Anthony Peters, SwissInvest Strategist
I love the closing scene of the film “A Bridge Too Far” when the generals assemble in “Boy” Browning office and try to identify what had led to the Operation Market Garden disaster. “It was the weather.” “It was the single road”… and finally “It was a bridge too far…”
The GOP will now be going through the same process as it tries to work out how it lost an election that was un-losable. In the end, I suspect and if it is honest with itself, it will have to conclude that it lost the female vote over the ever-contentious issue of abortion and that this has cost it the White House.
Two Supreme Court judges are due to retire during the next four years and the risk to Roe vs Wade may well have been enough to sink Mitt Romney’s challenge.
Alas, as far as markets are concerned, that’s all now as relevant as yesterday’s 24-hour weather forecast. As noted above, we continue more or less as we were. Creating jobs for hard-working American families is all well and good and massively necessary but with US$2.4trn of federal tax revenues and a deficit of US$1.1trn, it will take a lot more than is palatable in order to bring this imbalance under control. In his acceptance speech this morning, the President stated “…the best is yet to come”. Is he really quite sure about that?
Like most election campaigns, the really serious issues were not addressed – not that most of the voters would have understood them, even if they had – but the absence of debate does not make them go away. As much as the post-mortem by the GOP might blame the two impending Supreme Court retirements and the subsequent appointment risk for the defeat, so the Democrats, if equally honest, might conclude that the election was not won for them by a smiling Barack O’Bama but by Fed President Ben Bernanke and his policy of swamping the country with near-free greenbacks.
Most of us know something of some foreign language and would, if pressed, admit that we speak enough of it to get ourselves into trouble but not enough to get ourselves out of it again. It’s a little bit the same with QE. We know how to implement it and can at best guess what good it does the economy, but we have no meaningful clue as to how to reverse it and what the implication of that might be.
The Romney promise was that whatever the O’Bama policy has been, it has not achieved very much and that an entirely different approach should be sought. Markets have greeted the election results with mild indifference – rather the devil you know than the devil you don’t know – and with a certain relief that nobody is going to be experimenting with new policies.
The newest wisdom seems to be that the White House might be tempted to let the country fall off the fiscal cliff and wait for Congress to right the ship again rather than expend energy and post-election goodwill by joining in the dog-fight. We’ll just have to wait and see.
Snorkel tube for Greece
Meanwhile, Greek debt caught a bid yesterday as it became evident again that something will be done to make sure that the country is offered a sufficiently long snorkel tube. The cost of default, both financial and political, are simply too high and the creditor countries know that it is they who are really caught with their backs to the wall. In the final analysis, unless the nation’s debt is written off to more or less nil, it will never recover.
The critical austerity bill has passed committee stage and will be debated and voted by the full parliament today. Let’s assume that opponents will abstain rather than vote against so that a minority can vote in favour and still carry the day; everyone can claim victory. Then the creditor members of the eurozone have about three weeks to agree to bailing out the bailout and, once everyone has surrendered, a significant victory will be declared by Jean-Claude Juncker, the muppet in chief. How do I not like that!
Meanwhile, as we wrestle with politics, the global economy will continue to go nowhere in a hurry.