Election aside, we're stuck with Big Ben

No matter who wins the presidency, Federal Reserve policies and players are unlikely to change much, and Bernanke will be with us a while longer. But Wall Street seems to think change is on the way.

By Bill_Fleckenstein Oct 26, 2012 2:00PM
Federal Reserve Chairman Ben Bernanke © Sipa USA/Rex FeaturesI have noticed a great deal of chatter recently about the prospects of how different the Fed might look if Mitt Romney prevails over President Barack Obama. This, to me, seems not well thought out at all, but there is no doubt it is adding to the crosscurrents and uncertainty precipitated by the election and the coming federal budget crunch known as the "fiscal cliff."

 

The thinking seems to be that since Romney doesn't like quantitative easing -- the Fed's efforts to inject money into the economy -- Chairman Ben Bernanke won't be able to take the heat of being easy if the Republican wins.

 

However, I submit that if former Fed Chairman Paul Volcker could take the intense political heat precipitated by his aggressive fiscal tightening in 1980 to '82, then Bernanke could withstand the infinitely easier-to-deal-with flack that being "too easy" (in terms of low interest rates and monetary policy in general) might cause.

 

In short, a very loose monetary policy won't generate any real criticism.

 

It's as if he never left

In any case, Bernanke's term does not expire until 2014. While he obviously could decide to resign early, I can't believe that a man whose whole life has been about chronicling the "fact" that the Depression was caused by the Fed not being easy enough (he is wrong about that) would walk out with time left in his term, especially when (in his mind) the world "needs him most."

 

Thus, we should expect that Bernanke will be the chairman until 2014, regardless of who wins the election.

 

Given all that, in my opinion, the discussion of what Romney might do regarding a new Fed chairman is wasted speculation.

 

Nonetheless, if Romney were to win, the market could trade for a short period as if the Fed were about to become hawkish, even though the premise is ridiculous. That's not just because it is likely that Bernanke will serve out his term but also because the composition of the Fed next year will be particularly dovish.

 

For folks to believe that the Fed is going to get tough if Romney is elected would mean they expect that basically the entire Fed board will change its stripes or walk out, neither of which will happen.

 

The reason I bring this up is because, as I noted above, there seems to be a growing feeling on Wall Street that if Romney wins, various markets will trade as if the Fed were ready to tighten monetary policy, so I wanted to put this on people's radar screens. As I have just described, I don't think there is going to be a tighter Fed as a result of the election, no matter who wins. While I suppose the Fed could be ever-so-slightly less easy, given the fiscal constraints that might come from a Republican administration, the governors could also decide that they need to ease monetary policy to compensate for budget cuts.

 

Heads up for a head fake

So the bottom line is that there is liable to be a what's-the-Fed-going-to-look-like crosscurrent laced with election headline roulette, which will most likely entail the idiotically named risk-off trade.


If that occurs, it will likely present opportunities in a variety of assets (which could be anything, from oil to currencies, depending on the mood of the moment), as it is extraordinarily improbable that the Fed is going to approach anything like "not easy," much less actually tightening. 

45Comments
Oct 28, 2012 1:08AM
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With both of these guys you will get the same monetary policy. Heck they wont even debate it because they are both in love with it. QE infinity here we come. Milk and gasoline 7 dollars a gallon? Oh wait inflation is under control lmfao. The CPI and PPI are rigged have been since they threw out energy and health care etc. Its a house of cards and a bag of tricks and eventually I dont know when its going to stop working and KABOOM! Greenspan and Bernanke are tools for something bigger than the US constitution and part of an evil that has infected our country.
Oct 28, 2012 11:05AM
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Many of these comments are proof that if socialists understood economics, they would not be socialists.

BTW Max Sparticas, EVERYBODY should pay the same fed tax rate, and that includes the roughly 50% of American wage earners who currently pay zero net federal tax.

Romney`s 13% fed tax payment is considerably larger than your 13% payment. Those of us stuck in between that do not desire to continue growing our business are raped with a 35% tax rate……..that is nothing short of criminal, as is the 35% corporate tax rate. Making money LEGALLY is not a crime, nor is it something one should be ashamed of, and those of us who do succeed provide quality employment for fellow Americans. That is what successful business people do when they are left with enough of their hard earned dollars after the bloated socialist leaning government gets done raping us in order to provide their voter base with government cell phones and a myriad other handouts that have nothing to do with survival or to teach self responsibility.
Oct 28, 2012 9:18AM
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I clicked on this because I thought they meant Ben Roethlisberger.
Oct 28, 2012 10:59AM
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How much of Obama and Ben can we pay for??? Millions they have cost the tax payers. No it is trillions!!!! Vot them all out of office. Thanks
Oct 28, 2012 10:37AM
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This is why I cast my vote early last week for Ron Paul. Call it a protest vote, wishful thinking, whatever. It’s my vote. 

What sad commentary of our political process that I had to write him in on my ballot. How can someone with his congressional experience, and who’s ideology is so focused on the leading problem in our economy, not even be listed on the ballot? It just shows how corrupt, manipulated, and lame our political system really is.

I simply can’t vote for a candidate, Republican or Democrat, who chooses to ignore the abuse of our monetary system by Wall Street and crony capitalists at the expense of the middle class. I’m a better American than that.

 

Oct 28, 2012 1:59AM
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My "friend" KOO

On the surface your argument sounds fine

Going down smooth like honey

Yet just regurgitate the DNC line

Believed only by folks whose head is full of Pooh

While ignoring a basic question

What happens when you run out of other people's money?

 

 

 

Oct 28, 2012 11:01AM
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It's a hundred years past time that we regain the status of a sovereign nation, and shed the control of the international bankers, who are the ones truly in control of our economy and our nation.  The Federal Reserve Bank has a planned rate of inflation, and prints BILLIONS of dollars of fiat money to manipulate the value of our currency - which is diminishing as you read this.  Passive politicians, only concerned about their re-election, fear questioning the power the CENTRAL BANK has over our country.  The two party system America has become needs to be confronted by real Americans, who care more about the country than the re-election of the (R) or (D) candidate, who seem to like the status quo provided by the protection of their "Central Bank," one of the planks of the Communist Manifesto.
Oct 28, 2012 8:56AM
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The reason people think things will change is because they can't get it through their thick skulls that the fed is independent. They believe that the president controls the fed and tells them what to do, and everything they are doing is at the bidding of the president. President Obama can't control quantitative easing or lack there of. Just like he isn't running up the deficit because he CAN'T spend or allocate money. He can ask for it but the Congress is actually running up the deficit.

 Saying Obama or any past president is responsible for our over spending and deficit is stupid, and pretty much saying the child in a house hold is responsible for the parents being in debt. The child can ask for money and toys and designer clothes but they can't make the parents buy them or pay for them. Obama and any president can ask congress for money but they don't have to give it. This is evidenced by all the things they don't fund even when they pass bills demanding that this be done and that be done. Congress is a cancer that is killing this country.

The market is being held together by hope for free money. Whether that is in the form of fed easing or European bailouts or Chinese stimulus it all amounts to the same thing. Anything that threatens the gravy train is going to bring the stock market crashing down. Look back at all the news clips and see how many times over the past two years that the market has gone up because of hope for Europe. Not fundamentals and an improving economy - but hope that some country will get bailed out with fake/printed money. A good old fashioned shaking of that faith is all it will take for wall street to crash.

If the stock market participants had stuck to their capitalist ideals and taken their medicine when the collapse happened we would be recovered by now. Unfortunately, they proved that they only believe in capitalism for the rest of us - not themselves.  Their position was "give us the capitalism rewards and benefits" - but please hold the pain and negative consequences- that just belongs to the people/peasants. If they had refused the welfare/bailout and all the free money they would have earned my respect. Instead I have nothing but contempt for the so called capitalists. You all talked the talk but in the final analysis when it mattered most you couldn't walk the walk and that is why you will be pushed off the cliff in a few months. Happy landing.
Oct 28, 2012 1:52PM
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Ben needs to retire the sooner the better.  Savers/retirees not getting any interest income because of his 0% policy need some interest income to live off of.  And yes to all of you haters that don't think we should get interest income,  I do already have most of my money at risk in stocks/bonds trying to compensate for Ben's 0% policy and at the same time trying not to get creamed when the market tanks again. 
Oct 28, 2012 12:21PM
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To someone. Way to go. I did the same thing. Can you imagine the look on the faces of  the Obama and Romney  camps if they heard that  Dr. Ron Paul just won Ohio, and was expected to take California, and Florida.
Oct 28, 2012 6:23PM
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Changing presidents or Fed Chiefs won't help me one bit. A politician is a politician. Rich and getting richer.
Oct 29, 2012 3:31AM
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Big Ben Bernanke will have until 2014 to prove his policies, Big Ben of the Steelers will still have his job in 2014, and Big Ben in London will still give you time in 2014.  So in the next year 2013 we can focus on Big Ben Bernanke to prove himself like the other two!
Oct 29, 2012 2:22PM
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Welfare for wall street at near zero int rates at the FED window  ! No return on Americans saving ! For over 6 yrs . That a boy Ben ? The US Printing presses are running at full speed for over 6 yrs , devaluing the US $ .. That a boy Ben ? Causing all commodities to rise in price because all things are sold on the markets in US $ Devalue the US $ And the price of oil goes up ..But they have great inflation numbers.. Core and NON-CORE < A joke to Americans , but a BOOM to WALL STREET.. They only use core inflation , thats everything on the shelf people! < EXCLUDING non-core Thats only FOOD AND ENERGY.. < Lets leave out the fastest rising elements out of the numbers America > Real accurate stats.. < LMFAO..  And then to top it all off Clinton and the US Congress killed Glass - Steagall act and that is what made the meltdown America . And sucked all the value of our homes with it ! That a BOY BEN.. So you see America the same policies that got us here still has not been fixed by the US Congress , they are the only ones that can make law.. But then they are the only ones to tax and spend.. Its in the US Constitution..The Feds and the US Congress is truly teh problem with America folks..
Oct 28, 2012 12:13AM
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Keeping the enemy close thats funny actually their the only news station that tells the American people the truth about this sorry **** administration that needs to be replaced by somebody that cares about the problems facing the USA.I love this country and Im tired of a president and administration investing my money in stimulis plans that dont work and also I dont believe this president an American if he didnt have anything to hide why would he seal his school records.Maybe he took foriegn aid and really was possibly born somewhere else like Kenya

Nov 1, 2012 1:09PM
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If Bernanke can't be ousted (and he most certainly should be) maybe someone in Congress can at least put an end to those insane monthly mbs purchases.
Oct 29, 2012 4:02PM
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As long as the 16th Amendment exists to protect the Federal Reserve system we are doomed to Central Banks and to the fate that awaits us both fiscally and monetarily in the not so distant future. Just keep printing away!!
Oct 29, 2012 9:05AM
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The President could get rid of "helicopter" Ben the day he enters office.  Just strip him of his security clearance and Voila!, Ben can no longer enter the Feds Building.  Bye Bye moron.
Oct 28, 2012 4:37AM
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Profit, the money never runs out as long as the super wealthy are taxed, when I pay 13% and Romney pays 13% tax making 1 million times more than me, that's when revenues run out and government  collapses.
Oct 28, 2012 1:41AM
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It's simply a fact, that the larger the wealth disparity a nation has the weaker the economy gets, Romney's plan cuts taxes by 7% for millionaires and 2% for the poor, further expanding a ever widening gap and shrinking our consumer base, while giving more to those who already live in opulence. This will continue the shrinking of our GDP,  just like the Bush tax cuts did, but worse. What will Ben do then ?
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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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