Tuesday, September 6, 2011

Europe Is Not The Problem

The Lehmann Letter (SM)

The stock market tumbled this morning following sell offs around the globe.

But Europe’s fiscal crisis and sovereign debt problems and questions about the Euro’s longevity are not the problem. See the front page article in today’s New York Times that discusses Europe’s efforts to forge a united front to deal with these issues:


Europe will probably succeed, salvage the Euro and grow stronger for the effort.

Today’s stock market woes are tied to the prospect of weak earnings here at home stemming from inadequate growth in aggregate demand. Sales volume can’t recover until households and businesses are willing to borrow and spend at a more expansive pace. But why should they? How can they? Household balance sheets remain impaired and business won’t aggressively invest in new plant and equipment until households lead the way.

Investors are concerned.

© 2011 Michael B. Lehmann

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