Sticky patch or meltdown?

[Wiseacre]

In the latest issue of The Economist, an op-ed talks about the impact politics will or could have on the fragile economies here and abroad. The question proposed is whether politicians around the world will enact policiy decisions that improve the situation or not.

We are no longer fortress America, whatever happens in Europe or Asia has a significant impact on us. So whatever happens with Greece, even though it's overall economy is small, influences the rest of Europe if they leave the EU and go back to their own currency. Likewise how China and other developing countries handle their rising inflation.

Here of course, we are dealing with the debt ceiling negotiations and how much spending is cut both near term and far. The opinion is that too much in cuts right now could result in a worsening economy that is already fragile. I don't know if that's true or not, but I would be hesitant to reduce spending too much or raise taxes either. Screw fairness, worry about that after the economy gains some traction.

Point is, the political decisions made this summer and the rest of this year could have a resounding impact later. We better be making some wise moves, or things could go from bad to worse.

 

[kyzr]

In the latest issue of The Economist, an op-ed talks about the impact politics will or could have on the fragile economies here and abroad. The question proposed is whether politicians around the world will enact policiy decisions that improve the situation or not.

We are no longer fortress America, whatever happens in Europe or Asia has a significant impact on us. So whatever happens with Greece, even though it's overall economy is small, influences the rest of Europe if they leave the EU and go back to their own currency. Likewise how China and other developing countries handle their rising inflation.

Here of course, we are dealing with the debt ceiling negotiations and how much spending is cut both near term and far. The opinion is that too much in cuts right now could result in a worsening economy that is already fragile. I don't know if that's true or not, but I would be hesitant to reduce spending too much or raise taxes either. Screw fairness, worry about that after the economy gains some traction.

Point is, the political decisions made this summer and the rest of this year could have a resounding impact later. We better be making some wise moves, or things could go from bad to worse.

Totally agree, but you state the obvious. There isn't much there to debate. If Greece defaults a few French & German banks take a hit of about $20b each, not too terrible. The effect on the US would be nil.
The EU doesn't need Greece, and should kick them out and give them their Drachma again. Maybe they could trade with Somalia? Anyway, I'll start a poll on what should happen with the Debt Ceiling and solving the entitlement mess...

 

[Wiseacre]

Countries like Portugal, Spain, Ireland, and Italy are going to be looking at what happens with Greece, and they're going to want the same treatment. They're all in financial trouble, so we could be looking at a domino effect.

Why does it matter? Cuz if they all have to be bailed out, where does the money come from? IMF, with our money? How many of our banks are holding paper from those countries? What happens to the healthier economies over there if they get dragged down? What happens to us if things get bad over there? How many of our multi-nationals are going to be hurt?