A Tiny Cloud

The persistent problem, apart from such-like catalysts, is how to unwind the US current account deficit without causing huge disruptions—nobody doubts it must eventually unwind and comments like those above, particularly given their venue, indicate that patience is finally beginning to run out. I suspect, however, that absent a crisis all parties will try to make the shift as gradual as possible; thus a sharp 25% drop doesn't seem to be in the cards but a steady decline for the foreseeable mid-term does. What that would mean is inflationary pressure here as imports become more expensive, and higher interest rates as the Fed tries to contain it. Profits for the fat cats may continue for a while but it's going to be the doldrums for the masses from now through November. I can't think of any way the White House gang could successfully prime the pump for a short term boost at this point. Apart from strapping themselves in for the ride all their options are on the negative side: as Rummy is often quoted as saying, "if you can't solve the problem, make it a bigger problem." But much is now in play against an October surprise, not least public opinion, and my best guess is that that surprise just may fizzle out. A tip of the hat to Pelosi, then, for already starting her transition planning.