British residential and commercial property prices could be boosted by an Obama victory in the US. It would trigger a number of radical changes in economic policy in America where some of the latest reports suggest that house prices are returning to normal.
Any new confidence which sweeps through the US – and the swift implementation of several economy-boosting policies – is certain to be reflected in the British market.
Obama is likely to install a new Treasury Secretary immediately – the international crisis is such that he cannot wait around until late January when he takes over as President.
Some contenders for one of the most axial jobs in finance are highly regarded – such as Paul Volker, a previous chairman of the Fed. The simple act of changing the guards – installing new energy and fresh thinking – will all contribute to giving a much needed bounce to Britain’s economy and especially to its hard-pressed property sector.
Though house prices in the US are reportedly stabilising at previous levels – Obama is not shy of embracing Keynsian thinking. He is pledged to massive injections of money into big infrastructure projects such as roads, schools and bridges. This should help the beleaguered construction industry.
He also wants to try and inject money into the car industry – central to the world economy – and to stop General Motors going bankrupt. He will probably try and facilitate its merger with the Chrysler corporation.
As for the banks - it’s a fair bet that if they don’t start lending again at sensible levels Obama will impose punitive tax regimes or other types of regulation.
US banks have been bailed out with $700bn of public money and American taxpayers are not afraid of asking where their money is going and what they will get out the deal. There is considerable disquiet in America – as in Britain and the rest of Europe – about the hard-nosed and cavalier attitude the banks have adopted since they were saved.
This leads on to another area of reform – and regulators in Britain who face the same problem will be watching carefully to see how Obama and his team handle it – which is how to deal with bonuses and the continuing practise of rewarding people for failure.
Obama supporters expect him to act decisively with banks who won’t toe the line. His government will cajole, to employ a euphemism, those bankers seen to be acting in a hard-nosed way with mortgagees and businesses who have been hit by the credit crisis.
All economies are now linked one to another. China has been heralded as the new economic dragon. So it will be. But currently America is still the power-house and whatever its political and financial leaders decide will inevitably have global repercussions. Few nations are as closely tied to the fortunes of the US as Great Britain.
The old adage is that if America gets a cold then Britain catches pneumonia. Economically speaking, that’s never been more true than in the past few months.
But it’s possible that if America has a heat-wave – admittedly that still looks some way off - Britain might pick up something of a tan. Maybe that’s being a touch optimistic, but in such dark and gloomy times one has to look for the odd ray of sunshine.
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