Tuesday, October 06, 2009

How the Economy Will Bring Down Obama pt 1

In about three years the GOP will ask the voting American public the same question Ronald Regan asked when he ran for President against James Earl Carter; 'Are you better off today than four years ago'. If the current Fed Reserve forecast is correct the answer will be no. That will lead to the defeat of Obama. Here are the remarks from the Fed.

The shock to household net worth seems likely to have several important implications for household behavior. The shock creates a risk that the household saving rate could increase further. For example, during the period from 1990 to 1992, the household saving rate averaged about 7 percent of disposable personal income, considerably higher than the 4.3 percent average rate during the first half of this year. If the household saving rate were to rise, then consumption would rise more slowly than income, making it more difficult for the economy to develop strong forward momentum. In addition, it seems likely that some workers will respond to the wealth shock by postponing their retirement. This suggests that the labor force participation rate may rise once labor market conditions improve. This would tend to push up the unemployment rate, all else being equal.

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