Undoing the Holiday Jumpstart

By Lee Egerstrom, Economic Development Fellow, November 30, 2011 at 4:00 pm

Much excitement has greeted the post-Thanksgiving spending binge as consumers across America and in Europe stormed department stores and jumped online to order gifts and make deferred purchases. Stock exchanges around the globe responded positively.

But not so fast there, fella.

Any rally on Wall Street or in the European bourses can be undone the next day by other news. What Minnesotans know from both securities and commodities trading is that traders love to "buy the rumor, sell the fact." The key to markets for traders is to keep investors opening their portfolios, buying one day and selling the next, just so there are transactions to record.

What might take the edge off an otherwise solid beginning of the holiday shopping season? More debt problems in Europe, of course. More worries and rumors if not problems and facts are coming.

Two recent articles on The Local English language online newspaper site show why this is likely. France is the second largest economy within the euro zone market, behind Germany and ahead of Italy. One article, updated on Tuesday, reported that French unemployment rose to 9.1 percent in October, the highest since December 1999. A mid-November article cited several business media sources speculating that France could be the "next victim" of a sovereign debt crisis.

In a choice of words not heard since the Cold War, Norwegian Prime Minister Jens Stoltenberg warned his countrymen of a "domino effect" that could dry up credit across Europe if Italy's austerity measures fail. He issued this warning before speculation about France began.

How far away and how protected are we in Minnesota? Not enough. Whatever happens in Europe will spill over on us and our economy, like falling dominoes.

Posted in Economic Development | Related Topics: Economic Growth  Financial Industry  International Trade  European models