Whatever happens in the American electioneering over the next month, here are a few things to watch that touch only peripherally on the campaigns:
1. Slowing in Asia. The World Bank today lowered its growth forecast for East Asia and the Pacific region, chiefly because of China’s ongoing slowdown and lack of effective stimulus. This will have a direct effect on the Pacific Northwest because of our trade dependency on Asia (China is Washington’s No. 1 export destination).
2. The eurozone. Yes, this is getting old, but it’s not getting better. Greece is still in the monetary union, barely. Germany continues to resist more aggressive measures to restart growth. Austerity is causing a deep recession in many eurozone nations. It’s amazing how far they can kick the can down the road. But the best outcome on this trajectory is a long downturn complete with social unrest. The worst: A sudden crisis that causes all the dominoes to fall down.
3. QE Infinity. The Federal Reserve’s third round of “quantitative easing” has played at least some role in the stock rally, partly because the central bank’s pushing long-term rates lower makes equities more attractive. Inflation remains tame, affirming the basis for QE Infinity. The dollar has lost some value, a good thing for U.S. exporters — but an advantage offset by the slowdowns in Europe and Asia. Lately, it has regained some strength as a safe haven. Commodities haven’t spiked, another plus. So will QE Infinity “work”? Nobel laureate Joseph Stiglitz says no.
4. The “fiscal cliff.” I have hesitated to write about the large spending cuts and expiration of tax cuts that came out of the dog’s breakfast of negotiations between President Obama and House Republicans. It’s meant to be a gun at their heads to produce new negotiations. So reasonable compromises would be made to avoid a shock to the economy, right? Maybe not. The only way out, one way or the other, may be for one party to take both the White House and the Congress.
And Don’t Miss: Debunking the September jobs conspiracy nuts || Washington Post
Today’s Econ Haiku:
Summer lingers here
If it were just ‘El’ or ‘La’
And not climate change
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