First, at 4:30 this morning, the red noise on the front (website) page of the New York Times: European markets are dropping from between 1% (France) to 2.5% (Germany).
Luc Van Heden, chief strategist at KBC Asset Management in Brussels, said fears of a “double dip” in U.S. growth, where the recovery falters and turns into a second recession, were becoming even more of a concern than the sovereign debt crisis in Europe.
“We’ve known about the euro’s debt crisis for months,” he said. “Fears of a double dip in the U.S. are making the market very, very nervous at the moment.”
Mr. Van Heden said he thought it would take a really strong labor report — perhaps with the addition of 150,000 or so jobs in July — to durably lift investor sentiment. ...NYT
Which makes it abundantly clear that the first tremor occurred when Mitch McConnell made it clear the Republicans would do everything -- everything! -- they can to bring down President Obama, including souring the economy. Top of the list would have to be an full frontal attack on employment. We might want to be honest and call this the "McConnell double-dip" because that's what it's really all about.
And this is how they're doing it, quite specifically:
Great Recession II, if that is what we are entering, has provoked a completely different response. Now the politicians are squabbling over how much to cut spending. After months of wrangling, they passed a bill aimed at forcing more reductions in spending over the next decade.
If this is the beginning of a new double dip, it will have two significant things in common with the dual recessions of 1980 and 1981-82.
In each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. The recovery came when credit conditions recovered.
And in each case the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy. ...Floyd Norris, NYT
We know this is not a normal Congress. They have done whatever they can to prevent growth.
Government stimulus programs historically have often appeared to be accomplishing little until the cumulative effect suddenly helps to power a self-sustaining recovery. This time, the best hope may be that the stimulus we have already had will prove to have been enough. ...Floyd Norris, NYT
Fortunately, the American people are well aware of what conservative and radical activism are responsible for. They aren't pleased.
The debate over raising the debt ceiling, which brought the nation to the brink of default, has sent disapproval of Congress to its highest level on record and left most Americans saying that creating jobs should now take priority over cutting spending, according to the latest New York Times/CBS News Poll.
A record 82 percent of Americans now disapprove of the way Congress is handling its job — the most since The Times first began asking the question in 1977, and even more than after another political stalemate led to a shutdown of the federal government in 1995.
More than four out of five people surveyed said that the recent debt-ceiling debate was more about gaining political advantage than about doing what is best for the country. Nearly three-quarters said that the debate had harmed the image of the United States in the world. ...NYT
President Obama's approval ratings are for the most part unchanged -- at the mid-40% level. The tea party is in the tank.
The public’s opinion of the Tea Party movement has soured in the wake of the debt-ceiling debate. The Tea Party is now viewed unfavorably by 40 percent of the public and favorably by just 20 percent, according to the poll. In mid-April 29 percent of those polled viewed the movement unfavorably, while 26 percent viewed it favorably. And 43 percent of Americans now think the Tea Party has too much influence on the Republican Party, up from 27 percent in mid-April... The poll found that Mr. Obama was emerging from the crisis less bruised than the Republicans in Congress. ...NYT
The money lost, thanks to Republican actions, is getting public attention. The overall cost, for example, of the Republican close-down of the FAA, was $400 million according to a report on the Rachel Maddow show last night. And that's just a start.
One-half of our government is working -- steadily and effectively -- against recovery. It's clear from polls, now, that the public understands this and will respond. Paul Krugman has, who has seen this coming for a long time and issuing warnings, heaves a bitter sigh.
... Why should we be surprised at this catastrophe? Where was growth supposed to come from? Consumers, still burdened by the debt that they ran up during the housing bubble, aren’t ready to spend. Businesses see no reason to expand given the lack of consumer demand. And thanks to that deficit obsession, government, which could and should be supporting the economy in its time of need, has been pulling back.
Now it looks as if it’s all about to get even worse. So what’s the response?
To turn this disaster around, a lot of people are going to have to admit, to themselves at least, that they’ve been wrong and need to change their priorities, right away.
Of course, some players won’t change. Republicans won’t stop screaming about the deficit because they weren’t sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more — as became obvious whenever any rise in taxes on the rich was suggested. And they’re not going to give up that club. ...Krugman, NYT
But the guy is intellectually honest. It's not just about the political machinations of the Republicans.
... The policy disaster of the past two years wasn’t just the result of G.O.P. obstructionism, which wouldn’t have been so effective if the policy elite — including at least some senior figures in the Obama administration — hadn’t agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could ... ...Krugman, NYT
Time to get off the dime.
The point is that it’s now time — long past time — to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals. And if Republicans block those proposals, he needs to make a Harry Truman-style campaign against the do-nothing G.O.P.
This might or might not work. But we already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t. ...Krugman, NYT
At 5:30 this morning, the European stock markets are at about the same place. Dow futures are down.
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Later: All three European markets (Brit, French, German) are easing up a bit.
