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Barack Obama Has Ben Bernanke by the Balls

Posted by Larry Doyle on March 16, 2010 3:32 PM |

Is the White House now in charge of both fiscal and monetary policy?

The Federal Reserve just released its March statement confirming no change in its monetary policy and little change in economic outlook. A brief overview of the Fed’s statement includes the following:

>> Maintains the Fed Funds range at 0-.25% for an extended period.

>> The quantitative easing program used to purchase $1.25 trillion in mortgage-backed securities and $125 billion in federal agency debt is nearing completion at the end of this month. The Fed will monitor economic conditions and employ policy tools as necessary to promote economic recovery and price stability.

>> Economic activity is generally improving. The overall pace of economic recovery is moderate.

>> Labor market is stabilizing, but employers remain reluctant to add to payrolls.

>> Inflation will likely remain subdued given substantial slack in capacity utilization.

Wall Street continues to receive its free lunch while Main Street struggles along. Same drill different day and thus no big deal? Well, in my opinion, there is a very big deal in this Fed release and a statement from the White House earlier today (highlighted in my post, White House Sees Elevated Unemployment for ‘Extended Period’). So, what’s the big deal? Well, let me tell you.

I believe the White House statement and the Fed release were effectively scripted and coordinated. Utilizing the same two key words, those being ‘extended period’, does not happen by chance.  Those very words are a clear cut indication that the White House and Fed are totally coordinated in terms of economic releases, statements, and ultimately monetary policy.

Why is this such a big deal and an enormously negative deal at that? The Fed is supposed to be independent.

I have not thought that the Fed has been independent for a long time. That said, the appearance of an independent Fed is supposed to be important to markets and investors. I would put the wording of the White House statement released on the same day as a Fed release as a definite indication that the Fed is now held captive by the White House.

Barack just let Uncle Ben know that he has him by the balls.

Go ahead and tell me if you think I’m overdoing it. I’ll respond, however, that from this writer’s perspective our monetary policy and Federal Reserve system were seriously cheapened today.

My recommendation . . . sell the dollar.

LD

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  • Pat

    Did Ben’s renomination by Barack come with a price?

    Did Ben sell his soul?

    Did the Chicago way just take over the hallowed halls of the Federal Reserve?

    It does seem oddly coincidental that the ‘extended period’ phrase was utilized by the Council of Economic Advisers the same morning that the Fed was scheduled to release a statement.

    If it was merely coincidental then somebody in the White House should be fired for sheer stupidity.

  • Sunup

    Barack has Bernanke by the balls but we are the ones being screwed.Why are we not screaming louder.

    • Pat

      Dare I say the screaming is muffled by all the duct tape wrapped around the electorate by the major media outlets.

      Let me try……

      OOOOOOOWWWWWWWWWWWWWWWWWWWW ….!!!!!!!!!!

      That hurts..!!!!!!!!

  • WinstonSmith

    With respect for your opinion, I personally feel things are the other way around, so hope it is ok to have a different point of view around here. No doubt people will disagree with me, and that’s fine, we can all have an opinion.

    Bernanke has Obama by the balls IMO.

    The Fed has absolutely no interest in tightening and is fighting overwhelming deflationary forces (hence the unchanged rates). There is a mountain of debt out there just waiting to default, and the Fed knows it.

    The only “improvements” in the economy have been achieved through smoke and mirrors, and the Fed knows it, because they direct the smoke and the mirrors. But the reality is that things are much worse than they appear. The bankers are calling the shots, as they always have. Congress and Executive (whether R or D) play along if they want to have a shot a re-election.

    Obama holds no power over Bernanke. He nominated Bernanke for re-appointment because he was instructed to do so. It was approved by congress for the same reason.

    I agree that the releases were likely jointly scripted, but Obama answers to people higher up than him. That’s why his treasury secretary is from the Fed, and Geitner’s predecessor was from GS. The bankers/Fed have been pulling these strings all along. That’s why we had the TARP.

    The Fed operates with no congressional oversight, no auditing, nothing. They do what they want. Obama has no power over them. What could he possibly do?

    • LD

      Winston,

      Without a doubt, conflicting opinions are not only welcomed but encouraged.

      Why do I disagree? The White House statement this morning is a blatant politicization of the Fed and that is never supposed to happen….even though it does.

      Obama clearly wants to create some inflation in order to monetize some of the debt. Why do we know this? Look who he is nominating to be the number 2 at the Fed? Janet Yellen from the San Francisco Fed. Yelen is a major dove (soft on inflation).

      There are some regional Fed governors, led by Thomas Hoenig of the Kansas City Fed, who very much believe that the Fed should take out the accomodative language of ‘extended period’ from its statement.

      The fact that the WH used that phrase boxed the Fed and clamped down on those regional governors. Watch to see if the WH uses the phrase again.

      I do not disagree that currently the Fed does want to keep rates low but this WH statement is a shot across the Fed’s bow.

      Add it all up and I think Barack is telling Bernanke and the other governors that he will determine when the Fed will take that phrase out of the Fed statements.

      Obama may have cut this deal with Bernanke as part of his agreeing to renominate him for Fed chair.

  • Adam Smith

    Having read this commentary, I just rolled over in my grave.

  • Interesting article….
    Whoever is in control, it certainly pleasing to see they appear to be on the same page, in such an important period in world history. This helps promotes a calmer market place and economy, which exactly what was needed.

    I know here in Australia and many economies around the world, there were some tough decisions made by Govements, with strong fiscal policies. As in most recessions, they spent money in the communities to prevent many of the great economies slipping a deep recession, and at this stage you would have to say its worked.






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