There’s no pleasing stock traders. No sooner had European financial ministers granted Spain’s banks a $125 billion bailout than investors began worrying about Italy’s ability to pay its national debt – and to pitch in to save Spain. According to The New York Times, “[b]ecause Italy does not have enough economic growth to generate the money itself, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.” The Times on Monday quoted Italian Prime Minister Mario Monti’s pessimism: “There is a permanent risk of contagion.”
Although the mention of a European economic plague certainly makes ears stand up, the continent’s continual financial woes more resemble a Möbius strip of dominoes. With each new agreement to save one of the Mediterranean PIGS (Portugal, Italy, Greece, Spain), a new panic spreads on the floors of Europe’s stock exchanges. If there’s a contagion, it’s one of neurotic fear – here, not only of Monti’s failure to instill Germanic discipline in the Italian economy, but of the possibility he will seek to raise taxes on the rich.
But let’s face it – European investors and stock traders need to have something to be afraid of, they all but insist on seeing dominoes collapse everywhere they look. Today it’s Italy, tomorrow it will be Ireland, then Greece (with its elections coming up) all over again.
We in the States take a beating every time one of these dominoes seems in imminent risk of tumbling – Monday’s Dow Jones Industrial Averages flew south 143 points at the Italy-may-be-next news. The Times’ Web site somewhat cruelly juxtaposed its Italian fear story with a feature about the steady nosedive of American family income. Apparently all the “wealth” the average U.S. family has been acquiring since 1990 has been wiped out, according to the Federal Reserve’s triennial Survey of Consumer Finances.
The Times notes that the Fed’s data show “[m]ore families said they were saving money as a precautionary measure, to make sure they had enough liquidity to meet short-term needs.” Also significantly down was saving for the middle-class fantasies that once formed the American Dream: “Fewer said they were saving for retirement, or for education, or for a down payment on a home.”
All this sound of collapse is Mozart to the ears of American conservatives, however. For them, the worse things get, the better are their chances in the electoral races this fall. One thing they did in Congress recently, under the Tea Party banner, was to cut funding for the American Community Survey, the Census Bureau’s annual sampling of people’s education levels, incomes and spending habits – all of which help both government and business determine how to allocate their resources. But opponents in the House of Representatives successfully argued that this was a massive waste of money and an invasion of privacy, to boot.
No doubt congressional conservatives will next train their guns on the Survey of Consumer Finances – if they capture the White House, who would want to hear any more bad news about the economy, anyway?