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Which President Has Received The Most "Charity" From The Fed?
Submitted by Roger Thomas via Valuewalk.com,
If you’re an observer of the political aspect of the Fed policy, you’re likely aware that central bankers like to stay out of the spotlight. Spotlight creates political pressure, something Fed technocrats publicly dislike.
With this thought in mind, here’s a look at the federal funds rate overlaid with politics.
Question – Before going further, which president would you guess has received the most charity from the Federal Reserve? Meaning, after adjusting for inflation and employment growth (the two factors that theoretically determine the federal funds target interest rate), which president has experienced a very charitable Fed (i.e. keeps interest rates abnormally lower than what the inflation rate and employment growth would predict) and which presidents experienced a tough-willed Fed?
Another way of saying it is – Which presidents needed the Fed’s help and which presidents didn’t?
Here’s a look.
The Federal Funds Rate
First, a look at the federal funds target rate. The black lines represent periods when the rate was declining or steady. The red lines are periods when the Fed was raising rates.
Overall, the target rate generally declined for the first half of the 1980s and then rose to end the 1980s. In the early 1990s, the Fed rate declined, bottoming out in 1994 before the Federal Reserve started raising rates again. The early 2000s saw the Fed lower rates in response to the collapse of the technology bubble, and then raise rates in an attempt to deal with a global housing market bubble. Since the bursting of the housing bubble and the near collapse of the global financial system, the Fed has kept rates near 0%.
The last time the Federal Reserve raised the federal funds target rate was in 2006.
Federal Funds Rate with Presidents
Next, here’s a look at the federal funds rate by president.
Overall, it’s difficult to see any political cycle, likely because two important data points are missing from the graph. The two points are the inflation rate and the employment growth picture.
As John Taylor pointed out more than two decades ago, the Fed’s interest rate can be approximated by movements in the inflation rate and output against its long-run trend.
So, to see which presidents the Federal Reserve thought needed the most help, one would need to adjust the actual federal funds rate for inflation and output conditions. This would give an idea of which presidents the Federal Reserve thought (thinks) needed help.
A Look at the Charitable Fed
With the previous discussion as the background, take one last guess at which president you think the Federal Reserve was most charitable to. Was it Bush I? Perhaps Clinton? Reagan?
Which president needed the most help?
Here’s the results.
(As a note on methodology for technicians, the Taylor rule presented here uses employment growth as a proxy for output, with 2% employment growth as the long-term trend. Both components of the Taylor rule are equally weighted.)
Interestingly, the Fed has been most charitable to Mr. Obama. During his tenure, the Fed has kept interest rates lower by an amazing 4%.
Other the other end, the Fed’s least preferred presidents were Reagan and Bush II. Both presidents saw a Fed much tougher than what inflation and employment would predict.
The Fed Conclusion
In connecting Federal Reserve interest rate policy since the 1950s with inflation and employment conditions, some interesting results materialize.
Of the interesting findings is that the Fed has presidents it wants to be tough on and presidents it likes to show charity to.
In looking at the details,of the past 11 presidents, the Fed has shown the most charity to the sitting president, Mr. Obama.
The charity shown during Obama’s administration is astounding. When adjusting for inflation and employment growth, the Fed has kept to federal funds rate almost 4% below where it should be (based on a forked-Taylor rule).
One of these days Mr. Obama ought to publicly thank Mr. Bernanke and Ms. Yellen for their incredible generosity. He needed the help.
On the other end, the Fed was toughest on Ronald Reagan and Bush I. They apparently didn’t need the Fed’s help.
Overall, a fascinating view of Federal Reserve policy and its connection with politics.
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I don’t care ‘bout the rates, but I’ll be watching Yellen tomorrow in hopes she starts burping and swallowing her puke AGAIN. I’ll keep my fingers crossed… ;-)
Looney
Yeah that was a "Honey come in here and watch this!" funny moment for me.
The Fed stacks the deck in favor of Demoncrats?!
I'm shocked, SHOCKED!!!
[/sarc]
If you look at the list of presidents ranked by the Taylor rule, and you start with Eisenhower and follow the chronology you will go down the list to Reagan and back up to Obama. The Fed has done a round trip.
Charity
Obama
Eisenhower
Bush II
Kennedy
Johnson
Ford
Clinton
Nixon
Carter
Bush I
Reagan
Austerity
After Fed rate hike tomorrow and the ensuing implosions of stocks and banks in the aftermath; are the newly created bail-in laws going to be put into effect???
Jeff Nielson thinks those are the next steps on the horizon:
http://www.bullionbullscanada.com/index.php/forum/17-talk-economics/3303...
Gee Wally, the FED sure sucks a lot of democrat penis.
@ Rom,
All these sheep are arguing & voting for a a Crimainl Fraud UNITED STATES, COEP, INC. CORPOOEATION.
Obama don't care, his term is up. They can raise it, drop it, who cares, player is retiring at golf course soon
This article is just another data point supporting the case that Obama is the Affirmative Action President.
Say what you will about Obama, but when you call him a 'player' of golf you offend the millions of real golfers out there.
How dare you, sir...
Diddn't realize Jakarta had golf coarses.
But every time Reggie plays he gets a hole in one...
Yellen will not significantly raise rates I can tell you that right now imo.
Realtors are already screaming and yelling that house prices will fall fast and furious if she does. Main Street economy still stinks badly and house prices are moving sideways if not down. Commercial real estae vacancies are soaring esp in places like Colordao and texas where energy is plunging. I was shocked [as was the NPR host] to hear one of their guests say the middle class America, male and female, are in bad shape and that's why Trump has such strong support.
The 'expert' guest said both Repugnicans and Dems [of course] have totally ignored the American middle class worker and small businesspeeples.
I thought NPR would cut his microphone off after such blasphemy!
--define significant...methinks the mkt will consider the prospect of .50% inside of 6 months significant
--both those items will occur with or without higher rates....and dont get me started on (R)ealtors.....such a fking vacuous group of self described professionals. 'hi sign this, i'll post it on our members only website, and you'll pay be $20 grand'; there literally is no greater ripoff of the general public, they make brokers look like boyscouts
So he got "The Juice" and blew it.
If the economy don't grow, you got to go
Ciao, Obama.
Ciao, Hillary. <--- Name ONE accomplishment as SecState...
Chelsea's wedding?
Never swallowing Bill?
(that's what interns are for)
she helped kill a lot of people? thats a good thing right, something republicans should appreciate, at least.
As much as I do enjoy a good killin', and believe me I do enjoy the hell out of it, I do not like it when other people do it in my name without my consent.
She has the largest carbon footprint of any Secretary of State, to match the cankles of course...
A new study shows that one of her wet farts equals the carbon footprints of shanghai and bejing combined!
No
Yes
And even with all this help for Obama, one has to ask, "Am I better off today than in 2008"
Gouge your eye out if you voted for him once and the other eye if you did it twice; now you are really blind.
Obama inherited an absolute mess in 2008. The good solution was to force the bitter medicine onto the patient, let the cycle contract and the bankruptcies and foreclosures run their course. The bad solution was bailouts and money printing. If you have any other ideas, please share. Let me guess, get rid of NPR and Planned Parenthood?
This is a common misconception. The economy is not the responsibility of anyone in government. He inherited no situation.
We inherited a shit ton of debt nonetheless.
I agree 100% on the economy not being the responsibility of the government. The number 1 responsibility of the government is safeguarding our liberties, as RP said.
Kill the coal industry and then pass the affordable care act to find out what is in it. Do I win?
Sorry Midas. You are not aca compliant so you'll have to leave.
Would be a good start,and defund NSA-EPA-ACA and all the other parasites while you're at it? now go back to your favourite NPR show "the secret transbender life of the animal world" you asked,i shared....
He might have inherited a mess but he did nothing but make it worse. Shovel ready projects that weren't really shovel ready...but they were riddled with fraud.
Allowing the Fed to suck all the toxic paper off the banks balance sheets and on to the Fed balance sheet (aka tax payers)
Forced taxation for a health care plan that doesn't really provide health care. It does take your money but there's little care to be found and it was all done in the name of insuring the about 30 million without insurance. Well I got news for you, there's still about 30 million without insurance so it was a big dud.
I could go on, the list of moral hazards is endless, but you get the idea.
obama was right.. the biggest redist of wealth in history.. 2 WS
Progressives always look out after fellow progressives.
i suggest you are looking at the death of the shit system
started in 1913. notice the trend from 1980 regardless
of the politician in office. none of them threatened the
fed and the trend has hit the baseline. some would like
you to thing this is political but it is just a system
flaw, failing, regardless of the politics. the math demands
growth or failure and growth is cancerous at this point,
in dollar terms.
deal with it.
+1. Yes things accelerated in the 80's Once companies jumped off shore, inflating costs in US helped that push, real production income died in US. Spending continued...Financial derivatives created to correct this first US economic heartache...then came a succession of credit bubbles....ending with this - the treasury bubble.
US economy died in 2008. Bush 2 the original doomsday-er
" this sucker is going down "... It's been FED CPR ever since.
your system flat lined bro..
Now compare the economic conditions under Reagan and Obama. Kind of makes laissez faire seem like a better economic policy right? I wonder if Calvin Coolidge was factored in how it would look?
LMAO!.......Of course I have always been berated for my theory that the market swoon in 2008 was in anticipation of the democrats Obama, Reid, and Pelosi getting control of congress and the White House.....
No, no, no I was told, it was all Bush`s fault.......So i guess I stand corrected, the market is reverse looking then.....
But, equating the FED to a presidential welfare program is funny......
2008 was due to overly easy money by or monetary overlords
"Interestingly, the Fed has been most charitable to Mr. Obama."
Wouldn't want the Fed called racist would you? Have to bend over backwards to make sure he's well liked in the financial arena.
14 DECEMBER 2015
Charles Dickens: A Christmas Carol 1954
“You are fettered,” said Scrooge, trembling. “Tell me why?”
“I wear the chain I forged in life,” replied the Ghost. “I made it link by
link, and yard by yard; I girded it on of my own free will, and of my
own free will I wore it. Is its pattern strange to you?”
Scrooge trembled more and more.
“Or would you know,” pursued the Ghost, “the weight and length of the
strong coil you bear yourself? It was full as heavy and as long as this,
seven Christmas Eves ago. You have laboured on it, since. It is a
ponderous chain!..."
“But you were always a good man of business, Jacob,' faltered Scrooge, who now began to apply this to himself.
Business!' cried the Ghost, wringing its hands again. "Mankind was my business; charity, mercy, forbearance, and benevolence, were, all, my business. The deals of my trade were but a drop of water in the comprehensive ocean of my business!”
Charles Dickens, A Christmas Carol
.
http://jessescrossroadscafe.blogspot.com/2015/12/charles-dickens-christm...
The Federal Reserve's sole true mandate is enriching Wall Street by stealing from Main Street.
• Abolish the Federal Reserve System;
• Hold banking stock and bond holders and banking executive officers completely responsible for the totality of losses even if it exceeds paid in capital and face value of bond holdings;
• Prosecute and severely punish the political parasites for accepting bribes (I.e., campaign contributions, honoraria, fees for speeches, free rides on Crony Capitalist Corporate jets, etc.),
• Prosecute Crony Capitalist Corporations and Oligarchs for paying bribes to the political parasites;
the fed is consistantly good for Jewish banksters and wall streeters..I guess it is fed policy. right mr yellen?
WHY no ZH article on Obama's rump wrangling and boan snarfing while pretending to play golf?
So, let's say Obama would have selected, instead of Yellen, a person promising to do the right thing: abandon the bullshit "dual mandate," let the markets be free and fair, etc. Well, the Republican Senate would have NEVER approved that appointment.
And if Yellen would have snuck in and done the right thing anyway, Obama would have been impeached, and probably executed.
You see, I have no problem with anti-Obama rants, as I have no love for the man. But what I abhor is the mindless adherence to Party Politics that Right Wingers display. In general, Republicans of today are feckless robots controlled by a very small contingent of extremely wealthy oligarchs.