Political gridlock, strained family budgets, financial crises throughout the euro-zone, mediocre U.S. employment and economic growth… all of these things and more that exemplified 2011 are likely to continue into 2012. And all of this despite the perception among many economists that 2011 ended on a strong note that may possibly continue into 2012.
Without a doubt many people have heard news reports over the past few years where some economic analyst proclaims that the economy has finally taken a turn for the better and people’s lives are improving. After hearing the opinion of this talking head, many may be left thinking one of two things. Is the person who is offering this opinion so totally out of touch with reality that they haven’t got the slightest clue how people are continuing to suffer in our lethargic economy? Or, alternatively, some may ask themselves — particularly if these good-news reports seem to continue week after week — if their lot in life is so lacking and their efforts so undervalued in the marketplace that they are falling behind while everyone else is finally recovering?
In what now seems to be a weekly ritual, U.S. financial markets fluctuated throughout the past week based upon anticipated future economic and political developments. But as has become more and more common, it is not the potential outlook for our country that has memorized financial market participants, but rather that of the European Union’s 27 country confederation, or even more specifically, the euro-zone’s 17 member nations that utilize a common currency, the euro.
Every month financial market participants, government policymakers, and business people try to sort through all of the latest estimates of economic activity. Without a doubt, the figures that get the most attention are those related to employment and unemployment. Nothing seems to represent so completely and thoroughly the opportunities — or lack thereof — that people are facing in their everyday lives. These labor market developments, in turn, set the backdrop against which most other major domestic economic activity seems to flow.
Quite possibly never in our nation’s history have Washington politicians been more fundamentally divided about the future direction of spending and taxation decisions. Sometimes, it would seem, political gridlock can be a desirable outcome, since Congress seems almost devilishly capable of wreaking havoc with our nation’s economy, given the sometimes short-sighted fiscal policy actions enacted. At the present time, however, the political gridlock/opportunism/cowardice (pick your favorite descriptive term) that infects lawmakers is particularly destructive given the monumental issues that must be addressed over the next 13 months.
As yet another week begins, a spate of depressing news seem to be unfolding. In the European Union, many analysts seem to be coming to the conclusion that the “landmark” agreement to save the Euro-zone from potential monetary collapse may be unworkable. Not to be outdone, here in the U.S. the Congressional “super-committee” that was charged with finding a minimum of $1.2 trillion in deficit reduction has thrown in the towel and admitted failure. Given the debt-ceiling expansion agreement from earlier this summer, that means $1.2 trillion will be automatically cut on an across-the-board basis among impacted programs, encompassing virtually all federal spending categories outside of the entitlements such as Social Security, Medicaid and (most of) Medicare.
For the past couple of weeks we have examined the critical issues facing some members of the EU. The need to properly address the unfolding crisis cannot be overstated, with a failure to calm developing market fears potentially impacting every other major economy around the world, including the United States.
In a wild week that gripped the world’s financial markets, the prime minister of Greece threw a monkey wrench into a fragile (and still somewhat amorphous) plan that was supposed to bail out the financially strapped Greek economy, stabilize European banks, and recapitalize the European Financial Stability Facility (EFSF).