"Confusion Reigns"

By Michael Every of Rabobank

Earlier in the week I warned of a lot more US election wackiness to come.

Well, Exhibit A: The debate commission decided the upcoming presidential debate on 15 October will be virtual rather than in person, logical given President Trump has Covid-19; and Trump refused to attend a virtual debate….perhaps understandable given the experiences many of us have had recently: “I can’t use Teams, do you have Skype? No? Can I use Zoom? It’s banned? Oh.” And can you imagine a debate which was all “Hello? Hello? Can you hear me?“ Not that live debates are seeing any answers to the key questions though. Even the Vice Presidential debate was actually akin to the 1970’s Two Ronnies’ Mastermind sketch:

Q: Your chosen subject last time was answering questions before you are asked. This time, you`ve chosen to answer the question before last, each time, is that correct?

A: Charlie Smithers.

Q: And your time starts now. What is palaeontology?

A: Yes, absolutely correct.

Q: What is the name of the directory that lists members of the British peerage?

A: A study of old fossils.

Q: Correct. Who are Len Murray and Sir Geoffrey Howe?

A: Burkes.

Q: Correct. What is the difference between a donkey and an ass?

A: One is a Trade Union leader, the other one is a member of the cabinet.

Q: Correct. Complete the quotation “To be or not to be…”

A: They are both the same.

Q: Correct. What is Bernard Manning famous for?

A: That is the question.

Q: Correct. Who is the current Archbishop of Canterbury?

A: He is a fat man who tells blue jokes.

Trump has now been given a clean medical bill of health to start public events again from Saturday, and is holding a rally…so is the rescheduled debate date of 22 October still virtual? Joe Biden is doing an ABC Town Hall on 15 October now; will Trump do one too? Might it be with Joe Rogan, as Twitter is urging? Confusion reigns. Clear and substantive debate does not.

Exhibit B: Nancy Pelosi will today push a bill to give the House, not the Cabinet, power to remove a president from office for medical reasons under the 25th amendment. A few quick comments:

1) Is this needed by a party up 14-16 points in the polls and three weeks away from a sweep of the White House, House, and Senate?;

2) It will not remove Trump from office. Even if passed in the Democrat-majority House, the bill requires passage in the Republican-majority Senate and a presidential signature – which won’t happen;

3) If it did, it would just put Mike Pence into office for a few days, after which Trump could self-certify himself fit to take over again, and over-ruling that would require a two thirds majority in both the House and the Senate;

4) The move is likely to fire up the base – but possibly the Republicans more as Trump is selling it as an “attempted coup”; and

5) That should be relative risk off for markets, if they can read the political tea leaves - but I am not sure they cocoa, as said in the UK in the era of the Two Ronnies.

Exhibit C: The shocking news of the arrest of anarchist/”extremist libertarians” who had planned to kidnap Michigan governor Whitmer and hold a “treason trial” over her virus-related restrictions. This should underline just how worrying downside scenarios are in this present crisis.

Exhibit D: We are apparently closer to a comprehensive fiscal stimulus after all(?), after the Democrats had rejected offers for a series of clean bills for airlines and households. Perhaps Mnuchin and Pelosi can find a window today to continue their push-me-pull-you as the Fed sits in the background with its head in its hands. Rosengren yesterday called this all “tragic”, and for once it’s hard to disagree with the Fed. “The Fed can ease financial conditions. We can’t replace lose income, though. That’s uniquely suited to fiscal policy.”

On which (lost income), more pubs are closing in the UK, as people old enough to remember the Two Ronnies sadly start to fill the hospitals again. The UK looks set to go back to shielding the vulnerable indoors again for months. Spain is also following suite with a 15-day emergency lockdown in Madrid, while a Spanish virologist warns of up to two years of mask-wearing ahead.

Meanwhile, also very important at the margin is that last night the US imposed sweeping sanctions on another 18 Iranian banks, which now effectively cuts Iran off from the global financial system completely. The US may be a house divided at home, but abroad it is still capable of major action: critics say this US masterplan will backfire, but the campaign of maximum pressure continues. Markets must not forget that there are other countries potentially heading for similar treatment for a variety of different reasons – some of their currencies are recognising it, while one is merrily going on its way as if that kind of thing can’t happen to it. Quite the Masterminds at work there answering the previous question of financial inflows rather than the current one of (more) potential sanctions.

Of course, whether you are long or short MXN or RUB, as just two examples, is now very dependent on what you think is going to happen on 3 November; which is why you have to keep looking at the election campaign in all its shambolic glory.