Economic outlook is grim, but stocks still up this week

A stock board at the New York Stock Exchange

Steve Chiotakis: U.S. Treasury Secretary Tim Geithner is in Poland today cheering on European finance ministers trying to sort through the European debt crisis. Those ministers have delayed any more action on bailouts for countries with severe debt problems until next month.

Meanwhile, the economy on this side of the Atlantic continues to sputter. Jobs are nowhere to be found, yet the stock market's been on a bit of a rally.

Jill Schlesinger is editor-at-large at CBS/MoneyWatch. And she's with us live from New York, as she is every Friday morning. Hey Jill.

Jill Schlesinger: Good morning.

Chiotakis: So we've already been through one financial crisis. Has enough been done, do you think, in Europe, to stop the next one?

Schlesinger: I always like to think of Europe as a sick patient. And the central banks have now treated some of the short-term symptoms of the patient's illness, but they really haven't cured the big problem -- the spreading disease of debt. And that's the one that infects Greece, Spain, Italy and Portugal. Until they develop the cure for the larger problem -- again, probably not until October -- our patient is in ICU.

Chiotakis: So the short answer is no. We're waiting until October, as I mentioned earlier, for more answers. More uncertainty, I'm sure. How's that going to affect the American economy?

Schlesinger: Let's use our sick patient analogy again. When your relative's sick, you don't plan a big vacation, right? So right now, U.S. companies are holding back on making plans -- whether that means hiring new employees, or embarking on big expansions. I think the economy's going to probably stay in a pretty bad holding pattern here at this low level.

Chiotakis: Everyone being cautious?

Schlesinger: Yes indeed.

Chiotakis: Yeah. So we've had all this caution, and four days in a row of stocks going up. With all the bad news going on, what's got everyone on Wall Street so excited?

Schlesinger: Let's not forget that as much as we like to use computers, investors are human beings. And we're swayed by emotions. Just think -- you're so happy to hear that the doctor comes out and says, "the patient is stable." But you know, it's only in the short-term. Remember what happened in 2008 and 2009. The U.S. government injected our sick banking system with a massive dose of TARP. That definitely stabilized the patient. It didn't prevent a lot of suffering in March of 2009 when stocks bottomed out again. So it's going to be a bumpy ride, and I think you may be happy about this week but you know what? It's going to keep happening until we get to the core issue which is solving the debt crisis.

Chiotakis: Get it by its root.

Schlesinger: You got it.

Chiotakis: Jill Schlesinger from CBS/MoneyWatch in New York. Jill, thanks.

Schlesinger: Take care.

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