| HappySqurriel said: 1) I don't know where you are getting your information from but I suspect it is from the mainstream media rather than financial news sources. There is a very high probability that Portugal, Italy, Greece and Spain will default this year which will have cascading effects throughout the European economy and, being that the worldwide financial markets are connected and Europe as a region represents the United States largest trading partner, the United States. Even if that doesn't happen, last years "Arab Spring" has created massive instability throughout the Middle East. There is a significant probability that this instability could translate into a series of events which results in the disruption of the production or distribution of oil causing significant increases. With how $120+ oil/barrel impacts people's disposable income and company’s bottom lines, any major price increase of oil will have a dramatic impact on unemployment. Beyond that, many states are nearly bankrupt and they're probably going to need to increase taxes and cut spending to avoid default this year; which will have a significant impact on unemployment throughout the United States. When you factor in everything, it is almost equal the likelihood that the economy will improve, stay the same or get worse with a small "advantage" to getting worse. Certainly, the mainstream media has been talking about how great this year will be, but they have been cheerleading for the administration and a recovery since mid 2009.
2) People do feel inflation but, with how much money is in circulation currently, it is possible that any "recovery" will be associated with much higher inflation. While the Federal Reserve could increase interest rates this would have a significant impact to any "recovery".
Now, whether any of the Republicans could do any better is largely irrelevant when it comes to the election results. The presidency will be won or lost based on a handful of swing voters in a handful of swing states; which happen to be some of the states with the highest unemployment rates and slowest economic growth rates. If the economy gets worse, these swing voters will likely vote against Obama regardless of who his opponent is. |
1. If anything the only countries where unemployment rates would take a major hit due to a defaulted Italy would be those in the Eurozone. A rapid rise in oil prices due to any unexpected events will be bad for the economy, but like you said there is equal chance of those events not happening..I would like to be more optimistic and have more faith in the robustness of the US economy, especially after experiencing major hits in the last couple months of this recessionary period.
Yes, mainstream media get their sources from thin air. They dont have access to financial resources or info.
2. How much of an impact a increased interest rate will be on recovery is to any ones guess.
I would like to think that these swing voters are not that naive. I agree with you that the economy will have the most impact on Obama's chances of reelection, but I am more optomistic on the economy and I believe the current republican lineup is weak.
