With the American election looming we look forward to the final months of the year and the number of paradoxes we are facing.
The Republican principle demands that the deliberate sense of the community should govern the conduct of those to whom they intrust the management of their affairs; but it does not require an unqualified complaisance to every sudden breeze of passion or to every transient impulse which the people may receive from the arts of men, who flatter their prejudices to betray their interests.
Alexander Hamilton, Federalist No. 71, March 1788
As we look forward to the final months of this year and the most unprecedented election in American history, we are facing a number of paradoxes: If the US economy is progressing again after the financial crisis, it is close to full employment, incomes are rising, its population and its young people are more diverse and more progressive than ever, and the president has approval ratings of 50-55%, “how is this even close” as President Obama said the other day? And if the US economy is doing so well, and stocks, bonds and other assets are at record prices, why is there so little inflation and why does the Fed not raise rates?