The Organization for Economic Cooperation and Development has lowered its forecast for global economic growth. In our first article this week, their chief economist warns that the euro debt crisis is still the greatest threat to the global economy. Next, we have an article about how U.S. households are steadily reducing their debt, which declined $74 billion in the third quarter. We then turn to a discussion about the safeguards the Financial Stability Oversight Council is demanding to prevent runs on money market funds such as we saw in 2008. We wrap up this week with an article about continued market volatility as the fiscal cliff issue awaits resolution in Congress.
OECD Warns About Europe As It Cuts Growth Forecast – The Organization For Economic Cooperation and Development (OECD) lowered its forecast for global economic growth, noting that the euro zone debt crisis is the greatest threat. “The U.S. fiscal cliff is a very important source of concern, but the greatest downside risk remains the euro zone,” their chief economist said. http://www.reuters.com/article/2012/11/27/us-oecd-economy-idUSBRE8AQ0DB20121127
Americans Are Steadily Reducing Debt, New York Fed Says – Household debt in the U.S. declined $74 billion to $11.3 trillion in the third quarter, the Federal Reserve Bank of New York said. Mortgage debt dropped to $8.03 trillion, the lowest in six years. However, by doing the right thing in saving more and spending less, Americans are also reducing consumption and restricting economic growth as measured by GPD. http://www.washingtonpost.com/business/economy/americans-continued-paring-household-debt-in-third-quarter/2012/11/27/d59d6268-38cd-11e2-a263-f0ebffed2f15_story.html
Regulators Demand Safeguards For Money Market Funds – The Financial Stability Oversight Council is an umbrella group of financial regulators which serves as the new U.S. systemic-risk watch dog. They are steadfastly demanding safeguards to prevent runs on money market funds from triggering another financial crisis. http://www.economist.com/news/finance-and-economics/21567078-regulators-seek-shore-up-money-market-funds-against-runs-running
Market Volatility Will Continue Until Fiscal Cliff Resolved – On Wednesday, the S&P 500 Index initially fell close to 1%, but then bounced back after U.S. House Speaker John Boehner said he was optimistic that a deal on the fiscal cliff could be reached. We believe we will continue to see this type of volatility over the next month or until this issue is resolved. http://www.reuters.com/article/2012/11/28/us-markets-stocks-idUSBRE8AP08020121128
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John R. Day and Bill Ennis