How likely is it that the economy will get better after the elections next year?

Answer 1

The economy does run in cycles but most economists agree that you can trace those cycles back to their sources.

The first two answers back to back really tell the story - - - Fed got out of the economy's way in '91-'92 and then came off the brakes early in '93-'94, trying to avoid repeating its overshooting in '87.

Bernanke is not going to do anything unless he has to. Right now that leads to the right answer: we don't need any interest rate hikes, but a cut is unnecessary as well. I tried to explain this to my Dad a year ago, it takes time for the liquidity to dry up, and last summer a lot of deals that would have gotten done the previous summer weren't getting done because rates were higher thus there wasn't a way to finance the deal at the multiples the sellers wanted. The deals that did get done still had the same high multiples but fewer were getting done. Now the multiples are starting to come back down. In M&A the trends in the microcap arena really don't lag the large-cap trends - - I've played in both - - because money is money - they both are driven by the same factors one of which is liquidity.

What we've learned is that the Fed has for a long time tied its decisions to consumer prices, which doesn't really work the way it used to. Real prices were falling because of the efficiencies realized through new technologies (the capital investment in which couldn't / wouldn't have happened in the 1970s due to high tax rates and inflation and later, high interest rates) and free trade. In response, to prevent "deflation" - or apparent "deflation" - in consumer prices, the Fed supplied a lot of liquidity. There was also a lot of growth due to the same shift toward a more market-oriented economic policy, so you can't just take all the monetary growth and call it slush, but some of it was. But this did not translate into dramatically rising consumer prices - (a) because, again, the efficiencies almost outpaced the liquidity, and (b) because the liquidity flowed into long term assets, driving up their value. As a result you had a series of asset bubbles - - NASDAQ, housing, energy, minerals, housing again - - and when these bubbles popped the liquidity never found its way to consumer prices - - indeed when the minerals bubble caused costs of finished goods to increase, the producers of those finished goods just ate it - chemicals, agriculture, etc.... and only now in the last 1.5 years are beginning to be able to push the higher costs on to the consumer.

How did they survive? In part by trimming labor costs - - but you can pick your poison there, either you won't receive the same raises you used to, or prices will go up - - - I'll take price stability.

Have things improved over the last quarter century? Yes, and dramatically so. Is most of that real? Yes. But the liquidity effect cannot be ignored. Minus the liquidity effect I think the economy over the last quarter century would have been much like the mid-80s, early/mid-90s, 2005-6.

The cynic in me thinks what will happen is - - Hillary's going to get in, raise the top marginal rate by 1%, the Fed will at the same time cut rates by 100 bps, the economy will grow, real revenue will increase somewhat, and Dems will say "see, the tax hike brought in more revenue and didn't harm growth."

But the realist in me says Gentle Ben should not, and will not, cut rates 100 bps points.

And if he does, buy gold.

Answer 2

Hard to say, alot can happen in next 12-18 months. Although overall the economy isn't too bad. Other than the housing market everything is pretty good. My portfolio has increased about 9% a year for the past 8-10 years, my taxes are down. Unemployment is down, poverty is the same as it was in 2000. And the housing market was bound to drop, unethical lenders combined with too much growth too fast is bound to pop the bubble. It doesn't take a genius to figure out that if you keep building new homes instead of selling pre-owned homes sooner or later you will have more houses than people to live in them. And when you have more supply than demand prices go down.

Answer 3

It is well documented everywhere that the economy is thriving right now. As long as the GOP is elected again (which is pretty much a lock at this point) the economy will continue to grow and prosper.

Answer 4

Iv been wondering the same thing, I belive it will get better, I sure hope it does. I was watching CNN yesterday they were talking about homes loosing there value and how people used there homes as a "piggy bank" meaning they used it as collateral to borrow money against and all this money was building up our economy and now with the value of homes decreasing so is our economy. I have been thinking about what it would be like having some of the presidential candidates as president I feel like we should give someone else a go at it besides the Clintons and the Bushes. I asked a question simular to this one a few weeks ago, I hope you get a better responce.

Answer 5

not likely the fed reserve is in one of the toughest situations it has ever been in - there is a reason the federal reserve will not lower interest rates while the stock market falls -inflation is inevitable -historically after and during every war inflation has taken place at a greater rate than when in peace -also factoring in the fact that the price of gasoline has increased 300% in the last 7 years -unbiased inflation will arrive no matter what the fed does with interest rates - also another factor is that possibly one in ten homes will be in foreclosure in the next 1 -3 years due to the fact that the fed will be forced to raise rates to fight inflation -credit cards are now being used instead of home equity to keep consumer spending level when those cards are maxed-the little growth we see now will be over - .

Answer 6

If the Democrats win then expect a more deficit spending then a rationalization of a tax increase followed by a recession. If you think I am kidding look at what is happening now. The Liberals are already talking about tax increase and they are trying to pass legislation to increase spending over time.


By the way Loinheart. Clinton inherited a booming economy and left it in recession. Carter created double digit inflation and double digit morgages. Is that you idea of good?

Answer 7

If a Democrat is elect, much better. Republicans are so hypocrital with their pro-family, fiscal conservative rheteric but Democrats has to alway clean up the Republican's mess after they leave office. The Democrats have always been for the people and have always tried to do what is right by the people, but the Republicans can stand to see the common, everyday folks get ahead. So that stand in the Democrats was and drag their names through the mud. They have alway tried to make it a Stigma to be for the Democratic party. They have always tried to make the Democratic party the party all about gays, drugs and anti-family. You can't get no more hypocrital than that. But you can't hide the light of truth. What's done in the dark, shall come to the light.

Answer 8

We will stop throwing away billions into Iraq. The democratic party government will ease on terrosist paranoia and get more involved in a deveploment agenda. Hopefully, the new governement will cancel all imports from China and encourage and help American enterprenuers to invest and produce here at home thus creating employment and improving the quality of live of Americans. The new government will sort out the mess that is illegal workers and get every person working in the country to pay tax thus improving on the exchequer. The demos will keep their campaign promises on universal health care for all. This will unburden most Americans from the financial bondage they have been subjected to by the PPO etc on worthless and expensive health care insurance.

Answer 9

we have an amazing economy condisering we are at war and there is no major inflation, due to no major oil troubles. if a dem gets in, look out, expect problems unlike what we've seen with bush. bush has his faults, but the repubs always keep taxed low, especially on business. when you tax businesses to death, the machine which runs the economy, the economy gets hurt. dems do not care about that. god forbid if hillary gets in, she is anti business.

Answer 10

The economy always improves after a democrat gets elected president.