The Covid-19 effects on presidential election

I’d like to jump ahead 6 months — not to predict the future — but to model some of what I see could be happening to the economy.

The assumptions to this model is that 75% of the country is no longer on lock down, however only roughly 50% of the economy is open three weeks before the presidential election.

The biggest economic headlines have President Trump battling Fed chief Jerome Powell over raising the Fed Funds rate to combat expected inflation as a result of the trillions of dollars being pumped into the economy.

Hyperinflation is the buzz term used by Wall Street economic analysts as grocery and gasoline prices rise 33% over the last two months.

Comparisons are made to President Jimmy Carter’s Fed chief Paul Volcker taking interest rates up to 18% to combat crude oil pricing wars following the dollar coming off of the gold standard in the mid-’70’s.

The counterpoint from the White House is that the velocity of money is still too constrained by the fact that New York, Chicago and many other important cities are back in lock down after moving too quickly to reopen.

Treasury Secretary Steve Mnuchin is telling the nation that the additional liquidity is needed to get the rest of the economy up and running once the second wave of the Covid-19 passes. He points out that more than $10 trillion in economic activity have yet to come back on line.

While this may not effect the election results, 2021-2022 will be a constant battle between raising rates and economic growth.


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