US: the GOP and the mullahs

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Editorial
The Guardian,


A timeworn trope of rightwing discourse about Iran is that it is futile talking to ideologues. Historian Bernard Lewis thinks that the dichotomy between Iranian moderates and extremists is false. A more accurate description, he maintains, is between pragmatists and ideologues, between those who find it necessary to make compromises in power and those who maintain the pure doctrine of the revolution. How would America's Grand Old Party fare under the same analysis? After all, Republican leaders have complained that Barack Obama was more interested in talking to Iran than to them about the budget. The comparison between Iran and the GOP might be closer than they think.

The GOP ideologues are those who refuse to see their attempts to repeal or delay the Affordable Care Act as an unwinnable fight. Why do it, then? "Because we're right, simply because we're right," says Steve King, the representative from Iowa. As hundreds of thousands of civilian employees began to be laid off yesterday, the pragmatists are those Republicans who believe they are about to sign the biggest suicide note in their party's history.

To bring federal government to its knees for the first time in 17 years is one matter. If the disruption is short, it can be tolerated. Judging by yesterday's rise on Wall Street, investors are betting that Washington will soon find a compromise. But to threaten a fragile economic recovery is quite another matter. Even the partial suspension of government should be seen as a taster of the political paralysis that may be to come. The opinion of the credit-rating agency Standard & Poor's is worth quoting here: "This sort of political brinkmanship is the dominant reason the [US government's] rating is no longer 'AAA',".

It is part of the Tea Party's credo to treat the launch of health insurance subsidies as a groundbreaking development that will change the nature of politics, creating a new class of entitlement addicts. But for anyone else in the party who places strategy above the glory of the fight, the purity of the cause, this week must be profoundly disturbing. They are in the firing line more than anyone else.

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http://www.theguardian.com/commentisfree/2013/oct/01/obama-shutdown-republicans-iran

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1. Did Wall St want the Sequester and Shutdown all along? Austerity by another name is Rightsizing

That explains the behavior of the Dow and the Republicans who worship it. The seeming GOP hysterics over Obamacare is actually just a rational pretext to cut several weeks off federal payrolls with a like reduction in budget outlays. The ones who bear the brunt are individual workers, not big companies with ongoing, multi-year federal contracts.

Stock markets were up early Tuesday, shortly after trading opened on the first day of the federal government's shutdown.

The NASDAQ Composite was up more than 1 percent yesterday. The S&P 500 was up roughly 0.75 percent, and the Dow rose about 0.4 percent.

Each exchange is also up over the past month. The NASDAQ is up 6 percent since the beginning of September, while the Dow is up by about 2.6 percent.

Considering that corporations and businesses are exempt from the ACA for a year they should be happy. Many companies are telling their employees to sign up for ACA because the employer will no longer pay for their insurance, with a corresponding boost to the corporate bottom line, higher share values and added dividends that can be turned over to stockholders.

What else might explain the laissez-faire attitude among investors to political crisis? The lockup in Washington and the teetering of the government in Riome both present opportunities for global investors with a plan. Since the shutdown largely impacts individuals rather than large businesses,it looks like a win-win on Wall Street. Investment advisors aren't upset by either event, as this sampling of comment yesterday shows.

The strategy is to get away from "trying to pretend you know what's going to happen in any one event", said Alan Wilde, currency and bond portfolio manager at Barings Asset Management, which has $58 billion of assets under management.

"There's no easy way to trade unknown factors. One way is to take a view, but you're either horribly right or horribly wrong," he said.

For long-term investors to change their views, and thus spark sharp market moves, political instability would have to dent economic growth or trigger high and sustained volatility.

"The key challenge is trying to understand whether any bout of political volatility is sufficiently large to alter the path of the economy," said Mike Amey, UK portfolio manager at PIMCO, the world's largest bond fund.

"Ultimately, we doubt that this will be the case in either Washington or Rome," said Amey, who manages 8 billion pounds ($13 billion) of assets. http://www.reuters.com/article/2013/10/02/markets-politics-idUSL6N0HR2T720131002