The 2 November 2010 midterm elections are a good time to assess the economic record of Barack Obama during his first two-years in office. We first took a look back at the origins of the 2007-2009 crisis. We now turn in a second part on the economic situation. When he was elected in November 2008, Barack Obama inherited an economy mired in recession, a consequence of the burst of the credit bubble which developed from 2001 to 2007. Two years later, repeated efforts of the government and the Federal Reserve have born fruit and pulled the US out of recession. But the robustness and the strength of the ongoing recovery are still debatable.
The 2 November 2010 mid-term elections are a good time to assess the economic record of Barack Obama during his first two-years in office. We first take a look back at the origins of the 2007-2009 crisis. With the benefits of hindsight, one can say the roots of this crisis go back to the management of the dotcom bubble burst in 2001. That bubble was followed by another, this time a credit bubble, characterized by the growing subprime market. But starting at the beginning of 2007, its collapse led the whole financial system in a long, severe and evolving crisis.
The markets are currently imposing on Europe a more brutal tightening of fiscal policy earlier than expected. But that does not mean that the two other constraints have disappeared: central banks should normalise the settings of their monetary policy as soon as conditions are met, while there is a 'strong obligation' to maintain a certain level of growth. How this can be done is not at all clear, and there are fears that the markets will find it difficult to extract themselves from this new 'Bermuda Triangle' - not forgetting that the triangle can easily shift from one place to another within the region formed by the advanced countries.