The European problem
A number of analysts blame Europe for some of the recent drops in the U.S. stock market. N.C. State University economist Mike Walden explains what’s going on in Europe and why whether it’s impacted us.
“Well … Europe has the same kind of fiscal problems — public fiscal problems — that we do. They have an aging population. They have rising costs for health care, rising costs for pensions. Many of the public pensions are much more generous in Europe. And we’ve already heard over the last couple of years some of the smaller countries — like Greece and Portugal, Italy, to some extent — say they’ve got problems, and those problems have been being addressed on a piecemeal nature.
“Now, though, recently we’re hearing about some of the larger countries — in particular, France — may have some problems. In fact there was a rumor that some of the credit … rating agencies that downgraded the U.S. may downgrade France, and that sparked a panic.
“So, the bottom line here is that we don’t have a monopoly in the U.S. on these fiscal problems. Really … all of the developed world, or all of the world that’s aging, has these same kind of problems, largely generated by an aging population.
“So, yes, it is important to us what happens in Europe, because number one they’re our largest trading partner and number two many of our banks are intertwined. So, on a day-to-day basis what moves our stock market, investment markets may not be based on what happens here in the U.S. but may also be based on what happens in Europe.”Category: Economic Perspective