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Too hard to tell who is going to win, it will be VERY VERY close. If I was a betting man I would probably say Obama. I think between the tea party and the state of Arizona (and other states wanting to stop anybody who appears to be brown in color) just about killed any latinos voting for Romney. The 47% comment didn't help him either. Obama care is going to be tough on lots of working families and I for one am not happy with it.
My. 02
[QUOTE=Tiny12;428255]Member 2041, Why don't you stay on, but stop implying the rest of us are morons, idiots, illiterates, hypocrites and, worst of all, litterers.[/QUOTE]I'll pass, as I can't see any constructive purpose in continuing these discussions in this particular forum. BTW, I've never IMPLIED any of that mentioned above. Whenever I believe something to be the case, I say so, and I'm pretty sure I actually said so here.
I don't know who will win but if Obama does win, the (non-Cuban) Hispanic vote will for sure be a huge factor. AZ and CO are swing states with many latinos and Romney only has something like 10% of the vote. Of course the Hispanic turnout % is lower than average so that'll mute the effect of that. I don't think the stupid rape / abortion comments will affect the presidential election but they could affect the Senate majority, which is going to be pretty close as well. The IN guy might still win but the other one looks like toast.
Shit, it could be win-win for me if Romney gets elected but can't repeal the health care bill due to no Senate majority. I don't agree with his tax ideas but they do favor me from a selfish standpoint. I don't agree with all the right wing abortion stuff but I don't plan on needing an abortion any time soon. In fact even a sluggish growth scenario doesn't necessarily hurt me and would keep rents down. A lot of my jobs have been in fields where the worse the economy was overall, the higher was our demand, or else I benefited from inflation (because I had COLA and a fixed rate mortgage) , so it requires some different thinking to figure out whose policies are actually going to be better for me.
Selfishly I want higher interest rates and a stronger dollar. No idea which guy is going to give me that.
After following the campaign for several months, I have discerned the following differences between the Republican platform and the Libertarian platform:
[QUOTE=Dickhead;428260]Selfishly I want higher interest rates and a stronger dollar. No idea which guy is going to give me that.[/QUOTE]Too bad the Democratic ticket isn't Rubin / Volcker instead of Obama / Biden. Seriously.
Romney / Ryan would be better in the short / medium term. I don't know about the long term. If you believe what Obama and Boehner are saying then we will go over the fiscal cliff if Obama is re-elected. That means a recession and USA credit downgrade are much more likely. Which in turn means lower interest rates for a longer period of time and a weaker dollar. Also, Romney doesn't like Bernanke, because he believes his policies weakened the dollar and he believes Bernanke went overboard on quantitative easing, to lower interest rates. Romney would probably appoint a more hawkish Fed chairman when Bernanke retires, who would support higher interest rates and a stronger dollar.
In the longer term, if Obama is indeed going to carry on with his spending plans and is not going to raise taxes on the middle class or cut entitlements, then we're headed for a debt crisis. Normally that would mean higher interest rates and a weaker currency. But given the dollar is the world's reserve currency, will we have to raise real interest rates (which I assume is what's of interest to you)? That's a question. You probably have a better idea than I do. High real interest rates and massive government debt would be very painful to deal with. Could we go along with interest rates way below inflation and solve the debt crisis that way?
All of the above assumes politicians are telling the truth. Obama and Boehner might be likely to bend, and Obama if re-elected and if he has the votes in Congress might raise taxes on the middle class. Or just leave tax rates on everyone where they'll automatically be as a result of the end of the Bush tax cuts on Janauary 1.
I believe Romney's policies are more likely to promote growth, which in turn would cause higher interest rates and a stronger dollar. You'd probably disagree though.
[QUOTE=Tiny12; 428279]Too bad the Democratic ticket isn't Rubin / Volcker instead of Obama / Biden. Seriously.
Romney / Ryan would be better in the short / medium term. I don't know about the long term. If you believe what Obama and Boehner are saying then we will go over the fiscal cliff if Obama is re-elected. That means a recession and USA credit downgrade are much more likely. Which in turn means lower interest rates for a longer period of time and a weaker dollar. Also, Romney doesn't like Bernanke, because he believes his policies weakened the dollar and he believes Bernanke went overboard on quantitative easier, to lower interest rates. Romney would probably appoint a more hawkish Fed chairman when Bernanke retires, who would support higher interest rates and a stronger dollar.
In the longer term, if Obama is indeed going to carry on with his spending plans and is not going to raise taxes on the middle class or cut entitlements, then we're headed for a debt crisis. Normally that would mean higher interest rates and a weaker currency. But given the dollar is the world's reserve currency, will we have to raise real interest rates (which I assume is what's of interest to you)? That's a question. You probably have a better idea than I do. High real interest rates and massive government debt would be very painful to deal with. Could we go along with interest rates way below inflation and solve the debt crisis that way?
All of the above assumes politicians are telling the truth. Obama and Boehner might be likely to bend, and Obama if re-elected might raise taxes on the middle class.[/QUOTE]Well, a recession is associated with lower real interest rates (yes, I only care about real and not about nominal) , but a credit downgrade is associated with HIGHER real interest rates. I think the likelihood of a recession or even a depression is greater under Romney, personally, because of the demand side of thing. I'd ask the supply siders how come Hayek was never allowed to teach in the economics department (his PhDs were in political science and law but that is not the reason). When you look at a fiscal cliff, you have to look at both sides of the balance sheet. Ever since I took that intro accounting course at one of the great programs Doppelganger recommended, I realize you need to look at net liabilities and not gross liabilities. If you do that, the per capita NET indebtedness (negative international investment position) per citizen is only a little over $9k per person, assuming a 300 million population (source: US Dept. Of Commerce Survey of Current Business Conditions, July 2010 pp 9-10). That's not good but it is not Armageddon either. So I am of the belief that since the debt and trade deficit did not appear over night it is not necessary to balance the budget over night. I fear excessive belt tightening under Romney. It could be too much too fast.
Also I should point out that as long as the US dollar remains a vehicle currency, a current account deficit is almost inevitable because of what is known as the "Triffin dilemma." We have to supply dollars abroad and that creates a current account deficit. You have to ask yourself if the benefit from the seigneurage or interest free loan that results from having over 60% of the dollars outside the country is worth the risk to the current account as well as the risk of a run on the currency. I'm not really smart enough to figure that out but I DO know that the financial account now dwarfs the current account. Also roughly half of our current account deficit is traceable to China which means at least the problem is identifiable.
Similarly, and importantly, a recession in isolation STRENGTHENS the currency. I get really scared when righties don't understand stuff like this. Let's have a brief review of the current account and exchange rates.
A current account deficit is more likely with (as compared to other countries) : A higher price level (inflation makes your goods relatively more expensive than theirs so exports decline and imports increase) , growth in GDP (because it increases demand for imports; righties often get this backwards) , higher interest rates, lower tariffs and other barriers to entry (reduces imports) , and more attractive investment opportunities ([url]http://www.econlib.org/library/Enc/BalanceofPayments.html[/url], for example, but this is mainstream thinking).
Focus on that last one. Do we have a deficit because of excessive inflation, low productivity, and inadequate savings? Maybe. Or is it because US investments are viewed as being safer? Look how everyone ran to the dollar in late 2008 and early 2009 even though everything looked really dismal in the US as well. Then focus on the fact that the when you can settle a deficit by moving the foreign exchange rate instead of having to drain international reserves, the deficit is less urgent by definition. Not saying the deficit is a good thing, just saying that the righties often think in terms of a post-WW II Bretton Woods environment instead of a world with floating exchange rates.
Now, on to the determinants of exchange rates. US economic growth WEAKENS the dollar. Repeat that 500 times. Why? Because it increases the demand for imports. That increases the demand for foreign currencies while the supply of dollars is finite. US inflation weakens the dollar. Higher US interest rates (again, as compared to other countries' interest rates) strengthens the dollar; foreign capital flows to the US, increasing demand for dollars since the US investment is denominated in dollars.
So this: "Normally that would mean higher interest rates and a weaker currency," no. Sorry about that.
Let's look at what happens if real short-term interest rates remain low. This is supposed to be stimulative to borrowing and capital investment and thus should lead to job creation in the long run. So then the spread between LT and ST is supposed to reflect the consensus estimate of future inflation. Let's look at the spread between the 30 year T-bond and the 3-month T-bill. Right now it is 2. 92%.0. 12% = 280 basis points. 10 years ago it was 5. 16%.1. 64% = 352 basis points. 20 years ago it was 7. 65%.3. 00% = 465 basis points. My concern would be that such flatness would lead to excessive risk taking or "yield chasing" if it continues. That could be good for the equity markets in the short term but if you think about the graying of America there is a need for higher real yields on fixed income. This should happen on its own during times of economic growth, absent government intervention. So the government invention to keep interest rates low benefits the deficit but could be anti-growth if none of us old fuckers has any money to spend because we are getting 0. 01% on our money markets and don't want to invest long term since we could be dead. I would start gradually tightening the money supply at this point, while keeping the fiscal tap turned on a bit longer.
I don't thinking removing the subsidy on student loan rates was a very good idea. That has very long term implications for demand and consumption. OTOH I favor higher admission standards to keep some of the loans from going to waste.
[QUOTE=Dickhead;428281]but a credit downgrade is associated with HIGHER real interest rates. .[/QUOTE]You're right. In my own mind I was associating a credit downgrade with a weaker currency. When the USA was downgraded in August 2011, interest rates went down, probably because of the Fed. Having just looked at exchange rates too, to be truthful, the dollar got stronger afterwards too.
[QUOTE=Dickhead;428281]Similarly, and importantly, a recession in isolation STRENGTHENS the currency. .[/QUOTE]I don't believe this, if it's "in isolation". I looked at USA recessions back to 1969 and actually can't see a correlation between recessions and the strength of the currency. I think this is because USA recessions aren't usually in isolation. If the USA is suffering other places are too. You pointed out the example of people running to the dollar in 2008/2009 and that's a good point. Most of the steep recessions I'm familiar with in recent times have been correlated with weaker currencies. Since the late 1990's, Thailand, Indonesia, South Korea, Russia, and Iceland are a few examples. Conversely, regardless of what the theory says about current account deficits, when you're seeing growth, you see money coming into a country, to take advantage of investment opportunities and higher interest rates, so are more likely to see an appreciating currency. In other words, in the real world, the effects of growth on interest rates and investment flows swamp whatever effect the change is on imports.
How do you explain Australia? It goes through a long period of strong growth, always has big current account and trade deficits, and the currency is very strong.
[QUOTE=Dickhead;428281]So this: "Normally that would mean higher interest rates and a weaker currency," no. Sorry about that.[/QUOTE]OK, again, in the countries I've followed that's what happens during a debt crisis. Iceland in 2008 or Indonesia in 2007. Latin America in the 1980's. Zimbabwe. Germany in the 1920's. And that's what would be happening in Greece right now if it had its own currency. Governments take on too much debt and start printing money. Inflation goes up. Interest rates go up. And the currency becomes weaker. As I mentioned, I don't know what would happen in the USA since, as you say, the dollar is a vehicle currency.
[QUOTE=Tiny12;428287]Conversely, regardless of what the theory says about current account deficits, when you're seeing growth, you see money coming into a country, to take advantage of investment opportunities and higher interest rates, so are more likely to see an appreciating currency.[/QUOTE]That is the[B] non[/B]-current account, my friend. That explains some of the results you indicate, particularly in SE Asia where it was the financial capital pulling out. In fact because nothing happens in isolation, the theory behind determinants of forex rates is incomplete. So if you want to look for correlation, you're going to need to control for the other variables to "isolate" the effects. That is what Barro tried to do in that paper you posted. It's hard. The other thing about forex is that expectations play such a big role. Market expects the euro to weaken, so they sell euros, so it weakens. Self-fulfilling prophecy. Also, my guess is that when you looked at the "strength of the dollar," you were looking at the dollar versus a weighted average basket of currencies. That won't work, because as I said, what matters is the growth rate in GDP of country X versus a given country Y or Z. Your regression should be the change in the Euro/$ exchange rate versus the change in Euro zone GDP/change in US GDP and etc. for each of the major currencies. In fact I recently did that for the euro and dollar for the last twelve years, using monthly observations, and got the expected negative correlation. The r value was about (negative) 60% and 8 of the 11 signs (12 years so 11 changes) were negative (opposite). That's not a great r-value, which is consistent with an incomplete model. If you compare the average strength of the dollar vs. many currencies, then you are simultaneously comparing it to different countries in different stages of growth versus recession. It isn't too surprising you would not get much correlation doing that.
Now, a brief quiz. So foreign money comes in to take advantage of higher interest rates. What does that then do to interest rates? You need to think about interest rate arbitrage.
Dickhead, While I frequently disagree with you, I also learn from you, so thanks. We're getting off topic so I'll either send you a PM or continue on the thread that Punter kindly set up for this.
I went here:
[url]http://www.bea.gov/national/index.htm#gdp[/url]
and pulled the real GDP figures for as far back as they had them, which was 1929. I then calculated the rates of change for each annual period. Then I separated those years into Republican versus Democratic presidents (in the year following election I assumed the new guy was in for the entire year; somewhere in there, fairly early on, we switched from March 4 to Jan. 20 inauguration so it shouldn't make TOO much difference) , and averaged the rates of change in real GDP for all the years with a Democratic president and all the years with a Republican president. I had no idea what I would find. I will send the spreadsheet to anyone who wants it but it is simple to do.
Average (arithmetic mean) rate of change in real US GDP for all years ending with a Republican president. 1929-2011: 1.80%
Average (arithmetic mean) rate of change in real US GDP for all years ending with a Republican president. 1929-2011: 4.77%
Furthermore the coefficient of variation is about twice as high under the elephants as it is under the donkeys, 222% to 113%.
So I looked at this and smiled. I then felt sorry for the poor Republicans with the stagnant growth rates their policies obviously produce, and I decided to throw out the Great Depression and just look at 1933-2011. That is pretty charitable given that the Republicans were in power the entire decade preceding the Depression (which they then exacerbated by not listening to Keynes and doing pretty much what Romney proposes to do if elected).
Average (arithmetic mean) rate of change in real US GDP for all years ending with a Republican president. 1933-2011: 2.73%
Average (arithmetic mean) rate of change in real US GDP for all years ending with a Republican president. 1933-2011: 4.77%
The coefficient of variation is now a bit better under the elephants, I must admit, 113% to 85%. The compound return implied is still way, way higher for the Democratic regimes even if you throw out the Republicans' one biggest fuck up.
What do you Republicans and supply-siders have to say to these figures?
[QUOTE=Dickhead;428290]What do you Republicans and supply-siders have to say to these figures?[/QUOTE]Including the great depression and World War II in your figures is misleading. Sure, FDR's results are going to look great, starting when he did.
You're not taking into account Congress.
How much difference was there between the positions of the presidents? FDR, Carter, and Obama were left of center on economic issues. Reagan was a supply sider. Other than that the rest of the presidents could have switched parties and no one would have noticed.
As countries get richer GDP growth rates slow. The presidents from 1933 to 1969 were predominantly Democrats. As the USA became wealthier, there was a more even mix of Democrat and Republican presidents.
You're not taking into account changes in technology and demographics and many other extraneous variables.
The past is not necessarily an indication of the future. Putting Romney in the same category with Bush Jr. or Obama in the same category with Bill Clinton is a mistake, IMHO.
I looked at 1946-2011: Dems 3.71% vs. Reps. 2.73%, and during my lifetime, Dems 3 65% vs. Reps. 2.66%. I'd sure be interested to see the analysis with the Congress instead of the president but the presidents I know off the top of my head and the Congress I don't. Your other points are well-taken although I don't think I compared Clinton to Obama. You can see the growth slowing and the difference narrowing. It's true FDR benefited from a high base point but that doesn't explain the post WW-II results. If you did look at Congress you'd have to look at stuff like what was passed by lame duck Congresses and it could get messy. You could argue that you should look at the growth with a one year lag as well (this year is implementation of last year's policy). That is easy to do so I will.
Okay, if you credit this year's growth or lack thereof to last year's admin, the numbers don't change too much:
Rep Dem
Avg real GDP growth 1929 to date 1.762% 4.878%
Avg 1933 to date 2.666% 4.878%
Std dev 1929 to date 3.983% 5.368%
Std dev 1933 to date 2.375% 5.368%
Coefficient of variation 1929 to date 226.042% 110.039%
Coefficient of variation 1933 to date 89.090% 110.039%
Avg 1946 to date 2.776% 3.156%
LBJ was left of center to my way of thinking. Lots of fiscal stimulus and transfer payments. That was still Bretton Woods so no monetary policy.
[QUOTE=Dickhead;428294]Avg 1946 to date 2.776% 3.156%[/QUOTE]That's the one I'd go with. The difference doesn't look signficant in light of the other considerations. You'd never make it politics, you're honest. You're probably right about LBJ. I was thinking of his foreign policy, when I said he could have switched parties and no one would have noticed. But that's faulty thinking on my my part, as it's not relevant to what we're talking about.