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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.


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