EconomicCrisis.US

The world’s oldest democracy enters this election year in one of the foulest moods on record. Three quarters of Americans tell pollsters the country is going down the tubes. In roughly equal number, they hate the Republicans and the Tea Party, the Democrats and the Occupy [What Have You] movement, Congress, and anyone else in politics. “Get Angry!” the French nonagenarian writer Stephane Hessel urged in his smash-global0hit pamphlet (more than 3 million copies sold). Americans are seemingly as PO’d as any Greek or Spaniard, withouth the proximate cause of epic economic collapse.
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With his speech in Kansas, President Obama has begun a national conversation about the economy and the role of government. In presenting his view, Obama shifted the economic conversation from deficits to the crucial issue of growth. After all, deficits matter because they could have a harmful effect on growth. The question we should all ask is: What would make this economy grow?

One theory heard a lot these days is that the economy is burdened by excessive government regulation, interference and taxes. All these pressures on business, especially small business, are keeping the economy down. Cut them, the Republican candidates all say, and the economy will be unleashed. It’s a compelling picture, but the data simply do not support it.
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The United States is ramping up attempts to safeguard its financial system from a worsening of Europe’s debt crisis, joining nations in Asia, Latin America and elsewhere in trying to build firewalls.

U.S. policymakers, alarmed by the political upheaval in Italy and Greece, are digging deep into the books of American banks to find out how exposed they might be to euro zone creditors and the plunging value of sovereign debt.

Officials were stung by the implosion of Wall Street firm MF Global, which gambled and lost on European debt, and they are working on contingency plans for a worst-case scenario should another financial firm crumble.
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It is pretty much settled that the European Monetary Union, as it is now constituted, cannot survive. It is just a matter of whether the course of events will be disruptive, or will be coordinated by the European leaders. Given what we have observed over the past year-and-a-half regarding their unfolding debt crisis, I suspect the former. We may even see bank runs, frozen credit markets, plunging equity values and other ugly stuff if the political forces there don’t get their acts together real soon.

But, let’s not be so naïve as to think that we, in America, are immune from a similar scenario. No, the dollar isn’t going to break down into a set of regional currencies, although I do suspect that the coming QEs (3, 4, 5…) will significantly lower its value. What I am talking about is the inability of the U.S. political system to effectively deal with the economic imbalances that have developed in America, mostly in this century. By always kicking the can down the road, as only the skilled politicians in Europe and America can do, they assume the risk that the inevitable changes that must come to restore balance will be disruptive, even violent, rather than controlled and coordinated.
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