You think this is bad wait until...Oh crap it's now

It is fun to see how some writing can be timeless, being relevant reading centuries after inception. While other writing is firmly rooted in a particular time and place. For our class project I chose to write about an article from two years ago that discusses the evolving nature of national economies. Greg Ip's blog post from October 24th, 2010, titled "Think This Economy is Bad? Wait for 2012.", is funny for being a slice of thinking from the recent past that postulates about what is now current events. Ip's article discusses how election years tend to cause financial problems to come to a head.

We need only look at the financial chaos that played out during the last American presidential election to see how government transitions can wreak havoc on markets. As Lehman Brothers foundered just before the election, then Treasury Secretary Henry Paulson attempted short term solutions to allow the new administration to enact real reform. The market reacted with outright panic.

Wall St 1929 (https://encrypted-tbn1.gstatic.com/images?q=tbn:ANd9GcRNM3AHRMWE1pBHvPwaGLoOd5pD1QQ7-qU6hR69HFKnqP4JK_1h)

Attempting to pass the buck to the new administration on economic issues has a long tradition . In 1932 Franklin D. Roosevelt caused major panic in the market by refusing to clarify whether or not he would continue the Hoover administration policy of fixing banks while tying the currency to gold. By refusing to clarify his position, FDR severely worsened the Great Depression. In 1971 Richard M. Nixon used wage and price controls to attempt to suppress inflation until after his reelection bid. This worked, sort of. While Nixon's plan worked, it led to worse inflation and a recession starting in 1973.

Nixon (http://3.bp.blogspot.com/-iFj1QL8xlsI/UH3c-FRKO_I

/AAAAAAAAEMA/Q7bgVhTetPE/s1600/Nixon.jpg)

America is far from the only country to engage in short sighted economic tweaking in the face of changing leadership. The deep recession in Mexico known as the "lost decade" resulted from a failed attempt to buy time till a new government could enact serious reform in 1982. South Korea faced a monumental crisis in 1997, when the government negotiated a series of loans to prevent a default. However confidence in these reforms was severely undermined when the opposition parties candidate attacked the agreement. Brazil faced a crisis in 2002 when confidence in the markets evaporated due to the uncertainty wrought by the election of leftist candidate Luiz Inacio Lula da Silva.

Fixing BoA (https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcQP-ABXlZwjAjo83B836RTE8WFTWcqHe4dbxtra9FvquZ43w2Ls)

Markets enjoy predictability, and few things are scarier than a new administration. These countries are fairly young and prone to volatility. The last hundred years has seen these and for that matter all countries endure major economic rise and perilous falls.So how can we better foresee such crisis? Just watch the election calendar. The crisis of 2008 resulted from long festering problems such as the lack of regulation, giant budget deficits and an over valued currency. Combined with uncertainty over how the new administration would deal with these major problems. As a result the outgoing administration attempted a band aid solution, when I tourniquet was needed. The new administration coming in continued the policy for lack of options in a crisis. The band aid in this case was the Troubled Assets Relief Program (TARP), and it mostly just flushed taxpayer money down a drain to shore up bad investments.

In the time since the massive bailout disaster brought the worst financial crisis in America since The Great Depression, attempts have been made to make sure it never happens again. One such attempt was the enaction in of the Dodd-Frank Bill, which seeks to regulate financial services to prevent future mass failures. But as with anything passed in congress only time will tell how effective it will actually be.

What we can count on is that problems in the economy will become more apparent in election years. In his article Ip's predicts some of the political showmanship on display in the current presidential race, such as how the nation will pay down its debt. Ip posits that the Republican nominee will assault Barack Obama's fiscal record, while Obama will blame that record on the mess he inherited from George W. Bush. Ip's prediction  that I see being born out today is that both candidates talk about the importance of better managing our nations debt, while not being specific about how.

Who will the markets like better? (https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcQ4DAHiQdEjApCaAzEu1AoQ24epCy679tIT5YdYbXYPv_tIw9IWfg)

The big question seems to be how confident will investors feel this election year. In 2008 investors pulled their money out of the market rather than face the uncertainty of an Obama or McCain administration. We will have to wait and see how the market reacts to the prospects of future economic policies of an Obama or Romney administration.

A headline from the 2008 election fueled crisis (https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcRSiVuc0r0AqLeU8hKb8bux30EH29yUqEYEdEXoZSf_uvUw95-G)

All told economics is a fluid science. As Ip's say's at the end of his article if the market continues to give us the benefit of the doubt this election year and continues to grow, it will only be a matter of time till election year pressure creates another crisis.