State of the Union: 3 Economic Themes Obama Is Sure to Focus On

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what to look for in the state of the union addressIn most years, for most presidents, the State of the Union is something of a chore, an annual address that the chief executive is constitutionally obliged to make to Congress.

But tonight's speech is -- or, at least, could be -- something more. For President Obama, looking ahead to a potentially tough reelection fight, the State of the Union could be a springboard to his last campaign, a moment when he can outline what he has achieved over the past three years and give a glimpse of his vision for the next five. And, for both the president and for the middle class families who will be watching the speech, the central issue of this election will be the economy -- which many see as a sore point for the Obama Presidency. With that in mind, here are three key points that he is likely to hammer home tonight:

Jobs: In a historical sense, the current 8.5% unemployment rate is nothing to crow about, but it represents a significant drop from the staggering 10% high of late 2009. Expect Obama to mention the 3.2 million private sector jobs that have been created in the last two years, the rebirth of the American auto industry, and growth in manufacturing jobs. Obama will likely also address his plans for future job creation in the remainder of 2012 and in a potential second term.

Income Inequality
: According to a recent Pew study, the majority of Americans view wealth inequality as the biggest dividing line in the U.S. That's a narrative that dovetails nicely with Obama's political philosophy, and it seems likely that the State of the Union will bring up the dangerous gambles taken by the financiers of Wall Street, the outsized bonuses that its workers received, and the legislative remedies that Obama has championed for restructuring the financial system.

Supporting the Middle Class: In a move heavily criticized by Republicans, Obama gave Richard Cordray a recess appointment to lead the newly created Consumer Financial Protection Bureau. Combined with the restrictions he put on credit card banks in CARD Act, he has built a record for protecting the interests of ordinary consumers. Expect reminders of those actions to be woven into the narrative of his support for America's struggling middle class.

When joblessness is high, U.S. presidents tend to get pink slips -- the most notable recent exception being President Reagan, who managed to secure reelection despite what was then viewed as a daunting 7.2% unemployment rate. By comparison, the 8.5% unemployment rate Obama faces now is astronomical, and creates a mighty hurdle that he will struggle to overcome. Tonight's speech may be one of his best opportunities to convince the voters again he's the right man for the job.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Mike

It’s been said the US goes to war to protect its oil supplies, but doesn't it really go to war to ensure the continuation of the petrodollar system?

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.
There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011 Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant - and very messy - transition in the global oil machine.

January 30 2012 at 10:57 AM Report abuse rate up rate down Reply
ha6ai

Why is this Obama blogger's propaganda story still running? The "State of My Campaign" speech is over - and it was a sorry rehash of previous "State of My Ego" Obama speeches.

AOL/HuffPost's lefty propaganda blogger writes one propaganda piece after another, all published by this extremely partisan lefty web-site.

Look at Watson's leftist phony "talking points": (1) "Jobs" (an absurd loser for Obama - who tries to lie his way out of his failures), (2) "Income inequality" (selling hatred, envy, and socialism/communism - demagoguery to deflect attention from his abysmal failures), and (3) "Supporting the middle class" (How? By raising our taxes and engaging in more communist "class warfare", destroying jobs by blocking oil pipelines and drilling, and illegally attempting to tax business for creating CO2? - the stuff we exhale and plants inhale - which will increase the cost of American goods and services?)

AOL/HuffPost is not "news" media, it is lefist partisan propaganda.

January 30 2012 at 3:01 AM Report abuse +1 rate up rate down Reply
Mike

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.
There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011 Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant - and very messy - transition in the global oil machine.

January 29 2012 at 5:58 PM Report abuse +1 rate up rate down Reply
Mike

The "petrodollar" system was a brilliant political and economic move. It forced the world's oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.

As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount - the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.

There is another downside, a potential threat now lurking in the shadows. The value of the US dollar is determined in large part by the fact that oil is sold in US dollars. If that trade shifts to a different currency, countries around the world won't need all their US money. The resulting sell-off of US dollars would weaken the currency dramatically.
GOT GOLD?

January 27 2012 at 5:43 PM Report abuse +1 rate up rate down Reply
Mike

Tehran Pushes to Ditch the US Dollar

India and Iran are negotiating deal to trade oil for gold. Does this matter, you ask? It strikes at both the value of the US dollar and today's high-tension standoff with Iran.

Officially the US & EU is Tehran must be punished for efforts to develop a nuclear weapon. Sanctions on Iran's oil exports meant to isolate Iran and depress the value of its currency to a point that the country crumbles.

Sanctions will not achieve their goals. Iran is far from isolated and its friends - like India - will stand by the oil-producing nation until the US backs down or acknowledges the real matter the American dollar as the global reserve currency.

In the 1970s a deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on oil trade with the US dollar as the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up. Countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. The dollar's valuation stems from its lock on the oil industry - if that monopoly fades, so too will the value of the dollar. Global fiat currency relationships will change. Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

GOT GOLD?

January 27 2012 at 10:37 AM Report abuse +1 rate up rate down Reply
savemycountry911

See the movie "Iron Lady". Great Brittan was much like US in the 60s. Thatcher was touch and made the hard, unpopular decisions. That is what we need, not what we have.

January 26 2012 at 8:25 PM Report abuse +1 rate up rate down Reply
Samir semaan

The speech the president gave has given meaning to many points 1) is that the economy is improving on a small scale and small increment and that policy are working because today financials have recovered from the mortguage meltdown and stand on their feet. 2) manufactures in the USA are doing better than 2008 sudden death because GM are doing well. 3)The housing market is improving but it is slower than before the meltdown. That is why the president must make initiative and enforce the so called social programs that people subscribe to medicaid and medicare and food stamps and checks for rmonthly supplement.

January 26 2012 at 12:26 AM Report abuse -1 rate up rate down Reply
1 reply to Samir semaan's comment
savemycountry911

We need a real leader and we don't have one.

January 26 2012 at 8:23 PM Report abuse +1 rate up rate down Reply
petesmolan

just how liberal is the rag that watson works for??

January 25 2012 at 10:58 PM Report abuse rate up rate down Reply
dearthaircroi

How did he protect the interest of people with the CARD act? Interest rates skyrocketed under the new act even for people with excellent credit. At the same time the interest level for banks borrowing money is almost nonexistence.While the banks may have to be a little more upfront on how they do things the fact of the matter we are getting screwed while they find more ways to rob the people.

January 25 2012 at 1:21 PM Report abuse +3 rate up rate down Reply
n1yearocrapleft

~~~~~~~~~~~~~~~~~>AMERICA NEEDS SEGREGATION IN OUR NATION<~~~~~~~~~~~~

January 25 2012 at 10:12 AM Report abuse +3 rate up rate down Reply