Rick Perry and “Almost Treason”

Lots of chatter about Rick Perry.  At the time of posting, Intrade has him at a 40% chance of winning the Republican nomination, compared to only 28% for Romney and 7% for Bachmann.  That translates into a 19% chance of him becoming your next president.

There may be some things to like about Perry, but this post from Matt Yglesias highlights not just a gaffe, but a laying bare of the Republican’s “kill the economy to kill Obama” strategy:

If this guy [Bernanke] prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.

So he opposes further monetary expansion, not because he thinks it will be economically destructive, but because he thinks it will be economically beneficial, and as such would help Pres. Obama’s reelection chances.  Therefore to avoid having an impact on the election (i.e. “playing politics”), he wants Bernanke to do things to damage the economy.  Short-term pain for long-term gain.  The gain here being getting a Republican in the White House.

Wow.  This reminds of the book I just finished reading.  Lots of short-term pain there, but oh, the long-term gain!

Update: Scott Sumner reacts to this soundbite by calling Rick Perry “truly evil“.


Fed Statements, and The Timing of Market Movements

Loyal reader Adam offers:

the question [of why long-term rates Treasury dropped] regards the timing of the fall in long-term yields – was it before or after the Fed announcement?

Scott Sumner has two recent posts on this issue.  In this piece, Scott shows that first (i) equity prices and treasury yields both plummeted immediately after the Fed statement, and then (ii) equity prices subsequently surged while yields stayed low.  He argues that the immediate reaction in (i) reflected the market’s disappointment that the Fed did not explicitly announce QE3, while (ii) reflects “second thoughts”or perhaps a closer reading of the Fed’s statement.

I’m not exactly sure what those [second thoughts] were, but I’ve seen two possibilities discussed.  John McDermott suggested that there was wording similar to the Fed statement that preceded QE2.  Others pointed to the three dissents, suggesting that Bernanke is preparing to move ahead more boldly, and is willing to tolerate a higher number of dissents.

In this subsequent post, Scott reminds us never to reason from a price change, and explains that a drop in long-term Treasury yields could be either

seen as an expansionary move, reflecting greater than anticipated monetary stimulus, or a contractionary move—the Fed throwing in the towel and adopting the Japanese monetary model of ultra-slow NGDP growth.

So in answer to Adam’s question, the fall in long-term yields came after the Fed announcement.  But we still don’t know what that means.  And equity markets aren’t really helping us find the answer.