US Faces Debt and Job Losses
In addition to the recent financial and banking crisis in the US the country faces unprecedented debt and massive job losses. The US economy has been shedding jobs at an alarming rate. Because of losses in the stock markets many have seen their retirement savings dissipate and their children’s college funds shrink to a fraction of their former value. The fact that the US faces a presidential election only adds to the uncertainty felt by millions. Interbank Forex markets have been slow to react to the massive US bailout package and credit markets remain frozen.
Economy Bad News For Incumbents
For the incumbent administration and members of their party bad news is simply bad news. For the challengers bad news is good news and recently there has been no shortage of bad news. Historically during economic downturns US voters have traditionally punished the incumbents blaming them for current economic conditions.
Lack Of Confidence in the Economy
Despite the $700 billion dollar bailout and the $250 billion dollar plan to recapitalize banks many are not confident that the economy will fully recover. Unemployment is still only 6.1%, but everyone expects it to rise. Some economists feel the US is entering a recession and many voters feel it has already entered a recession. Massive home foreclosures, slumping house prices, massive job losses have most voters on edge. Recent actions by the Fed have contributed greatly to the strong performance of the dollar on interbank Forex markets and is still the currency of choice for risk adverse investors.
Economy Good News For Challengers
Few voters truly understand why the economy is in crisis but many blame the Bush administration. John McCain although a competent candidate is saddled with being from the same party as Bush and many voters see his candidacy as a continuation of the policies of the last eight years. Mr. Obama, due to the fact that his party does not occupy the current white house has a hefty advantage among the disgruntled. Barring a sudden economic turnaround, Mr. Obama’s prospects look good.
The candidates differ on economic issues with McCain sticking to relatively conservative positions and Obama promising tax reform and many social programs. Obama’s tax cuts would favor the middle class while McCain’s tax policies would be a continuation of the Bush policies. McCain favors corporate tax cuts in an attempt to stimulate business growth but opponents characterize these as ‘tax cuts for the wealthy.’ The truth probably lies somewhere in between.
Problems Unprecedented
No matter which candidate wins the election, he will face economic problems of historic proportions. On Wednesday, the International Monetary Fund — a cornerstone of the Breton Woods system — warned that the world economy faces “the most dangerous financial shock in mature markets since the 1930s.” Obama must offer voters a coherent plan for the economy if he expects to win in November. The problem is no one really knows what to do about current economic conditions, not Obama, not McCain, not Ben Bernanke or Paul Krugman or Larry Summers or Hank Paulson. The country is facing problems for which there are no clear solutions.
US Dollar and Economy at Stake
A lot can happen between now and November and it will be January when the new administration actually takes office. The future of the US economy and its currency are at stake. At present the US dollar is holding its own in interbankForex markets and the recent rise of the Euro is seen as an indicator that the global bailout is starting to work. The US faces unprecedented economic challenges and whoever wins in November will face challenges not faced by a US president since Franklin D. Roosevelt took office in 1933.
