…and why I think that personally the Fed jumped the gun. As you should know by now the breakdown of congress after this year will be House: 239 Seats for the Republicans, 186 Seats for the Democrats, 10 for Independents. Senate: 50 for the Democrats, 48 for the Republics, 2 for people who are Democrats but claim to be Independents. It was am pretty crazy run. Way higher voter turnout than is typical for a mid term election and a lot of really close races. One thing I can definitely say that in almost every voting district your vote counted somewhere cause almost every district saw a close race, whether it was in the Senate, House, or Governors race, or some combination of those.
I’m not going to break it down any more from there. I will make two statements though. What I wanted to happen, happened. The Republicans gained control of at least one of the houses of Congress. The other thing is that the Tea Party candidates did MUCH better than the media was predicting them to do. And those are the two statements I will make on that.
No I’m more interested to see what happens now. Every economist worth his salt knows that with a stalled government you get better economic growth, but the truth is, the government isn’t stalled yet. The new congressmen and women don’t take their seats until next year, which gives the currently still Democratically aligned government a month and a half in which to do things. Granted it’s not terribly likely that they’ll do anything with that time, but a lame duck session of congress is still possible.
So we’re not gridlocked yet folks, which is why I think Gentle Ben Bernanke jumped the gun. The bottom line, if you don’t want to read the article, is that the Federal Reserve is going to buy $600 Billion dollars in bonds in the hopes that this will drive money out of the bond market and into the more investment heavy stock market. However, this also has the problem of devaluing the U.S. dollar in comparison to other currencies because of the increase in the number of treasury bonds.
It was something that happened to majorly piss off a lot of other countries, especially those countries that are owed money by the U.S. and have debt in U.S. Dollars. The less valuable the U.S. Dollar is, the less valuable their debts are, because while U.S. companies will owe Chinese firms billions of dollars, the U.S. dollar will be worth less. On top of this you add that the vast majority of markets around the world can’t exist without the U.S. consumer market. It’s nice because we kind of have them in a rock and a hard place and now we’re starting to put them to it, which is something I whole heatedly support since their massive amount of over reaching on real estate is about to redouble our recession. If we can devalue the dollar enough then we won’t get dragged down with them when they go under.
However Ben made this move yesterday, instead of oh I don’t know, two months from now when he’s sure that Congress won’t try to suddenly “play nice” with China. With a Republican majority in the House I have fewer concerns that the government will make any stupid moves when it comes to the Chinese. Right now though I can’t be so sure. The lame duck Congressmen and women may decide, in their massive bitterness, to try and stick one in the eye of the incoming congresspeople. Here’s hoping they don’t, but even if they don’t the Chinese might still wake up to the problem they’re about to have and start calling in their debts early. The closer the Fed can match the timing of the undervaluing of the currency with the real estate bubble burst in China the better. So yeah Ben, it was a good move, but you jumped the gun on this.
