EconomicCrisis.US

True leaders would not walk away from grand bargain negotiations.

FOR Barack Obama, John Boehner, Harry Reid, Mitch McConnell, Nancy Pelosi and Eric Cantor, I just have two words of advice: Herbert Hoover.

I know you’re all familiar with that name. Hoover lives in infamy in US history for having been on duty when the Great Depression happened. You’re all courting a similar fate.

Your collective behaviour is setting all of you up to be known as our generation’s Herbert Hoovers – the leaders who were on duty when we entered our second great economic meltdown.
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Panic is back in the financial markets. In the United States, the long-awaited recovery is still missing and the latest economic data are very worrying.

In the labor market, unemployment is still above the ceiling of 9% of the workforce. Last week, the stock market, including the Dow Jones, went through a sharp decline following the publication of statistics on industrial activity in the country.

Major banks have already revised their growth estimates downward. For the fourth quarter of 2011, JP Morgan is now evaluating the growth of US GDP at 1%, versus 2.5% previously. Worse still, in the first quarter of 2012, GDP should grow by only 0.5% according to their estimates.
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Actually, the news from the AP’s survey of economists isn’t quite as pessimistic as JP Morgan’s long-term predictions earlier this month. The global financier’s projections showed a US growth rate for 2011 of just 1.5% and 1.3% in 2012, with unemployment increasing to 9.5%. AP’s survey predicts something closer to the mid-2s for the next two quarters and all of next year, with weak consumer spending being the main problem:

— The likelihood of a recession within the next 12 months is 26 percent. In June, the economists had put the likelihood at 15 percent.
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Confidence in the U.S. dollar, long the world’s premier currency, has been weakening as a reflection of investor doubts about the shaky American economy and the ability of its government to deal with burgeoning long-term debt.

For years, as economies around the globe teetered, investors looked to the U.S. dollar as a safe-haven investment, with the U.S. the most reliable country in the world to repay its debts. But with Standard & Poor’s downgrading of the U.S. credit rating last week, investors now are looking at other currencies – especially the Japanese yen and the Swiss franc – as possible safer, alternative currencies to hold in a time of world economic uncertainty.
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