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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

May 11, 2010 at 10:15 AM

Forget May flowers: Markers for a tumultuous month

Just a week and a half into May, the Dow took its worst point-drop in history and the experts are still searching for why, the European Union seemed near a crackup before ponying up a $1 trillion bailout — and Nordstrom opened in the Big Apple. Meanwhile, financial reform appears to be gutted — nicely played, big banks. A lazy springtime, it’s not. Here are some signposts to watch:

— Will the EU bailout work? The sum is huge and the markets are calmer, for now. But the fundamental problem remains: European monetary policy is divorced from the political policies of its member states. Another worry: What else is out there? If Greece is the equivalent of Lehman Brothers, more black swans will land across the pond. Long-term, the EU faces the same problem as the Fed, a rescue that entails more debt, even as a leveraged-based financial system motors along.

— Office 2010 launches for businesses on Wednesday, and every major rollout carries high stakes now that Microsoft is arguably a mature, “legacy” company fighting for its future against Google and others. First impressions are important.

— The tanker. Nothing may happen in the weeks ahead, but one thinks concerning EADS, “This is all you’ve got?” After all, the old partnership with Northrop Grumman brought along the support of Alabama senators. Might a surprise be coming? Some 11,000 Washington jobs would be part of a Boeing win.

— The stock market remains skittish, with much uncertainty and little fundamental support for a sustainable rally. Now even the technological systems behind the market are weirding out, a fact no doubt noticed by those planning cyberwarfare against the United States. On the other hand, they can just watch us destroy ourselves with casino capitalism…

— On Wednesday, we should get news from the government on international trade in goods and services. U.S. Trade Rep. Ron Kirk said last week American exports are reviving faster than the general economy. Will the trend last, particularly if the dollar is gaining strength from continued doubts over the euro? Next Tuesday and Wednesday, we’ll get the monthly inflation snapshot, with producer prices and consumer prices respectively. If the indices show an unexpected uptick, expect unease in the markets.

— China’s property bubble. Can Beijing navigate a soft landing? We’d better hope so, because China is leading the world recovery and any asset price collapse there would make Greek debt look like an afternoon at Seattle Center. Along with higher oil prices, this would be a major trigger for a double-dip recession.

Otherwise, all our potential troubles are lie further ahead. Unless…

Note to readers: I’ll be on book tour starting tomorrow, returning Monday, May 24th, and will do little if any blogging. In the meantime, enjoy the Sound Economy archives and the blogs of my colleagues.

Today’s Econ Haiku:

Fixing debt with debt

The EU’s bailout plan looks

Like my Visa bills

Comments | More in Aerospace/Boeing, China economy and business, Eurozone, Federal Reserve, Inflation, International economy, Microsoft, Outlook


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