The economy of the 17-nation euro zone, which accounts for nearly three-quarters of the overall E.U. gross domestic product, shrank for a fifth straight quarter at the end of 2012, and indications suggest that trend will continue in the January through March period.
A record jobless rate of 11.9 percent and government budget-balancing measures have hurt household spending across most of Europe, even as the United States continues to grow modestly.
Separate Markit reports showed both the German and French economies, the two largest in the euro zone, losing steam. . . .
Martin van Vliet, an economist at ING Bank in Amsterdam, said the report Thursday “pours cold water on hopes of an imminent end to the euro zone recession,” as it showed domestic demand remaining weak across Europe."
Now let's move on to the problems in the U.S. economy and our ongoing financial issues. What's wrong here? Well, Biggest Drag On Economy? Washington lays it out for us:
"Housing is on its way back. Consumers are spending more readily. Nearly two-thirds of U.S. private industries are hiring. The stock market is up. The U.S. economy is healing, albeit slowly.

And then there's Washington. . . .

Thank you (in Washington) very much, but what have you done for us lately? Basically offering more harm than help to an economy trying to recover.

At the insistence of Republicans, Congress is cutting spending now; Democrats have acquiesced to the across-the-board spending cuts of the much-feared sequester for the current fiscal year. At the insistence of Democrats, Congress has raised taxes this year.

Nearly all reputable economic forecasters agree that this combination means the federal government will subtract from growth this year. . . .

That might be worth the short-term pain if it were part of a long-term cure. It isn't.

Washington has done next to nothing on the big driver of long-term deficits—the growth in spending on benefits, particularly health care.

And for all the professed affection for "tax reform" in principle, Congress—despite the groundwork laid by House Ways and Means Chairman Dave Camp (R., Mich.)—hasn't moved much toward a revamp of the tax code that would spur growth and reduce future deficits. . . .

"It looks bad because it is," says Douglas Holtz-Eakin of the center-right think tank American Action, referring both to the deficit and the politics of Washington.

"We know something about how to solve the problem of big debt and bad growth," he argues. "What we've done is raise taxes, not reform them, and, attack core functions of government [such as national defense, research, education] while leaving transfer programs [health and retirement benefits] unchecked."

"We're doing it 180 degrees wrong," he adds. . . .

The governments of Europe aren't any better. . . .

"I don't remember a time when in the West, populations were losing [so much] confidence in the established political order," Mohamed El-Erian of bond-manager Pimco said at a Stanford University forum last week.

In the U.S., he said, the problem is polarization. "We go from one crisis to another and we never emerge stronger," he said. "There's no trust in Washington and there's no enforcement mechanism because we're not in a crisis."

The financial markets are unperturbed. Why? Perhaps because the Fed is holding interest rates down and, thus, chasing investors into stocks. Perhaps because corporate profits have been doing so well. Perhaps because the market is shortsighted.

So where do we go from here? The near term looks OK. The dysfunction in Washington is overwhelmed by the increasing vitality of the private sector and the buoyancy of the markets.

But after that?"

Summing Up

Our politics has the reached the point where the lack of confidence in our political leaders is having a big negative impact on both our economic future and the rest of the world's as well.

Europe and its social-democratic policies, aka welfare state, have failed. Why can't we see and learn from that? Why do our politicians continue to refuse to heed the clear lessons from Europe about the consequences of big government and the welfare state?

In this connection, I'm always reminded of the 1848 quote by French author Frederic Bastiat that "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."

In other words, there is no free lunch and government only is able to distribute to someone that which it first takes from someone else. Less the "commission" charged by the government for conducting its operations, of course.

As for the near term future of European countries, they're essentially yesterday's newspaper, if not toast. And the problems they've created for themselves won't be solved any time soon, if ever.

Not so for us. Not yet at least.

The problem and the solution for our problems lies within us. And it's not too late to have a happy ending here. Not yet.

That's my take.

Thanks. Bob.