Daily: My Reaction to the US Presidential Debate

There were a lot of media reactions to the Wednesday night US Presidential debate to sift through. The general consensus seems to be that Mitt Romney ‘won’ the debate and that this win makes the Presidential race closer. I think that’s probably true. Given the jobs report that just came in showing a massive 873,000 new jobs via the household survey, Obama may have a tailwind though. So the debate is probably not a big dial mover.

But the question for investors and for the economy is what the difference between Romney and Obama means. The common ding against Romney is that he will say and do anything to become President and that what he says can’t be believed. And if you believe this narrative, you will find his performance from Wednesday unconvincing. But my view is that Romney has pivoted to the center and that this is his more natural position. He feels comfortable being a moderate Republican and his debate performance shows this. I think that’s significant in terms of what we should expect policy-wise. What it means for me is that the ‘Real’ Romney is not that different from Obama. Likely, economic policy will be relatively stable whether Obama wins a second term or Romney wins an upset in November.

I would expect, then, that both Obama and Romney would resist heavy austerity with Romney probably moving slightly more to the austerity-life position that Cameron has in the UK. In both cases, I believe, there will be cuts in 2013 as a proof of fiscal rectitude but that those cuts would be limited in measure. The real question then is on the tax revenue take. Obama is likely to raise taxes, while Romney will not for ideological reasons, meaning that the risk of a higher deficit is actually greater with Romney since I am not expecting him to make large cuts.

So, overall, the importance of this first debate is that Romney has shown himself to be a natural moderate Republican. And he favors tax cuts but will be unwilling to make big austerity cuts. Overall, that reduces downside economic risk in my view. Finally, I should add that the US economy is performing better than I would have expected at this juncture. The jobs number and upward revisions speak to upward economic momentum that makes my January prediction of Romney winning due to the economy less likely.

Polls Show a Strong Debate for Romney – NYTimes.com

“A CNN poll of debate-watchers found Mr. Romney very clearly ahead, with 67 percent of registered voters saying he won the debate, against just 25 percent for President Obama.
A CBS News poll of undecided voters who watched the debate found 46 percent siding with Mr. Romney, 22 percent for Mr. Obama and 32 percent saying it was a tie.”

Debate ‘Cold’ Reaction: Yes, Romney Can Debate – James Fallows – The Atlantic

“I argued in my Atlantic story last month that Mitt Romney was better at debating than he was at any other aspect of campaigning, and that Barack Obama, famed and redoubtable orator, was worse.
Anyone feel like disagreeing with that, after the past 90 minutes?”

Obama’s Debate Strategy: Unilateral Disarmament? | Swampland | TIME.com

Obama Should Have Spent More Time in Court, Ctd. – The Daily Beast

“Politics is about communication and, last night, Mitt Romney was the most effective communicator. He presented himself as the moderate who won the Governorship in Massachusetts, not as the person he has been during this presidential campaign. For an unprepared debater, as the President was, that may have been a difficult about-face to deal with. But for someone who was prepared? You’ve been noting for months that Romney is on the wrong side of a number of 70-30 issues. Any shock that he moderated those positions in front of 50 million Americans? If the President wasn’t prepared for the Romney he saw last night, he has only himself to blame.”

Dana Milbank: President Obama doesn’t meet the press – The Washington Post

“In the hours after the Republican challenger Mitt Romney embarrassed the incumbent in their first meeting, Obama loyalists expressed puzzlement that the incumbent had done badly. But Obama has only himself to blame, because he set himself up for Wednesday’s emperor-has-no-clothes moment. For the past four years, he has worked assiduously to avoid being questioned, maintaining a regal detachment from the media and other sources of dissent and skeptical inquiry.”

Brenda Peterson: Why Romney Lost the Debate with Women: It’s Not a Prizefight

Why Obama Lost – The Daily Beast

“Romney, the multimillionaire, arrived in a suit, shirt and tie that looked like they’d been purchased at Macy’s. I doubt he’ll ever wear them again, but for one night, he looked the way most non-zillionaires look when they dress for business. His manner was warm, engaged, and respectful. He looked at the president when the president spoke, and his expression revealed no asperity or disdain. He jokingly expressed his sympathy to the president for having to spend his 20th wedding anniversary in Denver “with me” – and the joke worked.
Obama, by contrast, rarely looked at Romney. He looked down at his podium, which meant that the audience saw closed eyes and a frowning mouth. Again and again, Obama allowed himself to be dragged into a tangle of facts and figures – failing to realize that confusion is Romney’s friend. The Republican base saddled Romney with a hugely unpopular economic plan. The clearer and more specific the discussion gets, the more danger Romney is in. Unlike his supporters in the conservative media, Romney clearly understands this. The president must surely know it too, but he failed to act on that knowledge. He was professorial, elliptical, vague, abstract; Romney appeared plausible, concerned, compassionate, and energetic.”

For Obama, words not said in debate spoke the loudest | Reuters

“During their 90-minute debate on Tuesday night, President Barack Obama talked four minutes longer than Republican challenger Mitt Romney. But when the debate was over, it was what Obama didn’t say that defined the evening – and helped make it a good one for Romney.”

In the spin room, Republicans gloat, Democrats struggle | Reuters

“Republicans were quick to claim bragging rights after Mitt Romney’s aggressive performance in the first presidential debate on Wednesday, while Democrats struggled to explain President Barack Obama’s often flat showing.”

Post-Debate Analysis: The Media Can Now Get the Electoral Horse Race It Wants « naked capitalism

“From what I can tell, the trends that led Romney to do well in this debate are macro. Obama is not a bad debater, and he was not underprepared. Both Romney and Obama are executing their messaging strategy, it’s just that Romney’s worked, and Obama’s didn’t. Romney is pointing to the bad economy, and Obama is staying likeable and above the fray. Romney and his team believe that they can simply point to a failed economic strategy by the administration, and voters will fire Obama. Obama and his team think that Obama is viewed as a warm person, and they want to emphasize that he can relate to Americans in a way that Romney can’t.”


Monetary Policy

How ECB Chief Outflanked German Foe in Fight for Euro – WSJ.com

“By agreeing to create money to purchase struggling countries’ debt without limit, the ECB has ushered in the decisive phase of Europe’s battle to save the euro. If the ECB’s resort to the printing press fails to stabilize markets and buy time for crisis-hit countries to recover, nothing else will, economists say.
Even if it works, the ECB will emerge a fundamentally different institution, having abandoned major planks of the economic orthodoxy that shaped its charter and first decade. A more activist central bank, while welcomed in most European countries, is already confronting deep skepticism in Germany, where fears are growing that it is sowing the seeds of inflation.”

Monetary policy: The broken transmission mechanism | The Economist

Professor Woodford and the Fed | Gavyn Davies

“This is clearly a radical departure from anything the Fed has previously contemplated. The question raised by the epochal September meeting of the FOMC is whether it has now adopted the Woodford intellectual framework, in which case further significant policy changes become likely. Already, the way in which the Fed has formulated its commitment to a “substantial” improvement in labour market conditions is clearly influenced by Professor Woodford’s thinking.”

The Dow Is Up 2,800 Points in the Past Year Crossing Wall Street

“One year ago today, the S&P 500 hit its closing low for the year at 1,099.23. It was the first time the index dropped below 1,100 in nearly 13 months. The next day, the index got down to its intra-day low of 1074.77.
From the close of October 3rd to right about now, the S&P 500 has gained close to 32%. Of course, you wouldn’t know it from readying many blogs or following the financial news that stocks have done so well. It was about this time one year ago that crank Alessio Rastani gained notoriety by telling the BBC that the world economy was toast. The Dow has added over 2,800 points in the past year..”

Is there a zero bound? The “mysterious” world of negative nominal interest rates. | New Economic Perspectives

Will the Fed eventually move to negative nominal rate targeting? I think the answer is yes if the economy does not respond to present policy.

QE’s biggest problem? Destruction of savings – Matthew Lynn’s London Eye – MarketWatch

Macro Malpractice by Stephen S. Roach – Project Syndicate

“Two bubbles – property and credit – enabled a decade of excessive consumption. Since their collapse in 2007, US households have understandably become fixated on repairing the damage. That means paying down debt and rebuilding savings, leaving consumer demand mired in protracted weakness.
Yet the treatment prescribed for this malady has compounded the problem. Steeped in denial, the Federal Reserve is treating the disease as a cyclical problem – deploying the full force of monetary accommodation to compensate for what it believes to be a temporary shortfall in aggregate demand.” 

FT Alphaville » Don’t call it money printing, rubiks cube edition

““Today money” is made up of any exchange unit that is accepted by the economy for exchange of physical goods, assets or services. In our block it is represented by the light green colour. It can be bank credit, IOUs, currency notes, privately issued points, coupons or even pebbles. It really doesn’t matter. As long as the economy accepts the tokens for exchange and redemption of physical goods, it counts as “today money”.
It’s important to note that “today money” represents a ration of wealth that has already been created by the economy and is therefore already there for the taking. The work to create those goods has already been done. The money is a credit that allows the economy’s wealth to be shared out amongst the economy.  The amount of “Today money”  thus sets the clearing price for all goods and services.”

Currency Wars Are Good! – Matthew O’Brien – The Atlantic

“Sometimes, though, currency wars turn out badly. Just like I could respond to my friends getting in better shape by seeking out worse and less active friends, so too can countries take the wrong lesson from a currency war. They might try to prevent foreign capital from entering their country and hike interest rates to curb inflation rather than devalue. Brazil — which, rather hilariously semi-formally declared a currency war on Friday — is guilty on both counts.
The world needs more money. Currency wars create money. It’s time for policymakers to forget the wrong lessons from history, get competitive, and start pushing down their currencies. Peer pressure is real, and it might just save the global economy. “

FT Alphaville » Currency wars as global stimulus

“Currency wars are back in fashion. Even if you ignore the idea that those who fire the opening shots do so as an after-thought, there is still a feeling this may tip into widespread conflict.
But, the idea of currency wars as a negative may be fundamentally misunderstood (we blame the ‘war’ branding thing).”



Google warns of more Motorola cuts, revises up third-quarter bill | Reuters

“Google Inc revised up the bill for job cuts at its money-losing Motorola Mobility mobile phone unit in the third quarter and warned of further restructuring that may result in “significant” additional charges.”

Samsung claims jury foreman’s personal history tainted verdict

“Samsung has requested the $1 billion Apple v. Samsung trial verdict be thrown out on claims that jury foreman Velvin Hogan’s failure to disclose a previous lawsuit and bankruptcy led to a biased decision.”



Behind the Scenes of “Raiders of the Lost Ark”, 1980 | Retronaut

Hyperinflation Has Arrived In Iran | Cato @ Liberty

This has big geopolitical implications.
“Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.”

Review: Bull by the Horns by Sheila Bair | The Big Picture

““Bull by the Horns” is a really excellent book. Former FDIC Chairman Sheila Bair accurately describes the conflicted world of bank regulation in our democracy. Her well-written narrative of the Basel II mess, for example, and how these supposed “capital adequacy” rules, in fact, enabled vast securities fraud and criminality by the largest American and EU banks is very well done. Indeed, this book provides another authoritative view of the degree to which fraud was the root problem on Wall Street.”

ekathimerini.com | Troika wants faster cuts

“The troika is demanding that Greece increase the amount of spending cuts it will make next year by more than 1 billion euros in order for the country’s lenders to approve the austerity package the government has put together.
Kathimerini understands the European Commission, European Central Bank and International Monetary Fund want to increase the frontloading of the measures because they believe the Greek economy will perform worse than forecast in the draft 2013 budget presented by Finance Minister Yannis Stournaras this week.”

House prices fall for third consecutive month | Money | guardian.co.uk 

FT Alphaville » Chinese property is baaaaack!

“in 2010 the government began introducing measures to dampen speculation in the bigger cities, and the whole thing began to slow down, leaving many local governments and developers somewhat worried.
But, as of the last three months or so, there has been something of an upturn. More cities are recording price rises than price falls — a reversal of the late 2011 and early 2012 pattern. And Standard Chartered’s China strategists, who follow the sector quite closely, are fairly confident that is more than a dead cat bounce.”

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