The idea that elections strongly influence Federal Reserve policy is a myth, says Burton Abrams, an economics professor at the University of Delaware.
He found that only one of the last six Fed chairmen was swayed by politics, CNNMoney.com reports. And Abrams doesn’t expect current Fed Chairman Ben Bernanke to be the second.
"Bernanke would not be a good candidate for falling into that trap,” Abrams says. “He wouldn't have any real party loyalty to the Obama administration above and beyond conducting monetary policy as he sees fit."
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
Bernanke hasn’t shown loyalty to the Republican Party either, ignoring GOP pleas not to consider another round of quantitative easing (QE).
So, who was the Fed chairman who gave in to politics?
Arthur Burns, who granted President Richard Nixon his wish to ease monetary policy ahead of the 1972 election, Abrams says. Nixon, of course, wanted to boost the economy.
"Arthur Burns was a staunch Republican loyalist, more susceptible to pressure by Nixon than might normally be the case," Abrams tells CNNMoney.
Many economists expect the Bernanke Fed will soon make more asset purchases and/or extend its target date for historically low interest rates past late 2014.
Even before Bernanke gave a speech last Friday suggesting such moves might be on the way, Pimco’s star bond fund manager Bill Gross told Bloomberg that QE3 is coming “relatively soon.”
His reasoning: “unemployment is still above 8 percent and it’s obvious that the Fed isn’t comfortable” with that, Gross says.
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
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