I wrote this is a guest post for the News.com blog: not sure if they’ve run it yet.
The US elections, now only a few weeks away will be held in an atmosphere of economic crisis unparalleled since 1932. Paradoxically, however, it can be safely predicted that the immediate impact will be minimal, and almost certainly negative. This is because, under rules originating the pre-railroad era, the new President and Congress are allowed more than two months to make their way to Washington. In the meantime, the Bush Administration will carry on in â€˜lame-duckâ€™ mode. Back in 1933, Roosevelt had to wait until March to take office, and the outgoing Congress responded by bringing the inauguration of new presidents forward, but only to 20 January.
The Bush Administration is likely to be even more ineffectual in lame duck mode than it has been so far, and unlikely to consult in any positive way with its elected replacement, particularly if, as seems likely, Obama and the Congressional Democrats are victorious. So, US leadership is likely to be absent until early next year, by which time the situation will certainly have developed substantially, though it is hard to predict how.
Neither Obama nor McCain has any coherent plan to deal with the crisis. This is scarcely a major criticism; even those who anticipated the crisis in broad terms have been surprised by the speed with which it has developed, and even the most knowledgeable financial experts are making it up as they go along.
Still, it is clear that McCain has no real interest or expertise in economic matters, and his economic advisers have long since shredded their credibility. A McCain victory, with the associated prospect of a Palin presidency, would raise a serious risk of full-scale panic on global markets
The challenges for an Obama administration will be huge. Although there is reason to hope that the immediate danger of collapse in financial markets has been staved off by partial nationalisation, the US will certainly be deep in recession by January. With national debt already topping $10 trillion and interest rates close to zero, the capacity for fiscal and monetary stimulus is limited. Quite possibly, emergency nationalisation will have to be extended beyond the financial sector to rescue firms like Ford and General Motors which are, in the current context, too big to fail.