About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Friday, September 14, 2012

Obama Is In The Catbird Seat

On March 2 of this year I posted this: Events May Determine Obama's Fate, an article which outlined several possible events that could tip the coming Presidential election either to Obama or to Romney.

First on my list of events that would favor Obama is "A Well-Timed QE3." Yesterday, Ben Bernanke announced that the Fed would begin buying $85-billion worth of debt every month until further notice beginning today.

This is bad news for America, but good news for the President. Anyone who believes the Fed operates independent of the administration and of politics is a fool. Whether this infusion of new money into the financial system is "well-timed" is yet to be determined. I had predicted a June QE3.

Yesterday, the stock market exploded upward at the news. Expect the administration to announce the economy has rebounded. In the next two months, expect the media to publish many stories about new economic activity in the private sector which will generate new jobs. Expect the CEO's of large corporations to announce new plans for expansion and/or to cancel planned retrenchment activities.

Of course, the timing of this QE3 will prohibit any of this propaganda from being verified by official government statistics. Perhaps that's why it happened now rather than in June.

Another advantage of doing QE3 now is that its primary negative effect -- a surge in price inflation -- will not be noticed by consumers until after the election. The dollar will eventually fall against rival currencies, but rival governments are sure to print their currencies as well, thus mitigating the dollar's fall in value against them. Any action by the Chinese, Russians or others interested in ending the dollar's reign as the world's reserve currency would also occur after the election.

By the way, the only remaining "event" on my list that could benefit the President is "A Well-Timed National Emergency." This event is still possible should QE3 disappoint the President's reelection campaign by not exhibiting the expected effects -- or by exhibiting unexpected adverse effects. The possibilities are endless. War in the Middle East is always on the table. Another financial "crisis" can always be manufactured. And, of course, urban violence of one sort or another may flare up at just the right moment. Coincidentally, ABC News reported today that the "FBI Warns of Violence in America Over Anti-Islamic Movie."

Stay tuned.

By the way, the events I outlined that could benefit Romney seem unlikely to occur prior to the election. Although economic activity is still stagnant, Obama and the media are effectively papering over the bad news that too many Americans are sick and tired of hearing. There seems no chance in hell that birther issues or Obama's college records will injure him. The truth about Bin Laden's death is trickling out but there are no bombshells. Fast and Furious has been defused. The Solyndra story has no legs.

The bottom line is Obama is perched in the driver's seat -- or should I say the catbird seat -- and Romney can do nothing about it except spit into the wind. 

The advantages of incumbency and a sympathetic media cannot be overestimated.


John Galt said...

I have a somewhat
more favorable analysis on the two issues you fear will favor Obama's
reelection - Bernanke's Q3 reelection attempt and a middle East conflict.

On the former, I point out in my piece of
today that there will be a perverse effect in his attempt to juice-up the
monetary printing presses because even though it will undoubtedly favor the
stock market it will also increase commodity and energy prices - meaning food
and gasoline prices.(we are already seeing that since yesterday).

On the later, an attack of Israel will
shut temporarily the straight of Hormuz and will shut up oil prices to $150 or
more per barrel, with home prices of up to $8-10 per gallon. That by itself
will defeat Obama..

Sherman Broder said...

I hope you're right, John. Obviously, I'm thinking that the two month time frame is not quite long enough for us to see the price rise effects you're talking about.

LD Jackson said...

Your words are almost prophetic, Sherman. I really hope you are wrong.

Could I borrow this for your first post on Political Realities? I think it would be a good fit. If so, can you email me a short bio to place in your author's box under the post?

Anonymous said...

Why would CEOs announce new projects based on QE? The first rounds were ineffective. Also any attempt to talk up the economy will indeed clash with economic reality. All the economic data will continue to be bad even if QE worked as it takes monetary policy up to 12 months to work.