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The Fed is Engineering Obama’s Re-Election CampaignGary Dorsch Mitt Romney has just rolled up back to back victories in the Nevada and Florida primaries, and his path to the Republican nomination looks to be inevitable. Republicans are mostly basing their voting decisions upon opinion polls showing Romney has the best chance of defeating President Barack Obama in the Nov 6th presidential election. According to the latest Gallup poll, both Obama and Romney have equal support of 48% of the US-electorate, and if correct, more than a billion dollars worth of campaign and PAC ads will swamp the media outlets, in order to try an influence the decisions of less than 5% of undecided voters. In his standard stump speech, Romney charges Obama with peddling for votes by spending taxpayer dollars in order to support his re-election. “Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society,” Romney tells his supporters. Indeed, direct government payments to individuals shot up by almost $600-billion, a +32% increase, since the start of the Obama administration in 2009. A record 49% of Americans live in a household where someone receives at least one type of government subsidy, such as Medicare, food stamps, hosing subsidies, unemployment insurance, school lunch, veterans’ benefits, etc. And 63% of all federal spending this year will consist of checks written to individuals for which the government receives nothing in return, the White House estimates. That’s up from 46% in 1975 and 18% in 1940. At the same time, about half of Americans pay no federal income tax at all. While the Republicans rail against the burgeoning welfare society, they also support corporate welfare for the oil industry, and tens of billions in subsidies for America’s Agricultural farm factories. Americans are facing tough times. Millions are still out of work. Wages remain stagnant, while health care costs, tuition, and other household cost continue to rise. Many homeowners owe more for their houses than they are worth. Yet the income of the wealthiest 1% of Americans has risen dramatically over the last decade, and now equal 25% of the entire national income. Still, the federal government lavishes the top-1% with billions of dollars in giveaways and tax breaks. Meanwhile 50% of US-workers earned less than $26,364 last year, reflecting a growing income gap between America’s rich and poor. Undoubtedly, there will be plenty of mudslinging fired from both sides, with political spin artists trying to brainwash the public’s view of the state of the economy. “This president’s misguided policies have made these tough times last longer,” Romney said to his Nevada supporters on Feb 5th. “If elected president, my priority will be worrying about your job, not saving my own,” he added. For his part, Obama told the Democratic Caucus on January 27th that their votes for the $787-billion economic stimulus package prevented a second Great Depression, and enabled the progress made since the financial crisis of 2008 and 2009. “Over the last 22-months we’ve seen 3-million jobs created, - and more new factory jobs since the 1990′s. A lot οf that is because of tough decisions yου took,” said Obama.
Mitt Romney is now starting to aim most of his fire on President Obama, instead of attacking his Republican rivals. However, Romney’s Road to the White House faces a very big roadblock, - the Federal Reserve. The highly secretive central bank is working around the clock in order to help Mr Obama get re-elected, and the fruits of its labor are just beginning to sprout in the political arena. The Fed has engineered an improbable recovery rally in the stock market that has lifted the Dow Jones Industrials to its highest closing level since May 2008, - back to the time before Lehman Brothers collapsed. The Nasdaq, dominated by technology stocks, has rebounded to the 2905-level, its highest close in 11-years, led by juggernaut Apple Inc. Despite all of the turmoil in the stock markets over the past five-years, when retail investors withdrew $465-billion of their savings out of stock mutual funds, Fed chief Ben “Bubbles” Bernanke proved that the Fed could rig the stock market, - and engineer an economic recovery by printing vast quantities of money, and keeping interest rates locked at historically low levels. Behind the scenes, the Fed funneled trillions in loans to Wall Street bankers, arranged currency swaps with other central banks, and through in agents, intervened directly in the futures markets, in order to keep the stock market’s recovery rally intact. One of the Fed’s favorite tools used to pump-up the stock market is “open mouth” operations, in order to influence trader behavior and market psychology. The Fed broadcasts a constant barrage of hints to the financial media, that it could unleash another tsunami of “quantitative easing” (QE), at a moments’ notice. By flooding the markets with ultra-cheap liquidity, the Fed whets the appetite of risk takers, and starts an orgy of speculation in the markets and creates asset bubbles. In turn, a steadily rising stock market is boosting the odds of Obama’s winning a second term. Mirroring the steady climb of the Dow Jones Industrials, online bettors at Inntrade.com, now give Obama a 57% chance of getting re-elected. That’s up from 46.5% odds of winning on October 4th, when the Dow was plunging in a downward spiral to the 10,500-level. Thanks to massive intervention in the futures market, the Fed put a brutal squeeze on short sellers, and engineered a stunning +375-point rally in the Dow Industrials in the final 45-minutes of trading on October 4th. The Fed turned back the threat of a Bear market, and in hindsight, ignited the third leg up for the Bull market that began in March 2009. The Fed has proved its ability to manhandle the Treasury bond and stock markets, and few traders are willing to fight the Bernanke Fed these days.
Incumbent presidents are always hard to beat. The powers of the presidency go a long way. Not since 1971 and early in the 1972 election year, when Nixon pressured Arthur Burns, then the Fed chairman, to expand the money supply with the aim of reducing unemployment, and boosting the economy in order to insure Nixon’s re-election, have traders seen such massive political pressure on the Fed to intervene in the markets in order to help a president to get re-elected. In order to constrain an outbreak of inflation, Nixon imposed wage and price controls, and won the election in a landslide. Underneath the surface, the Fed was steadily increasing the high octane MZM Money supply, throughout the turbulent days of 2011. The size of the MZM Money supply has increased by $1-trillion from a year ago, to a record $10.75-trillion today. At the same time, Bernanke has gone far beyond the markets wildest imaginations, by pledging to keep borrowing costs for banks and hedge funds locked at zero-percent for the next three years. The Fed said that it aims to continue with its ultra-easy money policy until the US-jobless rate falls towards 6-percent from 8.3% today, and is willing to tolerate a higher inflation rate. Only one US-president since World War II -- Ronald Reagan -- has been re-elected with a jobless rate above 6-percent. Reagan won a second term in 1984 with an unemployment rate of 7.2% on Election Day. Reagan won in a landslide since the jobless rate had fallen almost 3% in the previous 18-months, and a sizeable majority of US-voters thought the economy was moving in the right direction. By contrast, under Mr Obama the unemployment rate has dropped by 1.7% in the last 26 months – from a high of 10% in 2009. The Fed aims to keep the ultra-easy conditions in place that would enable the jobless rate to tumble to 7% by Election Day, even at the expense of faster inflation, to help Obama win a second term.
It’s starting to look as if the US-economy is on a steady, if unspectacular, upward trend. Considering how beaten down the economy has been, - it’s possible that Obama might find himself in the sweet spot of a virtuous cycle of a business recovery, in the months ahead. Republicans will claim that Obama’s policies deserve none of the credit. “Mr. President, we welcome any good news on the jobs front,” Romney said. “But it is thanks to the innovation of the America people and the private sector and not to you, Mr. President,” he added. However, presidents tend to get the blame for everything bad that happens on their watch and receive credit for everything good. Obama’s chances for re-election are starting to look much better, after Labor department apparatchiks reported that US-employers added 243,000 workers to their payrolls in January, the biggest gain in nine months. The US-economy has created about a half-million jobs in the past two months, government bureaucrats say, and the unemployment rate dropped to 8.3% in January from 8.5% in December. Already, 2012 is looking like a winner for automakers -- just one month into the year. Another hopeful sign for the US-economy’s future, - sales of new cars and trucks rose +11% in January to 913,287, thanks to low borrowing costs and better loan availability. The sales pace accelerated to its highest level since the Cash for Clunkers program in August 2009. Chrysler had its best January in four years. If sales stay at January’s pace, they would reach 14.2-million, up from 12.8-million in 2011. While that’s below the 2000 peak of 17.3-million, it’s better than the 10.4-million trough hit in 2009. One reason car sales are improving is that buyers need to replace aging vehicles. The average age of a vehicle in the US is a record 10.8-years, nearly two years older than a decade ago. The bad news is that US-motorists are paying an average $31,300 for a new car, compared with $28,000 five years ago. To read the rest of this article, please click on the hyperlink located below: http://www.sirchartsalot.com/article.php?id=161 ### Gary Dorsch 321gold Ltd |
