Obama doesn’t do economics, and if he wins a second term he will leave the economy to Ben Bernanke, whose QE solution has long run out of steam
While the slide of China towards a hard landing, just as the new Politburo shuffles onto a creaking stage, confirms Phase III of Global Crisis, all eyes are shifting west to the American election, now less than a month away.
Things are getting serious at last, with Romney walking away with a clear victory over a disenchanting Obama in the first presidential election debate. It’s time to head West, and this erstwhile blogger is off on Monday to gauge the atmosphere and issues, as the US economy is the only one now left standing that can pull the rest of the world back from the brink.
The US figures are confusing: employment is recovering, but unemployment is rising too! Try and make sense of that one. Growth in GDP is still at stall speed, but only because of Obama’s increasing the size of the public sector, which can’t go on forever. Then the deficit is still rising, as is the ratio of government debt to GDP.
Something just has to be done, as the US faces the Fiscal Cliff on 1 January 2013, when Dubya’s tax breaks end and government cuts are required, knocking GDP by a whopping 4%. Something very serious is going to have to happen to get out of this debt trap spiral. No wonder the rest of the world is watching and shivering.
Obama doesn’t do economics, and if he wins a second term he will leave the economy to Ben Bernanke, whose QE solution has long run out of steam. He has been calling on Obama to do something on the fiscal side to boost the economy, but Obama lost control of both Houses, even if he had an idea other than another pathetic dose of Keynesian initiatives. Not much prospect of economic salvation is coming from the Democratic camp. It’s much more likely that under Obama that the Bernanke will be left to kick the debt can further down the road.
Romney does do business, as well as slandering the electorate, which is unhelpful. He has already called time on Bernanke, who can retire to a university and spend the rest of his time rewriting the economics books on how QE saved the world. Romney senses that government must be reduced, and the private sector boosted by tax cuts. He must tread carefully on both issues. Cutting mandated public expenditure is very difficult and takes time, and it all depends on clear control of both Houses. And tax cuts must be targeted on the middle and lower ends of the electorate, and not on the rich.
If corporate America gets expansive tax cuts as well as other business-friendly initiatives, then corporate America has the cash to get the economy growing again. Expect Wall Street to steam back into action, and for a massive amount of M&A deals to get going – no company with a market capitalisation of below $10.0 billion will be safe from takeover.
On the face of it, the GOP is nearer the economic answers than the Democrats, who can only offer more of the same. If Romney can use the next two debates to trounce Obama, especially on the economy, then the gaff-prone one could still become the next President. And that would be better for the world economy, which might be hit hard by renewed conflict in the Middle East: an invasion of Iran would send the price of oil sky-high, which would be deeply negative for the global recovery. Your favourite blogger will be assessing the debates and the prospects, and will be reporting back regularly. Stay tuned …
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