The overall picture of the U.S. and global economies is becoming harder to determine on a daily basis. The vast majority of data coming from domestic sources paints a grim picture of the U.S. economy. Unemployment is locked in at over 9.1% and there is nothing to indicate that better times are ahead. In fact, downward revisions from the first half of the year for overall growth indicate that the economy may already be contracting and in a recession. The fact that no real recovery has been realized since the financial collapse of 2008 has many claiming that we're actually already in a depression.But whatever terms you want to throw at describing the current macro-economic situation we're in is rather immaterial. The biggest hurdle the global economy faces at the moment is that sovereign debt is out of control, and the system as it currently exists is not equipped to handle that contingency. Greece is grabbing all of the headlines and the attention of Euro leaders today. But even with new bailout agreements, austerity measures, and claims of solidarity among Europe's economic powerhouses, few truly believe that this problem is going away. Greece, Italy, Portugal, Spain, Ireland, and perhaps other nations, simply don't have the potential for GDP growth outside of bubble conditions to allow them to keep up with their existing and future debt loads. Eventually, the same will be true of the U.S. and other global economic powers.
Even with new rounds of QE, which are now practically a certainty, the long-term prospects for recovery are non-existent on a global scale. The only way to move forward with a healthy global economy is to allow the toxic debt situations to die, regardless of how painful it might be in the short term.
We speak often of the fear of "contagion", but the fact is that the global economy is already sick - and it's because the powers that be have refused to let the infectious veins die off naturally. Once the infected pieces have died, new, healthier pieces may emerge to take their place. Until that happens, the entire body will continue to die a slow and painful death.
