Greek debt, small business woes, and poverty cloud U.S. economy
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Europe again today dominated the news, with Germany’s Chancellor Angela Merkel smacking down those in her party who would let Greece default on its massive sovereign debt.
For Merkel, it’s rock: meet hard place. On the one hand, more and more Germans are against further bailouts of Greece, and in some cases support breaking up the Eurozone. On the other hand, France and the United States (both of which support efforts to prop Greece up), are fearing the consequences of a default. Where Merkel comes down will say a lot about how the European debt crisis is resolved.
Today we spoke with Jeffrey Palma, the head of Global Equity Strategy at UBS. He said that a Greek default is still “likely” but he said that it shouldn’t be allowed to happen before Europe’s banks get their balance sheets in order, mainly by increasing their capital reserves. That way the banks – Greece’s biggest creditors – could weather the storm caused by a Greek default and not trigger a crisis much like the one the U.S. faced with its banks after Lehman Brothers collapsed in 2008.
At home, small business owners worry
But Europe wasn’t the only thing on the minds of the markets today. Here in the U.S., the National Federation of Independent Business (NFIB) released the results of its monthly Small Business Optimism Index and the news wasn’t good.
Small businesses became more pessimistic in August. Jeffrey Palma told us that the NFIB survey confirms the lousy sentiment in the past month on the part of both consumers and businesses. He said that the big reason for that pessimism is last month’s battle over the debt ceiling. Palma is looking to September to see if August’s weakness was event driven, or the start of a larger trend.
Poverty on the rise, too
The other numbers that came out today were especially shocking. The Census Bureau announced that the number of Americans living in poverty climbed past 46 million. Palma said it shows yet again the growing problem of income inequality; that the growth of the problem is a direct result of unemployment, which underlines yet again the importance of creating jobs.
We will leave you with some good news. Palma reminded us that corporate balance sheets are still good and that he expects these big companies to open up their cash reserves to buy new equipment and create some jobs.
Also on the show, news that truckers are buying less diesel fuel means there’s less stuff being trucked around the country. To us, that means less demand, which implies slower growth. So the Marketplace Daily Pulse is slow again today.
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