with ‘hard money’ then people get to keep LESS of what they have.

      • commonsenseobserver

        My second point holds true.
        Under George Bush, we didn’t have “hard money” either. We’ve not had hard money since Volcker was at the Fed.

        • Dave_A

          I would hope your second point holds true, and Romney does not listen to the Austrian wing of the GOP.

          And yes, you’re right about Volcker… Of course we haven’t had deleterious levels of inflation since Carter was President – and still don’t have it – which is what makes Volcker’s policies right for his time and wrong for ours.

          Further, for all Volcker did to get us out of the Carter mess, he’s abjectly wrong about bank regulation.

          The repeal of Glass Stegall – allowing banks to mix banking and investing – is one of the major reasons we didn’t have a depression… Bill Clinton and Phil Gramm share credit for that one…

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