The GOP Win: It Improves The Odds Of A Recovery, AND Makes A Crisis Way More Likely

weight weightlifter barbell


It’s easy to see why the GOP win could lead to an acceleration of economic growth. Bear in mind, that more stimulus has been off the table for a while, so to the extent that that’s a negative, the election hasn’t changed anything:

  • To whatever extent “regulatory uncertainty” was holding back business investment, that may go away, as there won’t be any huge overhauls of industry now.
  • Taxes are not going to get hiked.
  • Obama will be forced to aggressively be seen as more “pro-business” if he wants to have any chance of winning re-election. That probably means more tax cuts, etc.

But, here’s the catch… you can have a pro-growth environment that’s also crisis-prone:

  • If the banking industry needs a bailout, it’s way less likely to get one.
  • There’s a chance the debt ceiling won’t get increased, which would be catastrophic.
  • State bailouts are also going to be a longshot. If California is on the verge of going insolvent, help from Washington is going to be harder to come by.
  • Pressure on the Fed to print aggressively will increase, threatening to slam its standing.

So it’s a barbell, basically, and the outcome is either likely to be good or horrible, and not in between.

Now see here for the 11 states most likely to default.

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