The results of yesterday's elections further solidify the trend of increasing political volatility. Survey results indicate that much of this volatility has been driven by widespread dissatisfaction concerning the economic situation.
While this volatility has been recognized, many of its implications have lacked recognition.
On January 25, 2010 I wrote a post titled "Political Volatility." This post discusses other implications, particularly economic, of this political volatility.
Also of (increasing) relevance is an article I wrote in December 2008 titled "President Obama's Greatest Challenge." (listed as the fourth article in the Directory of Articles)
A Special Note concerning our economic situation is found here
SPX at 1193.57 as this post is written
Showing posts with label politics. Show all posts
Showing posts with label politics. Show all posts
Wednesday, November 3, 2010
Monday, January 25, 2010
Political Volatility
Over the last few years the political scene has become more volatile, swinging from heavily Republican to heavily Democratic. Now, it appears as if the political volatility is increasing yet again, with the recent election of Scott Brown and the unexpected hurdles Ben Bernanke is facing during his reconfirmation. Many incumbents (and political appointees) who until recently seemed to hold "safe" positions may well find themselves open to losing elections.
Many would view this increased volatility as a positive sign the political system is "working." Of course there is credence to this view.
However, from an economics perspective, there are other consequences as well. The implications are potentially vast.
Desperate politicians may well feel an increased need to "do something" to prove that they are mindful of, and acting upon, our economic problems. "Doing something" about our economic problems often entails some type of intervention or other variant of spending money. As we have seen, the size of these interventions is often implied to denote their worthiness, with larger interventions purportedly more beneficial than smaller ones. When one listens to politicians speak of their intervention legislations, it almost seems as if they view large interventions as a "badge of honor."
I have written extensively about interventions, and will continue to do so. They are very much misunderstood. Of particular concern is that as time goes on and our financial problems grow in size, there has been a growing insensitivity to the ever-increasing size of the interventions. Whereas just a couple of years ago a $150 Billion intervention would seem large, now that same size of intervention would be considered small.
While I have previously written that interventions would continue, it is important to understand what factors are driving the trend.
SPX at 1102.00 as this post is written
Many would view this increased volatility as a positive sign the political system is "working." Of course there is credence to this view.
However, from an economics perspective, there are other consequences as well. The implications are potentially vast.
Desperate politicians may well feel an increased need to "do something" to prove that they are mindful of, and acting upon, our economic problems. "Doing something" about our economic problems often entails some type of intervention or other variant of spending money. As we have seen, the size of these interventions is often implied to denote their worthiness, with larger interventions purportedly more beneficial than smaller ones. When one listens to politicians speak of their intervention legislations, it almost seems as if they view large interventions as a "badge of honor."
I have written extensively about interventions, and will continue to do so. They are very much misunderstood. Of particular concern is that as time goes on and our financial problems grow in size, there has been a growing insensitivity to the ever-increasing size of the interventions. Whereas just a couple of years ago a $150 Billion intervention would seem large, now that same size of intervention would be considered small.
While I have previously written that interventions would continue, it is important to understand what factors are driving the trend.
SPX at 1102.00 as this post is written
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