By the time you read this article the presidential election will most likely be settled by the debate of 16th October 2012.
Obama’s last appearance was so poor it appears to have scotched his shoe in victory. I’m a Brit, so a disinterested observer from a political view point, but it was clear to me Obama simply had had enough of the job.
You can’t blame him. Bear markets make people look like idiots and bull markets make them seem like genius. Obama had a terrific mess to clear up and he has failed.
Its hardly surprising.
So Romney wants the job and looks like he has a chance to get it. What does that mean for the markets.
It doesn’t look good.
Traditionally a new president delivers an initial two years of austerity followed by 2 fat years to get his popularity up.
This slogs the market.
The market will fear this from a Romney win and this may explain the stock market’s recent pause for breath.
..and what can Romney do to right the ship of the US?
Does the system actually let him?
The following at the key numbers.
The household income of a US household is approximately $50,000
Government spending on a family of 4, $48000
It turns out for most of us that the US government and for that matter most governments of the developed world spend more money on you than you can earn in a fair days pay?
From a socialist point of view that’s great but from a right wing point of view, that’s awful.
Forgetting the ideology, that status quo cannot be very efficient,
It is efficiency that the US has lost.
So Romney should be set to roll back the state.
His claim is that he will do this via attrition. This would be smart. Simply stop hiring new state workers. As most of US work 40 years, roughly 2.5% of state workers retire each year. Don’t replace them and in 1 presidential term the government has shrunk 10%. Freeze government wages and inflation cuts real public sector wages by 10% or more. 10% less people getting paid 10% less money.
This looks good on paper, but what actually happens is, the cuts don’t get made.
Somehow the system carries on regardless. There is a lot of talk but little action.
So for all the talk, a Romney presidency will mean no real change. Will that surprise anyone?
Instead the Fed will fund the US by buying back US debt for cash-like instruments devaluing the debt and the currency in the process in a slow stealth process.
Hard assets and equities will rise in value. Soft assets will fall through lack of demand and technology improvements. There might be a correction around election time, but then it will be a good time to pick the bottom when the smoke clears.
The tide will not be turned because printing money will remain the line of least resistance and the only course of action the democratic process will allow for.
The west is hooked on government. The average American will agree the rich should pay huge sums in tax so that people who have little can have their needs met.
“From each according to their abilities, to each according to their needs.”
Obama said as much in the debate and Romney didn’t challenge him on it. The man who came up with the idea would be delighted. Until America wakes up to who that was, there is no going back.