European economy has all but stalled

Economic growth in European countries has slowed if not stalled which could imply they are heading to recession.  In class we discussed what the global market implies for savings and the demand for domestic and foreign assets particularly in the case of the Great Depression.  For example, an increase in interest rates in France would change the nominal interest rate in the U.S.  The cost of borrowing in some European countries has grown in addition to economic shrinkage in others which means there is a contraction in lending.  The article points out that this will definitely affect the U.S. economy in that it can change lending expectations and the expected return.  A changed interest rate in foreign lending markets will affect the interest rate in the U.S. economy which could mean an increased recession.  It is clear that economic activity abroad is affecting the U.S. economy even today.

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