Swing voters are notoriously unpredictable. One election, they might support the Democrats, and the next, they turn to the Republicans.
These voters lack a consistent ideology or political philosophy to guide their decisions. They are indifferent to debates about the size of government or the merits of the welfare versus warfare state.
Ultimately, their priorities are quite straightforward. Their primary concern can be distilled into a simple question: What have you done for me lately?
For swing voters, the answer revolves around financial outcomes. If their investment accounts are growing, they tend to back the incumbent party. Conversely, if their assets are dwindling, they lean toward the opposition.
Whether the inflation in the stock market stems from dishonest practices or whether a market correction could provide a more stable foundation is of little concern to them. The trajectory of their portfolio serves as their primary indicator of whom to support at the polls.
The Intersection of Truth and Denial
Recently, Republican Presidential Candidate Donald Trump criticized the Federal Reserve for what he termed “false stock market” dynamics. In an interview with CNBC, he claimed that Fed Chair Janet Yellen and her colleagues were overly politicized and should feel “ashamed” for their actions, asserting that “The Fed is not even close to being independent.”
The suggestion that the Federal Reserve affects election outcomes is hardly a novel concept. At the recent central bankers’ summit in Jackson Hole, Wyoming, former Congressman Barney Frank advised the Fed, “Don’t raise rates before the election.”
A shift towards tighter monetary policy and a subsequent decline in the stock market can indeed spell trouble for incumbents. Just ask former President George H.W. Bush; he would attest that former Fed Chairman Alan Greenspan cost him the 1992 election.
From a fundamental standpoint, the degree of denial that follows a political accusation often reflects the truth behind it. The more vehement the denial, the more substantial the underlying truth seems to be.
Following Trump’s critiques, Minneapolis Fed President Neel Kashkari appeared on Squawk Box to deny any political motivations:
“Politics simply does not come up,” Kashkari stated.
One might wonder if Kashkari was being entirely truthful, given his controversial history. He has consistently pursued extreme economic interventions. As the federal bailout chief, he orchestrated the rapid distribution of $700 billion in TARP funds to select corporations under the instruction of Henry Paulson.
After this role had taken its toll on his mental well-being, Kashkari retreated to a cabin in the Sierra Nevada Mountains, seeking solace in chopping wood. We assumed he had vanished from the public eye for good.
However, after a failed gubernatorial bid in California in 2014, Kashkari resurfaced earlier this year as President of the Minneapolis Fed, to the dismay of many.
Understanding the Fed’s Impact on the Market Economy
Kashkari is a man perceived as having peculiar views. After denying any political involvement in setting Fed policy during election years, he elaborated on how decisions are made.
“We look at the data,” he claimed. This statement revealed more than his original denial ever could.
It seems Kashkari has yet to consider what this data truly represents. If he had, he might recognize the absurdity in utilizing data to discern so-called aggregate demand deficiencies and supply gluts.
Metrics such as unemployment rates, GDP figures, and price inflation are often modified to suit governmental agendas. Furthermore, each figure comes replete with footnotes and qualifiers—like hedonic adjustments and seasonal variations—that can significantly distort the results.
Even more outlandish is Kashkari’s belief that manipulating the price of money can somehow lead to improved outcomes based on this flawed data. To central planners, better metrics—like higher GDP, increased consumer demand, and stable inflation—equate to a healthier economy.
Yet after a century of mismanagement, especially in the last eight years of extreme measures, the Fed has failed spectacularly. The data continues to show underwhelming growth while the repercussions of their actions are increasingly severe.
Policymakers have inflated both public and private debt beyond sustainable levels. They have eroded the value of the dollar to less than 5% of its original worth while inflating bubbles in every conceivable market, from real estate to commodities.
Besides merely enriching private financial institutions, we now have a clearer picture of why the Fed has so thoroughly undermined the market economy: According to Kashkari, “the data told them to.”
Sincerely,
MN Gordon
for Economic Prism
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