A statue holding the symbol of the Euro, the European common currency, stands in front of the European Parliament building on Aug. 16, 2011 in Brussels, Belgium.
In the United States this week, the focus of speeches and political debates is jobs. It's not surprising. With almost 30 million Americans out of work, under-employed or so frustrated that they've stopped looking for a job, it's the issue that is widely considered to be the game-changer as far as next year's presidential election is concerned.
But as urgent as the jobs crisis is, it is only one of a stunning array of economic crises and potential flashpoints competing for the attention of top politicians and making investors extremely uneasy. You see, the main contagion problem confronting the global economy is not that one of these economic troubles will erupt in one place and spread to other countries ? but rather that there will be a domino effect among these crises, even as each spreads geographically.
Here are the top 10 in terms of their apparent relative urgency and potential global impact at this moment:
10. The U.S. Deficit
This is an issue that has virtually no urgency. That doesn't mean it is not important. It is. But right now, it is at the back of the line and if the U.S. punted on it (as we will) for the next 18 months, it would not be the end of the world ? provided it looks like we really have plans to address the problem and we are aggressively using the moment to produce deficit-reducing growth as best we can.
9. Brazilian Inflation and Real Estate Bubble
Brazil is overheated. Its currency is overvalued. Money is pouring in while its industrial base is being hollowed out. There are real estate bubbles in Sao Paulo and Rio de Janeiro and other cities, tied to the biofuels boom. And if it looks like the government is losing control of this issue it could spook investors ? and if that that produced a market spike it could have a contagion effect in the region and among emerging markets.
8. Threat of Middle East Unrest to World Energy Supplies/Inflation
A bigger worry is that upheaval in Syria or elsewhere in the Arab world threatens to spread and oil markets get worried. Or worse, that tensions between Israel, the West and Iran start to spike. Or between Israel and its neighbors over Palestinian statehood. Or due to.... You get the idea. This region is a tinderbox and all sparks risk a spread to energy supplies and costs worldwide. This could trigger unrest elsewhere if it fuels commodity inflation or threatens stability in...
7. Threat of Chinese Unrest, Bubbles, or Inflation to Chinese Economy
China, where high oil prices have already produced one big truckers' strike this year. Of course, anything that threatens China's growth ? including inflation or the bursting of its own bubbles ? threatens the world. Germany, notably, is dependent on exports to China and since the EU is dependent on Germany, well, you do the math. Right now, most semi-positive outlooks on the world economy are counting on steady, high Chinese growth. If it doesn't happen, if China cools, all bets are off in the EU, the United States, Japan, and global growth as a whole. First sign of that and markets will be spooked.
6. The U.S. Housing Crisis
Take an aging country with no savings that is depending on the value in their homes to see them through their retirements. Then crush the value of their homes. You would think that would be a priority issue for the U.S. government, especially if that crisis triggered the last banking crisis and the worst recession in three-quarters of a century. But you would be wrong. The crisis goes on, prices remain depressed and consequently Americans consume less. And lots more Americans own houses than are out of work if you're looking for political and consumer confidence impacts. But, still.
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