After being dragged along by Wall Street, the stock markets are stained red. Yesterday investors fled from stocks and found refuge in US Treasury bonds, where in some cases negative yields were obtained. This is an obvious signal of deflation.
Horrendous US employment figures offered no signs of recovery. Problems with competition and consumers mired in debt have not been addressed. During Washington?s negotiations to raise the debt ceiling, American politicians seemed prepared to put the credibility of the world?s premier economy in check. In any case, the United States? fiscal measures will have to adapt in order to ensure that its debt does not lead to another recession. Such a situation puts pressure on the Fed to print more money, yet another monetary expansion called QE3. Still, this time it is not going to enjoy the same leeway. The Fed has already put three billion dollars on its balance sheets and it could risk creating tremendous inflation that would be difficult to harness. By now, the figures paint an incomplete picture, but Bernanke could put forward something that could give the markets hope.
At the same time, as the OCDE mentioned yesterday, the signs of cooling growth have also reached the emerging economies. And the one Western economy that seemed to rise up out of the debt crisis, Germany, saw its stock market plunge 5% in one trading day and accumulate losses of 15% on the week. That is to say, the slowing down that the United States is dealing with could extend to the rest of the world. And that means the Germans will not continue exporting as they wanted. That could present a fatal blow to Spain. The Spanish government knows that national demand will not contribute anything toward growth and that only the foreign sector will have an impact. But a good part of our products are sold to Germany, such that if they slow down, we will truly be in trouble. All of Europe could begin suffering from deep and long-lasting unemployment.