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By Fareed Zakaria, CNN
The American economy seems to have picked up. The Dow Jones Industrial Average is hovering around 13,000 - the highest since the financial crisis began in May 2008. The NASDAQ is actually at its highest level since the technology bubble burst more than a decade ago. Stock prices aren't everything but data from the economy on the ground is also slowly getting better. Jobless claims are down; housing starts are up. Things do seem to be getting better, slowly but surely.
This is all good news for President Obama because there is a very strong correlation between economic growth and a president's prospects for reelection. The unemployment numbers are still pretty high but they are falling. Also, many models suggest that unemployment is not the crucial statistic to determine whether a President will win reelection.
Most people are employed. It's the rise in per capita GDP - the average person's income rise - that determines whether they feel things are getting better and thus whether they will vote for the incumbent or seek a change.
So does that mean the economy - and the president - are in good shape?
Well, they're in better shape that they looked 6 months ago. Many of the crises that people worried about now seem unlikely to derail American growth. Mario Draghi and the European Central bank have ensured that there will not be a European financial collapse. There might well be a European recession, but that has a smaller effect on American growth.
Derek Thompson at the Atlantic points out one worrying prospect, which is that the next debt ceiling renewal might actually have to take place before the elections, in which case we should expect another absurd and politicized drama since all the Republican candidates have already announced that they will not raise it. But let's hope that this is an unlikely scenario.
What's more plausible is a slowdown due to high oil prices. Oil has been creeping up for months now. It is up to $105 a barrel and over $3.50 at the pump. Why prices have moved so much, so fast is something of a mystery.
Oil was at around $50 a barrel in 2007 when all major economies were booming. Today demand from America, China, India, Europe are all somewhat weaker - and yet prices are sky high.
The one obvious factor, of course, is the political instability in the Middle East. Worries about Iran are probably the principal driver of these prices and the speculations surrounding it. Ironically president Obama’s foreign policy is having an impact economically that is not advantageous to him or the American economy.
Now, there isn't an easy path to lowering oil prices. Drilling more or raising efficiency - none of this will have much impact in the short run. For now, as so often in the past, the geopolitics of the Middle east - America, Israel and Iran - are the crucial drivers of the fate of the American economy , and possibly the fate of this presidency.
For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to visit the Global Public Square every day. Be sure to catch GPS every Sunday at 10a.m. and 1p.m. EST. If you miss it, you can buy the show on iTunes.