Where is the US economy headed?

I have been reading to today about Europe - mostly from sources there. I wish I knew more, but I see an obvious divide between northern and southern Europe. Germany seems to have hit a wall - political and economic - with its struggling neighbors, leaving France out on a limb.
We can talk about northern Europe's health, but isn't the whole notion of the EU and the euro teetering dangerously close to an abyss?

MILAN - The ghost of a new recession haunts the United States, and zombies of sovereign debt lurk across Europe. No one seems able to evaluate whether the Spanish and Italian bonds, whose prices continue to drop as yields rise, will have a second life -- or are already a financially dead man walking.

Indeed it has the makings of a horror movie, as ripples of fear turn to waves of panic now rolling across the connected networks of worldwide stock markets. The different worries on either side of the Atlantic feed each other: The United States economy is slowing down, and without the U.S. engine, the world spins ever slower.
In order to beat the sovereign debt crisis and attempt to consolidate public accounts — in Europe as in Washington — it is urgent to cut public spending and raise taxes, otherwise there isn’t any hope that other government interventions can give a jolt to the real economy.
It’s a globalized film, and among the large euro-zone countries, Italy is the one with the weakest growth; the spring forecasts of the European Commission, which mirror those of the Bank of Italy, give our country a 1% recovery on GDP through 2011, compared with a regional average of 1.6%.
The state of public finances, with a debt-to-GDP ratio of 118%, marks a record in Europe, and requires solutions different from those of the government budget, which was essentially dead on arrival, simply postponing a large portion of the budget adjustments to 2013-2014.
Within this dramatic situation, the latest in a series of sovereign debt crises was triggered. By now, the international markets no longer consider the bonds guaranteed by the US safer than private, individual bonds. On the contrary, if for tiny Greece, which accounts for only 3% of European GDP, the EU’s actions were too little too late, what could it do for the major economies of Italy and Spain? Very little, one fears.
In fact, it was far from comforting this week when the president of the European Central Bank, Jean-Claude Trichet, after having urged our country to lay the groundwork in our public finances for recovery, announced that the ECB had begun buying government bonds, but only those from Ireland and Portugal, and not Spain or Italy.
Not just speculation
But is it or is it not speculation that is raging against Italy? Speculative behavior belongs to those who sell a bond, usually without actually holding it, in the hope of triggering a decline that allows them to buy the same bond back at a lower price, thus turning a profit on the difference. In these days there is indeed speculation on security. But there are also many pure and simple sales of those who see trouble coming for Italy, and instead of betting against the deterioration of the situation, they prefer to simply call it quits.
While in Europe the fear is focused on the debt in the public balance sheets, on Wall Street the main worry is the anemic economic growth. Despite somewhat better news Friday with jobs numbers, we have seen a long series of data that depicts an American economy not nearly as strong as it was thought to be only a few months ago, most notably a GDP growth of 1.3%, well below expectations. (The latest grim news came Friday evening when Standard & Poor’s downgraded the U.S. from its AAA credit rating for the first time since it was granted in 1917)
The ghost that is hovering above the United States is that of a “double dip” recession after the stock market rally that reached its peak in May was proven to be but an illusion. This is the fear. The hope is that, like any decent big-budget film, the heroes arrive just in time. The charge could be led by the Federal Reserve President Ben Bernanke, who launches the third “Quantitative Easing,” to increase available credit by putting more dollars into circulation, and thus stimulating the economy.
But where does the money fleeing Wall Street in New York, Piazza Affari in Milan, as well as London and Frankfurt, wind up? Underneath mattresses (not as virtual as one might think), most likely because in times like these, choosing not to choose could be a logical choice. Gold remains at record levels, and the Swiss franc and German treasury bonds are solid. Some are even turning to the Japanese yen. Anything will do really…just to get out of the screening room of a movie that has gotten far too scary.
Read more in Italian from La Stampa

China urged the United States Saturday to face the problem of debt and questioned the status of reserve currency the U.S. dollar.
In a commentary severe your little diplomacy, the official Xinhua news agency expresses the feeling Beijing after the degradation of AA + sovereign rating of the U.S. Standard & Poor's.
"China, the first creditor of the world's only superpower, is now in its right to require the United States they face the problem debt and ensure the structural safety of Chinese assets in dollars, "Xinhua said.
"There is a need for international monitoring on the issue of the U.S. dollar and a new reserve currency, stable and secure, can also be an option to prevent a catastrophe is caused by a single country, "said Xinhua.
China suggests that Washington reduce its military spending and social issues.
"The U.S. government must resign himself to a painful state of affairs: the good old days when he only had to borrow to get out of trouble he had himself created is over, "writes the news agency.
RESERVES FOR DIRECT IMPACT CHINESE
Chinese economists believe that the deterioration of the American note is a significant risk to financial markets and expect that China, which holds more than 1,000 billion of U.S. debt, accelerate the diversification of its assets.
"It will be chaos on international financial markets at least in the short term . The most direct impact for China of its reservations. The dollar value of investments in China will fall, "said Li Jie, director of an institute at the Central University of Finance and Economy.
" China will need to consider other investments. The U.S. Treasury is no longer safe. There are the markets for riskier types of assets that (bonds) AAA, but less risky than AA +. China 's not thought of before but will have to do it, "he says.
For Ding Yifan, deputy director of a think tank associated with the Chinese State Council, the United States will have to ease monetary policy further, this possibly by a third operation 'quantitative easing', consisting for the Fed to buy Treasury bills.
"If the U.S. launches a truly EQ3, it will undoubtedly add to the uncertainty in the economy World and drive up commodity prices, "he said.

The day after Standard & Poor’s took the unprecedented step of stripping the United States government of its top credit rating, the ratings agency offered a full-throated defense of its decision, calling the bitter stand-off between President Obama and Congress over raising the debt ceiling a “debacle.” It warned that further downgrades may lie ahead.


In an unusual Saturday conference call with reporters, senior S.& P. officials insisted the ratings firm hadn’t overstepped its bounds by focusing on the political paralysis in Washington as much as fiscal policy in determining the new rating. “The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S.& P.’s sovereign ratings committee.

On Thursday, the ratings agency informed the Treasury that its seven-person panel would meet Friday morning to assess the creditworthiness of the United States government.

Even then, one administration official said, “We didn’t think they would actually do it.

I would imagine that S&P think that a nation that owes $20 trillion and has no political system able to organise repaying it is at junk status from the lenders point of view. And it is lenders S&P are advising

You are kind of like Jesus you healed the blind!

Is not that a dangerous proposition for you to use rl? Apply it to the Gospels and all your arguments against miracles fall to the floor.

You take the Bible too seriously rl

Don't the endless repetitions of being told about your wonderfulness and greatness not raise a suspicion that you are not so sure about it really and are in need of constant reassurance