If Romney Wins, Expect the End of Quantitative Easing

It’s been nearly eight years, since Fed chief Ben Bernanke told the Senate Banking Committee at his confirmation hearing, that “with respect to monetary policy, I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority.” The former Princeton University professor who served as a Fed governor from August 2002 to June 2005 before accepting the post as President George W. Bush’s top economic adviser, also pledged, “I will be strictly independent of all political influences,” Bernanke said.

History will show that Bernanke did follow in the footsteps of his mentor for the first 3-½ years of his tenure. The infamous “Greenspan Put,” or the knee-jerk reaction by the Fed to rescue the stock market whenever risky bets went sour, - through massive injections of liquidity and reductions in interest rates, - was seamlessly replaced by the “Bernanke Put.” Since Bernanke gained control over the money spigots, the Fed continued to expand the MZM money supply by +65% to a record $11.3-trillion today. That’s an increase of about +9.4% per year, on average. The yellow metal never traded a nickel lower since Mr Bush tapped Bernanke to become the next Fed chief in Nov 2005, when the price of Gold was $468 /oz. Today, Gold is hovering around $1,735 /oz, up +370% for an annualized gain of +57%, - highlighting the most devastating blow to the purchasing power of the US-dollar of all-time. 

Following the stock market crash of 2008, Bernanke decided to take US-monetary policy down a very dangerous path that his predecessor had never explored. Bernanke experimented with the nuclear options of central banking, - unleashing powerful weapons for the first time in the US, such as “Quantitative Easing,” (QE), the Zero Interest Rate Policy (ZIRP), and “Operation Twist.” These weapons were forcefully deployed in order to artificially re-inflate the value of the US-stock market, and in turn, help to boost President Barack Obama’s chances at winning re-election. Bernanke borrowed the blueprints of the Bank of Japan, - the original pioneer in QE and ZIRP, dating back to March of 2001. The Fed was able to engineer a doubling of the S&P-500’s market value in just three-years, for a gain of $7-trillion, from the bottom of the brutal Bear market that came to a merciful end in March of 2009.

However, the Fed chief broke his promise to stay above the political fray, when on Sept 13^th, Bernanke and his band of super doves, decided to unleash “Infinity QE-3” or the unlimited printing of money, at an initial rate of $40-billion per month, with less than eight weeks left in the race for the White House. The Fed crossed the line by brazenly supporting the President in his bid for re-election. By jolting the stock market higher, Fed aimed to conjure-up the illusion among the general public of an economic recovery looming on the horizon that would in the short-term, boost consumer confidence, and the opinion polls for Barack Obama.  (more)