The Age of Low Expectations

Observing today’s global economy is like watching Adam Sandler’s best movie.  It’s horrible, but it could be worse.

Consider what passes for improvement today:

Europe is no longer in a recession.  Under the headline, “Eurozone’s longest-ever recession comes to an end,” the Associated Press quoted Eurostat, the European Union’s statistics office, announcing that the 17 EU countries that use the euro saw their economic output increase by 0.3% in the second quarter of 2013.  Over a year, the Eurozone’s growth rate would be 1.1%.

That’s the first quarterly growth for the Eurozone since 2011, but it requires some perspective.  China’s growth slowed to just 7% this year and it’s widely regarded as a calamity, signaling that the world’s second largest economy is on the brink of failure.  Europe’s economy is growing at a rate of 1.1 % and the party hats are out because some believe that the Eurocrisis is finally over and we’ll never have to hear the term “sovereign debt” again.

Don’t count on it though.  The Eurocrisis is far from over.  Consider just a few unresolved issues outlined by Fidelity’s Michael Collins:

  • Greece is ever closer to collapse, an event that would trigger bank and bond runs in other troubled countries.
  • Mediobanca, Italy’s second-biggest bank, warned in June that the country might need an EU rescue within six months because the recession and the credit crisis for large companies are deepening,

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