Thursday, March 17, 2016

Not Political, Really?

The esteemed Janet Yellen, (she is mostly esteemed by liberals) claims that the Fed's decision not to raise interest rates is not political. In this case, she is right and she is wrong, both at the same time. Only in politics is this possible.

Back when Barack Obama took office in the White House, he promised to restore the economy. If he had done nothing, the economy would have restored itself. But that is not Mr. Obama's style. He had to tamper. And as often happens, he did the wrong things.

So the Fed, in order to protect Mr. Obama, started quantitative easing (printing tons of new money), and lowering interest rates in hopes that it would stimulate the economy. It didn't. What it did do is stimulate the stock market and make the richest two percent even richer.

The watchword from the left side of the media was, "The economy is doing great. Just look at the stock market". Most knew better, but they protected their idol.

As interest rates moved lower and the economy didn't recover, the Fed found themselves in uncharted territory. It hurt the middle class and the elderly because bank interest rates sank below sea level. But that was OK as the two percenters were doing great.

Now Ms. Yellen allows as to how they can't raise interest rates because they must protect the economy, but it is not political. The have a large vicious animal by the tail and they dare not let go. In that sense, it is non-political.

But it also keeps the legs under the two percenters who contribute heavily to left wing causes and candidates. Now that is political.

The administration and the Fed are locked into a "Danse Macabre". If either one misses a step the results could be cataclysmic. The government, including the Fed, has been foolishly adventuresome with economic policy. I suspect a very bumpy road ahead.

1 comment:

  1. Too true. If the Fed lets go, the inflation that the Fed created by printing about $4T out of thin air, which Janet Yellen doesn't believe in, will crash down on us like a tidal wave. It's going to be bad.