Recovery Lost:Why the U.S. and Europe Are Back at the Brink
How did the road out of recession lead into a cul-de-sac? And why, all of a sudden, is the world economy falling apart? The answer is all about growth and debt.
By Derek Thompson
Is the stock runoff for real?
Are we falling into another recession?
What the heck is going on, anyway?
If you find yourself confused about the market meltdown, you’ve got company. Dow crashes, like Monday’s 600 point plunge, are notorious black boxes. A few thousand investors acting on a hundred indicators rarely reveal a single, shining Truth. But this appears to be more than a one-time crash. The United States and Europe, twin engines of the global economy, are close to falling back into a recession.
What we’re seeing is the confluence of two challenges that are both economic and political in nature. There is growth crisis in the United States. There is a debt crisis in Europe. And there isn’t a single government that knows how to solve either.
WHAT’S THE MATTER WITH THE U.S.? GROWTH.
The first thing to understand is that the past two weeks didn’t tell us that the financial crisis is coming back. They told us that the crisis never ended.
If you can remember, July of 2010 was supposed to be the beginning of a “Recovery Summer.” But when unemployment lingered above 9 percent for the next few months, we settled for “Jobless Recovery.” For a year, that label stuck. Two weeks ago, we learned that gross domestic product grew less than 1% in the first six months of this year, and we downgraded to “Recoveryless Recovery.” Now, after the first-ever credit downgrade and a historically terrible week in the stock market, we’ve all but dropped the word recovery. After Monday’s carnage, all talk is of a possible double-dip recession.