I’ll have more to say later about today’s big stock sell off, but some might be interested in a post I made a little over three weeks ago:
In today’s Washington Post, in a typically thoughtful piece, Ezra Klein outlines some of the bad global trends (almost all of which are outside the control of American policymakers) and asks, “Where will the recovery come from?”
It wonâ€™t come from the United States. Our recovery has slowed, and updates to the Commerce Departmentâ€™s growth figures have shown that the hole weâ€™re in is significantly deeper than we realized. Thursdayâ€™s news only underscored that conclusion, as the early signs suggest that Fridayâ€™s job numbers report will be disappointing.
It wonâ€™t come from Europe or Japan. The debt crises in Greece, Spain, Portugal and Italy have quieted any conversation about recovery and raised the question of whether the Eurozone can survive. And Japan is still trying to rebuild after the horrific earthquake and tsunami that ripped across its coastline back in March.
For some time, the hope was that recovery could come from the worldâ€™s emerging economies, driven by China. But after years in which the Asian giant managed to defy global economic trends and post one incredible growth number after the other, the Chinese government is admitting that the economy has overheated and they need to begin tapping the brakes. That doesnâ€™t simply suggest the emerging economies wonâ€™t drive a global recovery; it also raises a new source of concern: What if the Chinese government fails to engineer a soft landing for its economy?
The impoverished and reckless economic policy conversation in Washington isnâ€™t helping to cope with these trends, but even if we got our act together, the reality is that we have limited influence over what happens in China or in the Eurozone and Japan. And itâ€™s not even clear how much an ideal policy response would do to speed Americaâ€™s recovery.
I’ve been asking some of these exact questions for a long time now.