Economics is Such a Drag

October 18, 2012

Clearly, the officials in Europe are going to great lengths to try and stimulate demand. However, recent evidence indicates that the situation does not seem to be improving. In fact, a disturbing trend of weaker growth in the previously solid core nations is starting to emerge.
-Fred Cooper, senior portfolio manager of non u.s. equitites, Columbia Management

At least in Europe it is. Central bankers around the world are doing everything they can to try and pump up the global economy. Mario Draghi, President of the European Central Bank, has been incredibly aggressive and creative in trying to rectify the imbalances plaguing Europe. However, there is only so much central bankers can do. As we’ve previously asserted in Columbia Management Perspectives, monetary policy cannot by itself create growth; it can simply reallocate it, either across geography or across time. European politicians are certainly saying a lot about the problems they are facing, and even doing a thing or two. Yet the economic backdrop in Europe continues to deteriorate. Obviously, the situation in the periphery continues to be awful. As you can see in the chart below, unemployment in Greece has risen for 15 straight months and is now barely below 25%. Moreover, housing prices in Spain continue to plummet.

Download File