One only needs to look at the roller-coaster ride of the Dow Jones and other economic indicators to see why there is so much worry over the economy, not just in the United States, but globally. This worry and uncertainty has lead many companies to “sit on a pile of cash,” unwilling or unable to justify capital spending until economic conditions become more clear. The latest potential monkey wrench to the global economy is the European debt crisis.
Over the last year-and-a-half, unemployment and government belt-tightening in Greece, Ireland, Portugal and Spain-the result of attempting to gain control over their potentially crippling debt obligations-are threatening the stronger economies of The European Union and beyond. Europe’s economic powerhouses, France and Germany, are being hurt by decreased business orders from these indebted countries, restraining their economies as well. In fact, European stocks fell sharply after German financial giant Deutsche Bank reduced its profit forecast for the year due to exposure in the debt problems of these countries. Investors were further scared off when speculation that French-Belgian investment bank Dexia could be the region’s first large bank to need a government rescue as a result of the current debt crisis.
And the potential fallout does not end with Europe. Emerging economies like China and Brazil rely heavily on European exports. The United States has major banking and trading interests in Europe, a region whose banks are said to be “the most interconnected in the world” with a currency, the Euro, that is one of the largest reserve currencies in the global economy.
A growing number of analysts and key financial figures have predicted that Europe is headed for recession, one of which is Goldman Sachs, forecasting that both France and Germany will slip into recession. The situation prompted Federal Reserve chairman, Ben S. Bernanke, to warn Congress that “the recovery is close to faltering” and could force the U.S. into a new recession unless the government took further action.
However, Greece has repeatedly said that is has no plans to default and will make good on its debt. Chancellor Angela Merkel has pledged that Germany plans to fully support Greece. The idea that these officials could be downplaying a potential crisis aside, there is an element of perspective here, for both the observed and the observer. As has been said, it depends on how you look at it. Adding to the already murky waters, for example, some have said that U.S. banks could lose as much as $1 trillion if the current situation “were to lead to a full blown financial crisis.” Others have said, “[The U.S.] could lose close to nothing.”
It is like Schrödinger’s cat. We will not know the extent of the risk to economies and individual companies until we look inside the box, meaning we won’t know the effect Greece defaulting or a European recession will have on the rest of the world until it happens.
This month, NDT Magazine offers a potential solution for those NDT companies feeling the same uncertainty about the economy and unable to justify capital expenditures in the current climate-NDT rentals. Find out what you need to know about the rental market in Dylan Duke’s feature article, “In A Down Economy, Look to NDT Rentals.”
Enjoy and thanks for reading!