A Very Bad Week

In the past week, Wall Street traders held their breath, hoping that a new recession wasn't in the cards. On Wednesday British and German stocks fell 3%, Greece fell 6%. Everyone's eyes then looked towards the US stock market. The indicators didn't look too good, retail sales, the producer's price index, and the manufacturing report were all disappointing. Interest rates on the 10 year bond fell more than 16% to an interest rate of 1.86. This type of volatile market is not a good sign for the global economy, with the Great Recession still fresh in everyone's minds. It's easy for the US to panic, but they need to remember their position among the world. Europe, save Germany, wasn't doing very well in the first place, and the Eurozone hasn't been able to recover from the Great Recession as well as the United States has been able to. The biggest elephant in the room, though, is Ebola. The Andrew Ross Sorkin wrote that it's almost impossible to model the economic consequences of this disease. In a normal model, it is assumed that the people are rational, but during an epidemic people's rationalities will be called to question, and an accurate model would be hard to make. The reason that the US stock market was so volatile in the past week also has to deal with the rise in the value of the dollar. As we discussed in class, this rise in value makes it more expensive for foreigners to buy American goods which will hurt net exports lowering GDP and the producer's price index/manufacturing report. This does hurt the economy, albeit just slightly. An upside to this lower price is the fall of gas prices, which means that consumers will have more money to spend. The US economy is stronger than the European's or Asian's, while this week has been a scary one in terms of markets, it'll go down as just another volatile week, not a major setback.
The New Republic