Options
How will the election results shape PMs?
secondrepublic
Posts: 2,619 ✭✭✭
My prediction is we will see increased borrowing, taxing, and above all spending. In the attempt to stave off deflation, look for the Congress to run the largest deficits ever. The result: inflation may be coming back with a vengeance. That should be good for PMs.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
0
Comments
Either party was going to inflate away as soon as the opportunity was right. So that's neutral imo. Let's face it. We have one effective party running the nation. The liberal majorities in the house and senate already showed the way.
What the markets have not yet understood is the effect of the remaining 90-95% of OTC derivatives. The markets also have no clue on how out of hand the printing presses could get down the road. Pundits may think that these are already fully discounted but there is no way it could be so. Maybe they're discounted for a month or few months out, but that's about it. There are just too many factors involved, with most of them totally hidden from view. Only the FED and Treasury (plus JPM and GS) know the full extent.
Derivatives won't be fully understood until the last bad trade is finally unwound. And if the bankers have their way, FAS157 rules will be deep-sixed for several more years. This might actually benefit gold in the short term as the deleveraging effectively slows to a crawl with the delaying FAS157. The need for dollars to unwind bets will wane and the printing presses can be placed in high speed to bail out everyone who shows up at the FED feeding trough.
A credit-crater too big too fill - Dow in best case sinks to 4000
roadrunner
<< <i>Markets tend to discount the future. >>
The process is highly imperfect. Remember Dow 14,000? Right at the time the credit bubble began to pop. Not much foresight there. How well did the the PhDs and MBAs and genuises at Bear Stearns, Lehman, etc. figure it out? Not even well enough to save their own jobs.
Ren
Stack'um High! (But well hidden)
John
1947-P & D; 1948-D; 1949-P & S; 1950-D & S; and 1952-S.
Any help locating any of these OBW rolls would be gratefully appreciated!
The following table shows the percentage rise or decline in the
Dow Jones industrial average .DJI, Standard & Poor's 500 index
.SPX and Nasdaq composite index .IXIC on the day after a U.S
presidential election and who won the Election Day vote.
Year Dow S&P Nasdaq President elect
2008 -5.05 -5.27 -5.53 Barack Obama
2004 +1.01 +1.12 +0.98 George W. Bush
2000 -0.41 -1.58 -5.39 No decision: G.W. Bush v Al Gore*
1996 +1.59 +1.46 +1.34 William Clinton
1992 -0.91 -0.67 +0.16 William Clinton
1988 -0.43 -0.66 -0.29 George H. W. Bush
1984 -0.88 -0.73 -0.32 Ronald Reagan
1980 +1.70 +1.77 +1.49 Ronald Reagan
1976 -0.99 -1.14 -1.12 James Carter
1972 -0.11 -0.55 -0.39 Richard Nixon
1968 +0.34 +0.16 --- Richard Nixon
1964 -0.19 -0.05 --- Lyndon Johnson
1960 +0.77 +0.44 --- John Kennedy
1956 -0.85 -1.03 --- Dwight Eisenhower
1952 +0.40 +0.28 --- Dwight Eisenhower
1948 -3.85 -4.15 --- Harry Truman
1944 -0.27 0.00 --- Franklin Roosevelt
1940 -2.39 -3.14 --- Franklin Roosevelt
1936 +2.26 +1.40 --- Franklin Roosevelt
1932 -4.51 -2.67 --- Franklin Roosevelt
1928 +1.20 +1.77 --- Herbert Hoover
1924 +1.17 --- --- Calvin Coolidge
1920 -0.57 --- --- Warren Harding
1916 -0.35 --- --- Woodrow Wilson
1912 +1.83 --- --- Woodrow Wilson
1908 +2.38 --- --- William Taft
1904 +1.30 --- --- Theodore Roosevelt
1900 +3.33 --- --- William McKinley
1896 +4.54 --- --- William McKinley
Source: Reuters EcoWin
<< <i>
<< <i>Markets tend to discount the future. >>
The process is highly imperfect. Remember Dow 14,000? Right at the time the credit bubble began to pop. Not much foresight there. How well did the the PhDs and MBAs and genuises at Bear Stearns, Lehman, etc. figure it out? Not even well enough to save their own jobs. >>
would it be stretch to think that the entire world market functioned and "grew" on easy money and equity in perceived increased real estate values based on VERY easy money, there fore creating a demand and forcing the real estate prices higher....i think a few "knew how high"
For Obama, Long-Term Ills and Short-Term Pain
By FLOYD NORRIS
Published: November 5, 2008
BARACK OBAMA’s victory in Tuesday’s presidential election was in many ways a repeat of Ronald Reagan’s win 28 years ago. Like Ronald Reagan, Barack Obama was elected in a year when a recession had helped damage the popularity of the incumbent. His eventual success as president may depend on a willingness to do what Mr. Reagan did: be willing to combat long-term economic problems while accepting short-term pain and the risk of a prolonged slowdown that could damage his popularity.
Both men were elected in a year when a recession had severely damaged the popularity of the incumbent. In each race, the incumbent party’s candidate tried to paint the challenger as a dangerous risk. Mr. Reagan was portrayed as a right-wing actor with extremist views; Mr. Obama as an inexperienced liberal who was weak on national defense and had “palled around,” as Gov. Sarah Palin put it, with a terrorist.
In each case, it appeared that the presidential debates helped to persuade voters that the candidate was an acceptable choice. Mr. Obama will enter office with the United States, and most developed countries, in a recession. What had been a slow downturn accelerated in September when the financial crisis worsened and the investment bank Lehman Brothers was allowed to collapse. Businesses and consumers slowed their spending drastically.
Stimulating the economy will almost certainly be at the top of the economic agenda, and some action is likely this year by the lame-duck Congress. Mr. Obama will obviously be in a position to help shape that legislation.
In doing so, he would be wise to keep in focus the longer-term problems that need to be solved, and to try to stimulate the economy without worsening those problems. They include severe budget deficits, crumbling infrastructure, accelerating costs for health care and a housing crisis marked by falling prices and rising foreclosures. The financial system has been kept afloat with the aid of government bailouts, and most mortgage loans — in a country that sees itself as a bastion of free market capitalism — are being made or guaranteed by the federal government or its agencies.
Unemployment is rising, and the figures for October — to be released Friday — are expected to show a sharp increase. Some have suggested that Mr. Obama should push for infrastructure spending, to repair roads and bridges and sewer systems, as a way to stimulate the economy and provide jobs while attacking long-term problems. The tax rebates earlier this year provided a temporary lift to spending, but the effect faded almost immediately, and a repeat of that tactic could increase the deficit without much offsetting benefit. But an infrastructure bill could easily degenerate into a pork-laden measure that benefits regions with powerful lawmakers, rather than serious needs.
How to cushion the foreclosure crisis will be a major issue for Mr. Obama and the increased Democratic majorities in Congress. Doing that without creating unintended and undesirable side effects could be difficult. Measures that delay the adjustment in house prices could postpone the day that the housing market is able to recover. Measures that help those in danger of losing their homes could encourage some who are now paying their mortgages to default.
Reshaping the financial system, and its regulation, will be a major challenge in 2009, perhaps made more difficult by the fact that most major financial institutions are now partly owned by the government. Mr. Reagan’s major challenge was soaring inflation, which his three predecessors — Richard Nixon, Gerald Ford and Jimmy Carter — had tried to confront without much success. The Carter recession was over when Mr. Reagan was inaugurated, but a focus on short-term economic growth would have made it much harder to bring down inflation.
The course Mr. Reagan adopted was to cut taxes at the same time he allowed a Federal Reserve chairman appointed by Mr. Carter — Paul Volcker — the freedom to attack inflation by sharply raising interest rates. Mr. Volcker, now an adviser to Mr. Obama, is remembered as an economic hero and has been suggested as a possible Treasury secretary in the Obama administration even though he is 81 years old.
But in the early 1980s Mr. Volcker was blamed for causing a severe recession that began early in Mr. Reagan’s tenure and continued through November 1982. The Republicans suffered losses in the 1982 midterm elections, and Democrats thought they were in good shape to win back the White House in 1984. Instead, the economy was clearly in recovery by then, and inflation was down sharply. Mr. Reagan was re-elected in a landslide, and was so successful that he became the first president since Calvin Coolidge to leave office and be succeeded by a member of his own party, George H. W. Bush.
George W. Bush, the son of the elder Bush, came into office determined to follow the Reagan course and not make the mistakes that his father had made, which led to his being a one-term president. He too confronted a weak economy early in his administration, and like Mr. Reagan he was able to push through substantial tax cuts as a way of stimulating the economy.
But unlike Mr. Reagan, who later allowed taxes to be raised to combat soaring budget deficits, the younger Mr. Bush refused to contemplate such an action. When the economy was booming, he saw no need to apply the brakes, and neither did the Federal Reserve chairman he had inherited, Alan Greenspan. Had they been willing to do so, the current bust might have been avoided, or at least been much milder.
Like Mr. Reagan, Mr. Obama will have to confront taxes in his first year. The Bush administration’s large tax cut in 2001 was temporary — a strategy that under Senate rules made it possible to push through the cut without having to win Democratic votes — and needs to be changed in 2009. Had Mr. Bush chosen a bipartisan approach, the tax cut would have been smaller, and the new Congress would not have to pass a tax bill immediately.
In passing a tax bill, the Congress and Mr. Obama will have to balance the long-term deficit problem with the need for shorter-term stimulus. Mr. Bush’s first tax bill presaged a leadership style that focused on partisanship and a determination to avoid compromise with his opponents. Mr. Obama’s first tax bill could show whether he will follow the bipartisan approach that he, like Mr. Bush before him, promised in the campaign. The success or failure of his administration is likely to be determined by how well he deals with the long-term problems the nation confronts, not by how soon the current recession ends.
<< <i> I cannot see how such huge deficits do anything other than damage the dollar and help PMs. >>
The value of the dollar being relative to that of other currencies, the answer will depend on the state of the economies of other nations. If our economy recovers first, the dollar will be strong relative to other currencies. If we lag behind other key nations we will have a weak dollar.
CG
<< <i>
The value of the dollar being relative to that of other currencies, the answer will depend on the state of the economies of other nations. If our economy recovers first, the dollar will be strong relative to other currencies. If we lag behind other key nations we will have a weak dollar.
CG >>
The value of something also depends on how much of it exists. The more money printed, the lower its value if likely to be. Similarly, the more borrowed, the greater the likelihood of an eventual debasement or even default, and hence the lower the value.