Europe Sneezes, We Catch a Cold

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Real Time Economics reports on the latest forecast for Europe’s economy:

J.P.Morgan was among the first European banks to forecast a euro zone recession, meaning two-straight quarter of economic contraction, back in September. It was supposed to be a modest one, with GDP falling just 0.8% from its peak.

It now looks like things will get even worse. “We now believe that the recession will be deeper and longer lasting, and we are making forecast changes to show a peak to trough move in the level of GDP of just over 1%, with the recession lasting through the third quarter of next year. The risks around this forecast are for a deeper and even longer lasting contraction,” the bank said in its latest research note.

Urk. I’m not even sure what kind of comment to offer on this. But it strikes me as unrealistic to think that Europe can fall into a recession — possibly a deep one — and the United States won’t be seriously affected. I know we have an overhang of demand for cars and houses, and that’s going to spur more spending, but a recession in Europe is going to affect jobs in America, which affects incomes in America, which means there’s no money for cars and houses no matter how much overhang there is.

On the other hand, maybe there’s a cheerier scenario (for America, not Europe). It’s possible, I suppose, that a recession in Europe will drive down demand for oil, which in turn will lower the price of gasoline, which in turn might stimulate the U.S. economy more than Europe’s recession hurts it. Somebody somewhere must have modeled this, right?

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DEMOCRACY DOES NOT EXIST...

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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