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We Are All Europeans Now

12:00 AM, Oct 1, 2011 • By IRWIN M. STELZER
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Of course, there is plenty of bad news right here in America. Orders of durable goods declined as the summer ended. New home sales continue to drop, falling in August by 2.3 percent, the fourth consecutive month in which buyers found record low interest rates of about 4 percent on 30 year mortgages an insufficient incentive to take on those mortgages, and banks found many of those willing to do so to be insufficiently credit worthy to warrant a mortgage. House prices seem to have stabilized, but nevertheless were 4.1 percent in July, below levels from a year earlier, the last month for which we have data from the Case-Shiller 20 city house price index.

Even the good news is bad: the government revised its estimate of second quarter GDP to account for higher personal consumption expenditures and exports, and lower imports. The result was to raise the growth estimate by 0.3 percent—but only to a meager 1.3 percent, not enough to put a dent in the 9.1 percent unemployment rate. Optimists say the economy is stalled, pessimists contend that it is already in recession.

Most important, businesses continue to sit on their cash. A survey of 140 CEOs by the Business Roundtable, an organization of the largest American firms that together account for $6 trillion in sales and employ 14 million workers, found that most have downgraded the forecasts of sales and capital spending that they made in the second quarter. “The findings of this survey show declines in every category of economic measurement… [and] increased uncertainty among CEOs concerning the economic climate and business environment,” commented Jim McNerney, chairman of the Business Roundtable. Since McNerney is also CEO of Boeing, which this week watched its first Dreamliner fly off to Tokyo after a three year delay, we must assume that he is privately more optimistic than his colleagues.

And certainly more cheerful than the CEO of Coca-Cola, Muhtar Kent, who says that the business environment in the U.S. is less friendly “in many respects” than in China, and that Brazil is more attractive to investment than America. “They’re learning very fast, these countries. In the West we’re forgetting what really worked 20 years ago.” That’s what commentators have in mind when they say that until confidence in the American political system returns, the economy will hover between stagnation and recession.

One recipient of these weekly effusions says that reading them has become an exercise in masochism. Sorry about that: I’m just the messenger.

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