Financial markets remain fixated on the question of whether or not America’s political classes will impose an entirely avoidable disaster on themselves, their fellow US citizens and, by extension, the rest of the world. While there are signs of rapprochement this weekend, Congress may yet fail to agree a new “debt-ceiling” limit. That could spark a world-wide market meltdown, so upending the fragile global recovery.
Those on the Democrat side of the aisle feel they’re on solid ground. The party controls both the White House and the Senate. President Obama’s sweeping healthcare reforms have been extensively debated, passed into law and ratified. And last year he was re-elected, no less, having campaigned on a ticket featuring this policy.
While still in opposition, David Cameron used to promise that a “Conservative government would share the proceeds of growth” between higher public expenditure and tax cuts. That was the Tory mantra – repeated ad nauseam from 2005 until the summer of 2008. It was a slippery phrase, allowing the Cameroons to have it both ways. By pledging to “match Gordon Brown’s spending plans”, Cameron hoped to banish the Tories’ “nasty party” reputation. The promised lower taxes, meanwhile, placated his core vote.
While “sharing the proceeds of growth” seemed like clever political positioning, it was actually economic nonsense. Brown’s spending plans, coming after years of turbo-charged state borrowing, were profligate. Matching them was “me too” student politics. Talk to some senior Tories now and, when recalling the “sharing the proceeds of growth” years, their eyes roll as their right index finger faintly twirls.
On 18th September, the Federal Reserve announced that it wasn’t about to start slowing its $85bn-a-month money printing habit? Why did the US central bank decide not to “taper”? The official line is that the Fed was worried about the impact of higher mortgage rates on the still-shaky US housing market. Fed Chairman Ben Bernanke also outlined his concern that the American labour market is weaker than it seems.
Another possible reason for the taper delay, one not cited by Bernanke, is that we’re in the “debt-ceiling season”, with Democrats and Republicans indulging in their seemingly annual game of posturing and buck-passing. Washington is playing chicken, once again, over the prospect of a US sovereign default.
Why are some Western governments contemplating an extremely risky military strike on Syria? What is the true motivation of those trying to upend the unsavory regime of Bashar Al-Assad?
Were we to see intervention, would the main driver be moral outrage, as the US and its allies sought to punish the Syrian President? After all, Assad last month ordered a ghastly chemical weapons attack, killing hundreds in a Damascus suburb.
“We’re not as cynical as the pundits believe,” proclaimed President Obama last Wednesday. “We are greater than the sum of our individual ambitions”. When it comes to post-election oratory, few can match the 44th President. Hoarse, even broken-voiced, after months of campaigning and the final desperate push, the most powerful person on earth basked in the adoration of supporters in Chicago, as they reveled in his re-election.
As the crowd’s roar hit fever pitch, Obama’s rhetoric soared, his final sound-bite fitting snugly into TV news bulletins across the globe, precisely as was intended. “We remain more than a collection of red states and blue states,” the re-confirmed President thundered. “We are, and forever will be, the United States of America”.
With just over a week to go before the US election, it’s too close to call. President Obama is rediscovering his touch as a ladies’ man, polling well ahead among female voters just as he did when he won the White House back in 2008.
Republican challenger Mitt Romney, meanwhile, is the choice of most men – or at those who intend to vote. The outcome of this titanic struggle really is in the balance, not least in the likes of Ohio and Florida, the all-important “swing states”.
Last Thursday, in its latest bid to kick-start the US economy, the Federal Reserve went “open-ended”. America’s central bank is to launch a third round of “quantitative easing”, Fed Chairman Ben Bernanke announced, while extending the length of its pledge to keep interest rates at rock-bottom. On cue, global equities surged, as confidence grew that the world’s leading central banks have “finally taken decisive action” to buttress both the US and European economies.
Bernanke’s move, of course, followed news in early September that the European Central Bank is to engage in “unlimited” buying of the sovereign bonds of “peripheral” eurozone members. This encouraged the belief that monetary union is less likely to crumble, which cheered-up global equity markets just before last weekend. Many traders are celebrating this weekend too, following Bernanke’s words on Thursday, which caused the S&P500 to extend a rise that has now pushed the index to its highest level since 2007. European shares also reached highs not seen for over a year.