Andy Kessler

Stock Market and Oil vs. Monetary Base

A picture is worth a thousand printed dollars!

The Dow Jones vs. Monetary Base:

Oil (West Texas Intermediate) vs. Monetary Base:

WSJ: Raise Rates to Boost the Economy

The chairman of the Federal Reserve is stuck between a rock and a hard place—well, more like a house and a gas tank. How to escape? Mr. Bernanke, raise interest rates now.

In order to the save bank balance sheets that he never cleared of toxic mortgage assets, Ben Bernanke's near-zero interest rate policy and dollar- printing programs were an attempt to create a so-called wealth effect. "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance," Mr. Bernanke wrote in a Washington Post op-ed last November. "Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending."

In other words, the Fed is manipulating the stock market. And it has been on a tear, up 19% since Mr. Bernanke's Jackson Hole speech last August outlining a second round of quantitative easing.

Unfortunately, when you print dollars, you debase the currency—and it shows up in higher oil prices, already rising well before the rebellions in Egypt and Libya. Copper and wheat and food are also seeing increases. For that matter, just about everything is rising except home prices. The Case-Shiller home price index dropped 2.4% in December.

What Mr. Bernanke's dollar printing has given to consumers in a supposed wealth effect, it has taken away in the cost of living.