September 2nd, 2011
08:35 PM GMT
I was just asked on air why in the world European markets, after two decent days, would fall heavily on the back of U.S. employment figures.
It’s simple - there had been no good reason for markets earlier this week to recover from the crazy, volatile days of August.
Nothing has changed.
The U.S. economy is not recovering. Unemployment numbers are some of the best to watch as a barometer. Only when businesses feel confident do they hire, expand, and increase production. Since it’s easy to hire and fire in America, the creations of jobs (and the reverse, of course) can happen dramatically over a period of six or so months and show the direction of the economy.
Oh, and then there are Europe's own problems - part of which could be solved if the U.S. economy started to really grow again. It is not.
You may notice analysts in the U.S. like to point to Europe’s troubles for the market mayhem. In Europe, they like to point fingers toward the American debt debacle.
Let’s blame Europe for now. Greece is back on the mind - it was confirmed today the country will not meet its deficit targets this year. Its growth is getting worse, not better.
The meetings between Greece and the EU/IMF/European Central Bank troika broke up on Friday without a common understanding of how bad things are getting in Greece – and they won’t meet again until mid-September when Greece has prepared its 2012 budget.
I keep hearing that the Greek people simply will not agree to yet another round of austerity. Will German taxpayers agree to let Greece miss its targets that were agreed in order to get the bailouts?
Greek bond spreads hit euro-era highs on Friday. The market is once again betting that Greek will have to default a la Thailand and Russia in order to start again.
Italy is already backsliding on some of its austerity promises. Talks among eurozone governments about already-approved loans to Greece and the enlarged European System of Financial Supervisors aren’t going well (Why must Europe fiddle with what has already been approved?).
And of course there is the fear of global recession. Good thing Europe isn’t raising interest rates and cutting government spending just when it needs the opposite to stimulate the economy.
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