25 August 2012

The Fed Weighs Who Should Win in November

In an above-the-fold article called “Fed Moving Closer to Action” in Thursday’s Wall Street Journal, the authors state, with a blandness fitting the topic:

Democrats have urged the central bank to take steps to bolster growth, pointing to high unemployment, but Republicans have urged caution, pointing to the risk of inflation and a weaker dollar.[1]

Does anybody believe that these are really the motivations behind the two political parties’ exhortations for Fed action (or inaction)? It seems obvious to me that it is all about the election in November. The Democrats want the Fed to do something that will make the economy look good in the short term because that will help President Obama win, and the Republicans want the Fed to stand still so that the economy continues to be just as it is--which is to say, lousy--thus working against Mr. Obama in November. It's as simple as that.

Of course, any action the Federal Reserve takes (short of dissolving itself, abolishing fiat currency, and apologizing for a century of grand theft unprecedented in the civilized world) is harmful to the economy in the long run. But the central bank can artificially prop up certain benchmarks that can be measured to make it appear that the economy is doing well. The Fed can, in effect, clip little pieces off of all the coins in our pockets without our noticing it, then generously distribute the loot to a population in ways calculated to make us feel (temporarily) just a little bit wealthier. 

And it can do this just in time for the election.

I realize that this observation--that the Board of Governors of the Federal Reserve has significant control over elections--is stating the obvious, but it is worth pointing out from time to time. For one thing, it highlights the perils of voting according to short-term, personal concerns (such as whether you are currently employed, or in debt, or feel well-off) instead of to long-term, fully integrated principles. Also, for those interested in the “inside baseball” of practical politics (I am not one), the Fed will reveal by their actions in the coming weeks who they want to win the election.


[1] Jon Hilsenrath and Kristina Peterson, “Fed Moving Closer to Action,” The Wall Street Journal, August 23, 2012, p. A4.

No comments: