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Wednesday, August 10, 2011

8/10/2011 - America vs. Europe: Which is the Bigger Threat to the World Economy?

Curious Capitalist
America vs Europe: Which is the Bigger Threat to the World Economy?

"Over the last few days, the United States has been in the world's crosshairs. Political bickering in Washington produced a debt agreement widely criticized as insufficient and incomplete. Standard & Poor's downgraded America's credit rating, raising concerns about the health of the world's most important economy. Slow growth in the U.S. is threatening the entire global recovery. Stock market turmoil on Wall Street has turned markets from London to Seoul into volatile rollercoasters. It is easy to be angry at America for the world's economic ills right now. Perhaps the sentiment was summed up best by a recent headline in a Chinese newspaper, the Global Times: "The World Should Kick America's Butt." Yes, the U.S. has been a source of much uncertainty in recent days. But in my opinion, the real danger for the global economy lies elsewhere – in Europe. If we're going to have another financial crisis, the chances are it will start in the euro zone, not Washington. Here's why: On a macro level, you could say the U.S. is worse off economically than Europe right now. Economists have been frantically reducing their 2011 growth forecasts for the U.S. as its GDP limped along in the first half of the year. In Europe, growth is holding up. The IMF raised its growth projection for the euro zone in late June to 2%."

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