Yes, Wall Street, There is a Santa Claus

“Santa Claus rally” is a stock market slang term that the highly-caffeinated fellows on Wall Street like to throw around this time of year, but the jolly bearded fat man who delivered Wednesday’s big gains was Ben Bernanke.

The out-going Federal Reserve Chairman has been very generous to the stock markets during his long reign, having printed up so many billions of dollars of that had nowhere to go in a zero-interest economy but Wall Street, and his parting gift was an announcement that the printing presses will now slow a bit. This might seem at first glance a veritable lump of coal to investors who have become addicted to the Fed’s unprecedented “quantitative easing,” but the stock market responded by pushing the Dow Jones Industrial Average up an impressive 293 points to a new record close.

Most of the media, who occasionally take time out from bashing those greedy Wall Street fat cats to tout their obscene profits as proof of a roaring economy, at least when there’s a Democrat in the White House, saw the gains as a reason to declare that happy days are here again. The Fed is “tapering” its money-printing because of recent encouraging economic data, the media helpfully explain, and the markets are now responding to same hopeful signs of growth. This beats writing stories about the record number of workers who remain out of the labor force, and there might even be some truth to it, but the good news seems wildly overstated.

Although the Fed will cut back on its bond purchases by $10 billion a month, it still believes that the economy is wobbly enough to require a $75 billion monthly infusion of freshly-printed cash. This is still a huge amount of monthly money even by Washington standards, and the more likely explanation for Wednesday’s big jump was the market’s relief that it will likely keep coming when incoming Fed Chairwoman Janet Yellen takes over. A 7 percent unemployment rate and the best year for housing starts since the immediate aftermath of the catastrophic popping of the last housing bubble might be good news by recent standards, but it’s hardly a reason for the record highs on the stock market.

— Bud Norman

The Good News is Killing Us

On Wednesday the experts at the Federal Reserve once again reported that the  economy is not at all well, something plainly obvious to all the non-experts who have given up all hope of finding a job, and the stock markets celebrated with yet another record-setting close. In the convoluted world we now live in, bad news is good news.

The bad news that the economy is sputtering and will likely continue to do so is good news for the stock markets, because it means that the Fed will continue to flood the economy with newly-printed dollars that have nowhere to go in our low-interest world except Wall Street. That record number of former workers now resigned to long-term idleness is good news, too, as they’re no longer counted among the unemployed and thus unemployment rate is falling. Should the bad news ever get so good that economy comes grinding to a complete halt that will also be good news, as America’s carbon emissions will also come to an end and we’ll all be saved from global warming, although the stock market might see that differently no matter how many dollars are printed onto recycled paper.

Those of a more glum disposition might think that the good news about an over-inflated stock market is actually bad news, or will be when the Fed is at long last forced by economic reality to stop printing money and the bubble is inevitably popped, and that a 7.3 percent unemployment rate is insufficient compensation for the lowest work force participation rate in decades, but that is why they aren’t editors or producers at the big news media outlets. The cheerier sorts of people who do get those jobs are content to report a record closing at the stock market and a declining unemployment, then move on quickly to the latest murder spree or celebrity divorce. Much of the public is therefore unaware of what the Federal Reserve is or what it’s been up to or what the consequences might ultimately be, and we’ve doubt they’re cheerier yet.

Many of the public officials who have to worry about this stuff as a requirement of their jobs are more concerned with other matters, judging by the debate about who will be the new boss at the Fed. Current Chairman Ben Bernanke is coming to the end of legally-limited term, during which he has been so obliging to the stock markets, and some of the Senators who will be voting on his successor seem more interested in the applicants’ race and gender than their monetary theories. President Barack Obama had hoped to appoint former Treasury Secretary, White House economic advisor, president of Harvard, and lifelong white male Larry Summers to the post, but so many Democrats objected to Summers’ past friendliness to business and his white maleness that he politely declined to be considered.

One of the leading foes was Sen. Elizabeth Warren of Massachusetts, the fake Indian and bona-fide left-wing nutcase, who was serving on the Harvard faculty during Summers’ presidency there and apparently developed a personal dislike for him. Much has been made about Obama’s inability to get a high-level appointment past his own party, with some seeing it as another encouraging indication of his weakened political standing, but even the shrewdest politician would find it difficult to placate a personally offended Ivy League professor.

There are good reasons that Larry Summers shouldn’t be the Fed chairman, but his whiteness, maleness, and insufficient anti-capitalism are not among them. The poor fellow has a strange record of being fired for the wrong reasons, though, and was pushed out of his post at Harvard by the likes of Warren not because he had badly mismanaged the school’s finances but because he quite reasonably stated that the Harvard math faculty was mostly male for reasons other than sexism. This is how positions of responsibility are now filled and vacated, though, and it looks likely the next several years of monetary policy will be determined by the same sort of silly identity politics.

The two most likely candidates are now Janet Yellen, currently a vice chairman of the Fed but invariably described as someone “who could become the Fed’s first woman chairman,” and Roger Ferguson, a former Obama advisor who is invariably described as someone “who could become the Fed’s first black chairman.” There are no doubt good reasons that either should Fed chairman, even if that “former Obama advisor” line on Ferguson’s resume is distressing, but their femaleness are blackness are not relevant qualifications any more than another candidate’s maleness or whiteness would be. Any applicant who is invariably described as “most likely to keep the foot on the pedal even after the car has gone flying over the cliff” would be the clear frontrunner for the gig, and you’ll want to be in the market on the day that good news is announced.

— Bud Norman