Chart of the Day: Synchronized Cliff Diving

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Last week I blogged about a new paper suggesting that the European and the U.S. economies are more interconnected than most people think. The basic story had to do with credit conditions: Starting around 1999, European banks began to supply (or recycle) a lot of America’s credit, and this means that when European banks start deleveraging it’s likely to produce a severe credit contraction in the U.S. as well.

That conclusion was a little speculative, but you may recall that last week I also posted a chart showing that industrial orders had plunged 6.4% in the eurozone in September. Today, Tim Duy overlays U.S. industrial orders on the same chart and produces some sobering news:

Not a perfect match, but enough to suggest the idea of substantial decoupling looks like more myth than reality, especially in the face of a severe recession….Bottom Line: Don’t take US resilience for granted this time around — Europe is getting ugly, and it is far too late to prevent severe recession. The best policymakers can hope for at this point is too avoid a depression.

Correlation is not causation. But whatever the reason, it sure looks as if the U.S. and European economies really are linked closely in some fundamental ways — which shouldn’t be too surprising since Europe is our biggest trading partner and their banks are pretty tightly joined to the U.S. market. If Europe tumbles — and it sure looks likely that it will — we’re likely to tumble too.

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without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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