By announcing another massive economic stimulus program just weeks before the election, Federal Reserve Chairman Ben Bernanke delivered a vicious sucker-punch to the Romney campaign and may have rigged the election in favor of Obama. But his actions will likely have disastrous consequences for the American public after the election is over.
So far, Romney has run a rather lackluster campaign, refusing to attack Barack Obama’s character and refusing to attack Obama’s radical past and associations with the likes of Jeremiah Wright and Bill Ayers. And Obama’s attempts to paint Romney as a heartless, greedy rich man have failed, as it has become increasingly clear that Romney is a genuinely caring, patriotic, and decent man.
Too decent, perhaps, to understand that his “Goody Two-Shoes” approach may not work against the cutthroat crew of Chicago pols in Washington. Romney, speaking honestly — but, perhaps, stupidly — announced that if elected President, he would not reappoint Bernanke as Chairman of the Fed when Bernanke’s term expires in 2014. Thus, Romney not only gave Bernanke a fixed date upon which he would become unemployed, he also gave Bernanke plenty of time and motivation to leverage the enormous power of the Fed against his campaign.
Bernanke’s gambit is designed almost entirely to undercut the main pillar of the Romney campaign: that the economy remains moribund and that Obama is unqualified and incompetent to fix it. On Thursday, Bernanke announced a third round of “quantitative easing,” which is simply an Orwellian euphemism for “printing money” — and the Fed has already printed about $2 trillion of it since 2009.
The Fed will also purchase mortgage-backed securities and Treasury debt to the tune of $40 billion per month – indefinitely – and keep interest rates at virtually zero until 2015.
The upshot of these policies is to cause a temporary illusion of economic revitalization just prior to the election. The Fed’s actions have already goosed the Dow Jones by over 200 points; the purchase of Treasury debt will continue to allow the government to maintain another year of $1-trillion-plus deficit spending; and the purchase of mortgage-backed securities may cause a temporary blip in housing starts by October.
Obama – and a fawning media 100% in his hip pocket – will point to headlines about a rising stock market and increased housing starts as proof that the private sector is “doing fine” and claim that he deserves another four years of economic stewardship. October 401(k) reports will show a rise in stock-based portfolios, and retirees and conservative investors making zero on CDs and savings accounts will be prompted to vote for the party that promises them more government benefits. Advantage: Obama.
The illusion will collapse almost immediately after the election. Capital gains taxes are scheduled to rise in January, making a mass exodus from the artificially-inflated stock market a possibility in December. The “Bush tax cuts” are also set to expire, and the overall half-trillion tax hike in 2013 will throw the economy back into recession while the country is $16 trillion-and-counting in debt. The Fed’s $40 billion-per-month of “quantitative easing” could kick off inflation, led by rising prices in the energy sector — exacerbated in no small part by Obama’s unwillingness to approve the Keystone pipeline, approve domestic drilling, or impose order on the Middle East.
But Obama will have his second term to finish “transforming” America, and Bernanke will get his reappointment.
The country will be in very, very deep trouble.
They’ll just blame Bush.