1. There really isn't a relationship--it is just random coincidence. This explanation is easily debunked by statistical analysis--but more on that in later blogs. Also, do we really believe that everything the Fed does has no consequence and money supply is just random?
2. Bernanke thinks the economy is fine and doesn't need any help. Really?
3. Bernanke cares about the banking industry but not the economy. There has been a lot written on this in the financial pages and on the websites in the past few years, and to some extent it may well be true. But it doesn't explain election cycles.
4. The Fed has run out of ammunition to increase the supply of money. This is consistent with slowing year-over-year increases in money supply, but not with acceleration in money supply. Money supply growth decelerated prior to the 2010 election, accelerated dramatically in the interim between the 2010 and 2012 elections, due in part to quantitative easing, and has decelerated prior to the 2012 elections. Yet Bernanke says that another round of quantitative easing is available if necessary. So it must be that Bernanke thinks it is best not to have quantitative easing?
5. Fed decisions on the money supply are directly related to influencing elections. Oooh--isn't this a bit of a weird conspiracy theory? Is there really any evidence at all to support this?
Which is your favorite explanation? More data and analysis to come on