James M. Lindsay

The Water's Edge

Lindsay analyzes the politics shaping U.S. foreign policy and the sustainability of American power.

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The World Next Week: September 11, the November Election, and Ben Bernanke

by James M. Lindsay
September 6, 2012

President Barack Obama, first lady Michelle Obama, former president George W. Bush and former first lady Laura Bush walk beside the north pool of the World Trade Center Memorial during ceremonies marking the 10th anniversary of the 9/11 attacks on September 11, 2011. (Larry Downing/ courtesy Reuters) President Barack Obama, first lady Michelle Obama, former president George W. Bush and former first lady Laura Bush walk beside the north pool of the World Trade Center Memorial during ceremonies marking the 10th anniversary of the 9/11 attacks on September 11, 2011. (Larry Downing/ courtesy Reuters)

The World Next Week podcast is up. Bob McMahon and I discussed the anniversary of the September 11 terrorist attacks; the home stretch of the presidential campaign; and what Federal Reserve Chairman Ben Bernanke will decide at next week’s meeting of the Fed’s policymaking committee.

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The highlights:

  • Eleven years after the 9/11 attacks the United States has made significant strides in diminishing the odds of a catastrophic terrorist attack. That is partly because al-Qaeda no longer has the advantage of surprise, and partly because intelligence, law enforcement, and military operations have killed or captured much of al-Qaeda’s leadership and disrupted its operations. Only 34 percent of Americans say that terrorism is an “extremely important” factor in their decision on who should be president, down from 42 percent four years ago. Perhaps more telling about how much terrorism has receded from American public life, less than one percent of Americans flag it as the most important problem currently facing the country. Nonetheless, the essential danger of terrorism remains: while government has to foil every plot to be successful, terrorists need to succeed just once.
  • In honor of the 9/11 anniversary, Barack Obama and Mitt Romney have agreed to suspend political ads for the day. But otherwise, you can expect both sides to go full bore with just two months left until the election. Foreign policy is unlikely to be a leading issue, as Romney’s decision to devote less than two hundred words in his four-thousand word acceptance speech to the challenges America faces overseas attests. Specific foreign policy issues could dominate the campaign conversation if one of the candidates says something unwise, as the Democrats look to have done with the platform flap over Jerusalem, or if events overseas take a turn for the worse.
  • Federal Reserve chairman Ben Bernanke gave a speech late last month that has raised expectations that the Fed will take steps soon to jumpstart the sputtering U.S. economy. Such a move would be controversial, as it could be read as trying to influence the outcome of the election. Of course, not doing anything could be read the same way. We will know what Bernanke’s choice is after the Fed’s policymaking committee meeting next week. Even if he decides in favor of steps to stimulate economic activity, the U.S. economy still faces a potentially powerful contractionary force: the looming “fiscal cliff.” Some U.S. companies are already considering layoffs because of the confluence of sequestration, the end of the Bush tax cuts, and several other government policy changes set to go into effect in January.
  • Bob’s Figure of the Week is Mario Draghi. My Figure of the Week is 23,000. As always, you’ll have to listen to the podcast to find out why.

For more on the topics we discussed in the podcast check out:

Anniversary of September 11 Terrorist Attacks. The Daily News reports that the Romney and Obama campaigns have agreed not to run political ads on September 11. Secretary of Defense Leon E. Panetta is scheduled to visit the Flight 93 National Memorial on Monday, September 10; the Flight 93 National Memorial has organized events throughout the week to commemorate the victims of the attack. Bloomberg writes that Stephen Colbert spoke at a 9/11 Memorial benefit dinner on Tuesday. Last year, President Obama declared September 11 to be Patriot Day, a national holiday committed to the memory of the victims of 9/11.

The Presidential Campaign Enters the Home Stretch. The Economist writes that after a rough first-term, President Obama will need to convince voters that he can bring change in a second term. The Wall Street Journal notes that voters give President Obama higher marks than Mitt Romney on national security, something seldom seen with Democratic presidential candidates. Foreign Policy flags the reasons that President Obama has the upper-hand in this election.

Fed Policymaking Committee Convenes. The New York Times speculates about what Fed Chairman Ben Bernanke will do next. CNN suggests that the Fed may still change monetary policy, despite the tense campaign climate. The Wall Street Journal concludes that the Fed is still lukewarm over lowering the reserve rate. The Washington Post contends that Columbia University professor Michael Woodford may have authored the most important monetary policy paper this year; find it here. The Federal Reserve shares the minutes of the Federal Open Market Committee meeting.

Post a Comment 6 Comments

  • Posted by Fred A.

    Bernanke throwing gasoline on the economic fire will be a huge vote for Obama. It could swing a million votes to the Democrat side.

    The power of this one man, especially a man that is unelected and whose office is not mentioned in the Constitution, needs to be curtailed, more strongly regulated or even totally removed.

    His ability to sway an election is affecting the freedom we (once) had…….more and more and more.

  • Posted by Mike

    You should put your audio on itunes as a podcast I can subscribe to. If it is already there and I am mistaken, could you please send me a link? I just discovered your podcasts today, and I loved it. Very informative and relatively unbiased presentation of events!

    Thanks,

    Mike Morahan
    Founder of FreioMusic.com

  • Posted by Chris

    I’m not concerned with Bernanke swaying the election, I’m more concerned with the influence of corporate money in the current election. The Citizens United decision has taken the vote from real people and put the vote in the hands of artificial people aka corporations.

    Bernanke’s job is to get the economy back on its feet, the election has nothing to do with it. We cannot afford to wait until after the election to start working to improve the economy.

  • Posted by Jim

    Maybe Bernanke should have taken that step a long time ago!

  • Posted by Rachael Kauss

    Thanks, Mike. The podcast is available on iTunes under the title “The World Next Week”

    http://itunes.apple.com/us/podcast/the-world-next-week/id306597476

  • Posted by Todd Lowery

    Easing before Election
    By Todd Lowery

    Let’s look at this objectively by taking the “My Guy’s Gonna Win” blinders off for a few minutes. To do this we can examine both scenarios, because ultimately the outcome of the election has more lasting impact and influence on the flow of money than a proven short term fed fix. Let’s assume in the first scenario that the President remains. If Bernanke were to act quickly, and ease the most he is able to without immediately triggering staggering inflation, then we would see a brief boost and it would last into the first three or four months at the most of the next term. It only kicks the can down the road at best, but the risks are even far greater. As in 2010, the last round of Quantitative “Credit” Easing, Richard W. Fisher, then president of the Federal Reserve Bank of Dallas, warned that a potential risk of QE is, “the risk of being perceived as embarking on the slippery slope of debt monetization. We know that once a central bank is perceived as targeting government debt yields at a time of persistent budget deficits, concern about debt monetization quickly arises.” The Economic Climate is more deeply rooted in a lack of business starts, growth and overall expansion. In 2010, the Economic Climate was more dynamic in an immediate sense and the apparent hemorrhaging occurred in the housing sector. Then, we could directly attribute the cause and effect of QE2 to that of directly helping the economy because the easing that took place was in the form of buying private sector assets including residential mortgage-backed securities. Back then it was appropriate, but now that the crisis has flowed into all sectors of the economy and isn’t as focused in the housing sector, we have to wonder if this same approach is the wisest thing, especially as a knee jerk reaction to a widely publicized Jobs report. Wouldn’t another direction of spending by the Fed, like in the form of expanding new and existing business growth do more to stimulate the economy? Getting back on track, let’s next examine the second scenario of Presidential Candidate Romney being inaugurated January 20th. Bernanke may well institute QE3 ahead of the Election. The resulting inflation that always follows the artificially induced prosperity of QE is directly proportionate to the amount of easing. Assuming no other dynamic economic changes sneak up on us and affect these two huge drastic changes, an Election and QE, a new President Romney will then be inheriting and tackling a gigantic $16 Trillion dollar debt and 8% unemployment, to add to that freshly minted, artificially induced inflation would not make his job any easier, in fact it could just make it a whole lot harder. In light and lieu of either of these two only possibilities, I would recommend to our fair-minded Chairman Bernanke to stay the course, wait patiently as he has been for the dynamics of a once-in-four-year General Election to run its course and he can get a real bearing of where the winds of change will be taking us. Only then, in all fairness, will the good Chairman know just how much, if at all, easing will be required.

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