Pessimism about the future is feeding into a slowdown today. Failure by politicians and bureaucrats to deal with pressing problems in Europe and the impending fiscal cliff in the U.S. is the biggest threat to the economy and the markets…. Link to article:
Chief Portfolio Strategist Dr. Brian Jacobsen, CFA, CFP®, and Chief Equity Strategist John Manley share their thoughts on this week’s European Union summit.
Although details are lacking, which we should be used to by now with these summits, today’s news from Europe seems to be a step in the right direction. Instead of having the European Stability Mechanism (ESM) lend money to governments, who then would need to recapitalize their banks, the ESM is going to bypass the national governments and inject capital directly into the banks. This should help governments’ balance sheets from getting leveraged up as they attempt to bailout their overly leveraged banks.
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In 2008, when President Obama was then president-elect, his chief of staff, Rahm Emanuel, famously said, “You never want a serious crisis to go to waste.” People on the right excoriated him for taking such a Machiavellian view of politics, but he had a good point. In fact, Franklin Delano Roosevelt used the pain of the Great Depression to transform the U.S. economy, and Ronald Reagan used extremely high unemployment in the 1980s to drive through tax reform in 1981. A crisis can often be a catalyst for significant change.
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