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Timing is everything

I may think the policies in WA are downright stupid and at cross-purposes with what is good for America but the people implementing them are not stupid at all. Unfortunately... From Investors Business Daily:

The Major Political Implications Of QE2
As the media look for signs the economy is heating up � and whether a recovery will be in place when President Obama runs for re-election � it's a good time to consider the likely effects of the latest initiative from the Federal Reserve, called quantitative easing (QE2), on top of the administration's other economic policies. It's not a pretty picture.

The Fed initiative involves the central bank's buying $600 billion in government bonds from the Treasury over eight months starting in November 2010.

The intent is to avoid deflation and create just 2% inflation as measured by the consumer price index (CPI).

Chairman Ben Bernanke has promised that if inflation shows signs of exceeding 2%, the Fed will take countervailing action. The personal consumption expenditure index of inflation is now below 1% and could be 0% within a year, according to Marc Sumerlin, former deputy director of the National Economic Council under President George W. Bush.

There is an analysis of what Quantitative Easing is and some numbers:

On the Dec. 5 broadcast of "60 Minutes," Bernanke claimed there has been no increase in currency, the basic component of the money supply.

An examination of the Fed's data, however, shows the annualized rate of increase for the three months ended in October 2010 was a substantial 9.5%.

Later, four-month data that include a projection for November show an annualized rate of 9.6%.

These data indicate the currency component of the money supply is increasing at an increasing rate.

And a bit of history and a bit of sobering forecasting:

In his 1991 book, "Monetary Mischief," Friedman concludes from his lifelong study of monetary policy that there is a pattern in the lags.

Six to nine months after an injection to the money supply, there is a short-term increase in economic activity. After 24 months, inflation appears and is persistent until money growth is slowed, another recession occurs, and 24 months pass before the inflation is abated.

If these lags are superimposed on the nation's political calendar, there is a disturbing conclusion.

A short-term increase in economic activity will occur before the 2012 presidential election, and a virulent inflation will occur after the votes are in.

Not good -- let's hope that more people are watching this and coming to the same conclusions... Posted by DaveH at January 15, 2011 12:18 PM