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Another Hypo of Fed-Fizz for the Economy?

Markets are croaking right now in anticipation of the Federal Reserve pulling its hypodermic syringe out of the arm of the American economy; that is, the end of QE II. If I were in the Obama administration or the Federal Reserve I would recommend that the Fed not break out its new syringe, QE III, until a solid consensus of support has built up.

In fact the more screaming and bleeding there is in the markets this summer, the better, because it will help to form a "coalition of the willing" across the political and economic spectrum: Chamber of Commerce Republicans on Main Street, Wall Street bankers, narco-Keynesian Democrats -- all could be smacking at the vein in their arms, for another needle of fed-fizz (sugar and caffeine). It's the only idea that economists can come up with.

On the other hand, Republicans at the national level could be unhappy if the economy feels a jolt from the Fed's joy juice in the summer of 2012, in time to help reelect Obama. But what will really count in the Media is not how good the economy is in the summer of 2012, but rather, how noticeable the improvement is. Breaking news, you see.

So the worse things look this summer (2011), the more dramatic the improvement will appear to be in the summer of 2012. Surely accounting schemes as complicated as those of the United States government are, uh, elastic enough to move as much bad news as possible into the summer of 2011. Perhaps some econometric computer models could be tweaked to help things along.

The irony is that the Fed's needle is all that's left to a country that has been fighting (and losing) a War on Drugs since the Reagan administration.

The only party-pooper is the double digit inflation in food and energy that might get worse if the Fed goes into helicopter mode. The Obama/Bernanke administration might have some success at limiting the political damage by demagoging speculators and greedy oil companies. Windfall profits tax, anyone?