Quoting MoneyMa$terDislikedYes both the FOMC and Congress have power, however in November a potential power shift can and probably will occur in the good old boys' club, Congress. And when it's all said and done, these guys (FOMC, federal political appointees, and members of Congress) dine at the same restaurants, attend the same dinner parties, play golf at the same clubs, have the same connections, donate to the same fundraisers....that's just political life.
My analogy is appropriate because those who have it (power) never want to lose it; it is taken by a measure of force, sometimes in a civil, subtle fashion (politically), sometimes not so subtly (war).
Books and class room education will rarely confirm or deny what goes on in the halls of power beyond the sterile relationships that supposedly exist as a result of separation of power or checks-and-balances. In other words to think any nominated body is truly 100% impartial and objective is just naive. Do you really believe the US Supreme Court is always an independent actor, despite the fact that they are justices for life?
It's called "you scratch my back and I'll scratch yours"; it's called "you owe me one"; it's called "payback". It's called politics. I call it the wrist guiding and bending the invisible hand in the marketplace. So now in this election season, I turn to you my weekend golfing buddy, whose daughter attends school with my son, whose wife goes shopping at Tyson's with my wife, who sits on a couple of not-for-profit, charitable fondations with me, I say to you and say I need your help, good buddy. And you say: just name it!!
Bernanke need not "abandon his mandate" but there are exceptions to every rule. FOMC goes beyond Bernanke and I can't tell you who owes what to whom, or who controls whom. But this I know: most if not all the major political players in this town either owe a debt(s) or are seeking repayment, and they will do whatever is necessary to maintain their hold on power. And remember, they all hail from other states, other cities so they're never really isolated from other FOMC members, bankers and the power players back home, where the voters are tired of interest rate increases (be ye democrat or republic is irrelevant, a pause helps everone seeking re-election).
We're not talking an "or" gate here; it's an "and" gate. Monetary policy impacts politics daily yes AND moreso during election season. Think about it. How on the one hand can the feds say with a straight-face there's no inflation, despite an increase in the so-called "headline" CPI? They do it by saying "core" CPI is still acceptable!! Here, that's politely called "pressuring" FOMC to pause. Quite frankly, that core CPI was probably not a true number. Think. If you ask most Americans living outside the Beltway, whether we're experiencing inflation, they will give you a common sense straight-forward answer: yes!!
And I never understood how the ADP numbers were so out of whack in July!! ADP was way off, but they were probably the true numbers (just out of step with the government's version of reality). So what happened? The official July NFP came out confirming no inflation.
This month, August, ADP got the message and joined the party line as their numbers were consistent with the official August release, confirming no inflation.
Simply distinguish mirage from reality. And interest rates will rise again as our new Treasury secretary is on record as favoring a strong dollar. Just get November out of the way first.Ignored
Regarding ADP, NFP, and core CPI, it isn't necessary to attach shadow politics to the results. I was predicting a q3-q4 slowdown back in November based on purely economic factors. With home price appreciation running well above historical averages and the resultant equity extraction being used to fuel the majority of GDP growth, any neophyte economist could have surmised a slowdown was immanent. The latest data merely reflected the downturn in consumers capacity to consume.
The ADP figures, as reported by ADP, have a standard deviation of 91,000 (through Dec 05) from the as reported BLS numbers. Even with the July miss, the report is still within the expected deviation for the year. ADP is a huge company, but it still has a sample size less then 1/5 that of the BLS NFP report and by ADP's own admission, the report is only marginally better then economist expectations. How many times have those well reasoned expectations missed by 200k or more?
Finally, given your prestigeous credentials I am awe struck by your comments regarding core CPI. There is little doubt in my mind that by sampeling random Joe's on main street that a consensus for the existance of inflation could be discovered. Average Joe barely understands how to keep his checkbook balanced! How can you expect him to make a distinction between sticky and variable prices? Should I derive from your comments that you would advocate drastic interest rates cuts to avoid deflation when (not if) oil drops to $40brl?