EconomicCrisis.US

Although Greece’s financial crisis won’t bring down U.S. markets, it’s a stark reminder of how bad fiscal and government policies can cripple a nation.

That’s the latest word from University of Central Florida economist Sean Snaith, whose latest national forecast, released Wednesday, outlines how Europe’s debt crisis and the flailing euro — along with the BP oil spill and still-weak labor markets — have riddled the U.S. economy’s recovery with uncertainties.

“The crisis in the EU is a cautionary tale that unchecked government deficits and high national debt can lead to serious and painful consequences,” said Snaith, director of UCF’s Institute for Economic Competitiveness.
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European financial troubles are unlikely to send the world back into recession, and the U.S. may actually benefit from unsettled markets over the near term as investors look for a safe place to preserve their wealth, a U.S. central bank official said Tuesday.

Because the trouble in Europe is rooted in government debt problems, there is good reason to think events “will probably fall short of becoming a worldwide recessionary shock,” Federal Reserve Bank of St. Louis President James Bullard said. The official noted the world has seen these types of events before, and “there is nothing intrinsic about such crises that they need to become important shocks to the broader, global macroeconomy.”
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There is arguably no greater danger to financial and economic stability than a central bank pushing cheap monetary policy – by forcing interest rates to low levels with negative real interest rates, and unlimited liquidity onto the banking system. Loose monetary policy pushes credit, inflates asset and commodity prices, and leaves bankruptcies and economic and financial chaos in its wake. This is essentially the path taken by the US Federal Reserve since 2001, the most hazardous monetary policy since its creation in 1913.
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Still deep in recession / depression, it is possible and perhaps even likely that the US economy will be dealt a sledgehammer blow over the coming months. The full price for the European crisis might be paid in American jobs, with four categories of job losses imperiling the US economy and threatening the standards of living for millions of people. If you are employed in the US, UK, Canada, or Australia (among other nations), don’t pity the continental Europeans, because it may be a European that ends up taking your job.
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