I disagree with Kudlow. It’s political and not economic.
The dems know that when the economy tanks they will get beat severely in the 2014 midterms. And if Bernanke ends his huge bond purchases a number of bad, bad things will happen.
1. Interest rates will rise. With a debt payment alone each year of 300 billion on our current debt, that will double or triple from its very low 2% or so right now. 600 billion will be the equivalent of the pentagon budget, and 900 billion will be the equivalent of social security and Medicaid. Try paying bills each year with the money spent on one of those 2 already spent just on interest payments. (Higher interest impacts big purchases, too.)
2. The stock market will nosedive. The Feds 85 billion purchases are what forces investors into the stock market because it’s the only place where money can be made. IOW, it’s artificially high and will crash.
3. House market will collapse. Mortgage rates will go back up to their historic rates of 6-8%. With wages decreasing and jobs dying, nobody will be buying.
4. Unemployment will surge higher. Higher interest rates will kill expansion along with obamacare killing expansion and holding down hiring. GOP amnesty will flood the market with illegals looking for jobs at the lowest rates. Maybe there’ll be a market for hovels.
5. Recession: all of the above will kill the economy.
So, will the dem party permit the Fed politically to cause all this without some kind of come-to-Jesus meeting behind closed doors?
My guess is that they’re already combing NSA records compiling Bernanke’s weaknesses. IT’s not a good time to be a relative of Ben Bernanke.
Kudlow should read your post!