The Grim Global Outlook
A very quick ‘major economy’ round up.
The Eurozone crisis is getting worse. Spanish and Italian bond yields are at Euro-era highs and the market is increasingly focussed on worries about the Italian banks.
The divergence can also been seen in the spread between French and German bonds hitting a Euro-era high.
In the US, the debt deal may have passed, but a bad manufacturing PMI and awful consumer spending numbers have revived fears of a double dip recession.
As investors flee to safe havens, we risk round two in the ‘currency war’ as Switzerland attempts to devalue the Swiss Franc which has been driven by its ‘safe haven’ status.
Against this backdrop governments from London to Washington to Berlin are committed to cutting government spending and austerity.
What is now worrying me is that we may be verge on a major financial crisis – one not based on ‘too big too fail’ banks on but ‘too big to save’ Eurozone states – and unlike in 2008 there is little evidence of intra-government cooperation and no appetite amongst policy makers for a stimulus programme.