Pennies From Heaven

As the Presidential race unfolds and the slate of Democratic candidates is winnowed down to a mere 10 or 12, it becomes less clear what the potential outcome of the election might mean for capital markets, particularly given that electing the Donald did not provide any clear cut winners that one might have surmised at the time. As we can see from the last 3 years, The Donald is ostensibly for the following: low taxes, low interest rates, low dollar, and low to no regulation. Democrats  (who so aptly put by David Brooks of the NYT, seem to act as if they are all running for president of Brooklyn) are for: higher taxes on the wealthy (wealthy to be determined), strong green initiatives including onerous regulations on energy across the board, and a multitude of changes to health care depending on the day and which candidate you are speaking with at the time. At its very core, its one side playing defense with the other side trying to coalesce enough to play offense. Republicans would have you believe that its about protecting what’s ours via tariffs and targeted tax legislation, Democrats would have you believe that its time to take back what is collectively “ours” through punitive tax laws and re-regulation of industries which are deemed environmentally unsound. While my intent is not to get into a discussion of the relative value of each party position, what is clear is that as the economy weakens further, the efficacy of monetary policy will prove to be less and less outwardly effective at staunching the decline, leading both parties to support (read demand) new monetary policies  which stand outside the realm of pure interest rate manipulation i.e. direct payments to individuals. Think cash for clunkers but on a grander scale.

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