Double-dip recession? Europe has been only the most notable, but from China to the US, the economy and job creation is losing steam. In the US, today (June 1, 2012) saw job creation weaken to a creep. It follows over the past week other data, from production to consumer confidence, that also reflects potential fatal weakness for economic recovery and President Obama’s re-election.
Playing Away from GOP Social Agenda Weakness?
The connection between the economy, jobs and the prospects of an incumbent US President are well established. The Republican Mitt Romney will now be able to campaign on what most Americans give him the benefit of the doubt on – knowledge of business and the economy while he can avoid social issues which most potential voters differ from the GOP. Romney can now choose the rhetorical style as well substance of the campaign debate.
Austerity’s Bad Medicine:
In my opinion though it is the substance of austerity (including US prospects of further spending cuts) as well as the spike in oil prices that has been the greatest culprit. While some center of right politicians in Europe (Angela Merkel & Nicolas Sarkozy) and in US have pressed fiscal austerity, the policy has been premature as well as counterproductive in view that globe really had not recovered from 2008 recession. Actually the US Fed at least had the risks analyzed correctly and has continued to point to the type of scenario unraveling today including the danger of deflation. Read Blog for Film: "Austerity is Killing Jobs & Economic Health”.
Speculative Tail Waging the Global Economic Dog?
However, the cold water poured on economic growth and consumer confidence cannot be discounted. Some of my brightest colleagues on Wall Street have labeled this “dip” in the economy as “carbon driven” – spiking petroleum and gasoline prices have sucked most of the positive energy out. Prices reflect dramatic spikes not justified by either demand or supply data. Demand in US is down to more than decade levels while stockpiles have risen to 22+ year highs. Production is actually increasing and some see US as net exporter of oil within the decade (– Obama actually has incorporated “drill baby drill” as part of an overall energy strategy-Read our Blog for Video – “Myth of Drill, Drill ,Drill”
Speculation about speculation? -rising demand in emerging markets as China and India has not created a shortage nor is it evident in the foreseeable future. However, the speculation had driven prices up by more than 1/3 and now has dropped by almost as much. Market forces have had a correcting effect, but only by first adding more negative burdens upon an already stressed economy. It is as if the speculative petroleum tail was wagging the global economic dog. Blog for Video “Petroleum Prices Spike, But Why?”
Ironically it may also turn out that speculation is more effective in becoming a self-fulfilling prophecy about President Obama’s reelection. Once perceived as having lost control over the economic agenda, it is difficult both for the President and economy to regain confidence. See our Popular Blog -"Oil Prices Beyond the Pump"
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