Wednesday, November 04, 2009

Post-Election Analysis.

Mike Barone provides a concise recap of what happened yesterday. It's actually two columns (here's the other one) and it pretty much covers the waterfront.

The parallels to 1993/1994 seem especially ominous for Team Obama, as well they should. The aftershocks of the 1990-1992 recession made 1994 the year of going sideways and backwards and down. Veteran Wall Streeters still shudder at the memory of it. The aftershocks of the nearly complete collapse of the global financial system in 2008 and the recession of 2007-2009 will likely be much more vicious and much more painful.

Soon enough, perhaps sooner than people think, the great flood of free money (which was necessary to keep the financial system afloat) will begin to abate. Interest rates will begin to creep up as the Fed exits from the stage. The dollar carry trade will no longer work. Markets will deflate. Cost cuts will resume. Unemployment will get worse, not better. 2010 will likely bring nothing but economic pain.

If you're the party in power, you're going to get hammered as a result. Assuming the GOP can adopt a very simple platform -- spend less money, create more wealth -- they can recapture the House, the Senate and most of the key statehouses. This being the modern GOP, I'm certain that they'll figure out a way to snatch some defeats from certain victory. But the wind is at their back and all they really have to do is raise a big spinnaker and point the ship dead down-wind.