To recap on August 6th, I put out my list of things that needed to change to boost the markets.
Here they are again:
- Job growth that is consistently +100k.
- The Federal Reserve rolling over the quantitative easing purchases that are maturing.
- Congress announcing it will extend the Bush tax cuts for 1 or 2 years.
- Congress announcing it will extend the Death tax holiday for 1 or 2 years.
- Congress announcing a cut in the corporate tax rate.
- A turning over of the current White House economic team. (Romer and Orzag have already resigned.)
- A new economic team that contains members of the business community.
- A focus on polls showing a turnover of the House of Representatives.
- A focus on polls showing a turnover of the Senate.
- Republican leadership announcing they will back the Ryan deficit reduction plan.
- Bipartisan agreement to vote on Wyden-Gregg tax reform bill.
- A continued sell off in the US dollar that helps boost exports.
- A 5-10% appreciation of the Chinese renminbi.
- A signing of free trade agreements by the United States.
- The CFTC, the SEC and the Fed announcing they will follow the lead of Basel III and delay implementation of new capital rules.
As you can see, the list isn't perfect, but they are coming to fruition and the market has been rallying on them.
The latest is the resignation of President Obama's top economic adviser Larry Summers. The NYT reports that, "The White House says the departure has been long-planned(my emphasis)....His departure gives Mr. Obama a chance to reshape his economics team after the midterm elections, when Republicans are expected to gain strength and possibly reclaim the majority in Congress."
Long planned since the unemployment rate went to 9.6%, US GDP has decelerated and the Presidential approval ratings dropped significantly. I do agree that President Obama will reshape his team and this will be critical from the future of the country and the economy.
The criticism of the Obama economic team was that it was too academic and didn't have enough people with real world, private sector experience.
The key component missing appears to have been an understanding of the challenges of running a business and how regulatory burdens create uncertainty and generates a lack of confidence for hiring.