The Daily Beast
By Zachary Karabell
September 7, 2012
The attention of Americans has been consumed the past weeks by extreme weather and extreme politics. The quadrennial convention ritual is as much a media fest as a political one, and the focus on the presidential election is merited. But while Presidents Clinton and Obama garnered attention, perhaps the most important event this week had nothing to do with American politics. It was instead the announcement by the head of the European Central Bank, the Italian technocrat Mario Draghi, that the bank was prepared to provide nearly endless funds to troubled governments provided only that they first promise to get their economic houses in order.
It doesn’t take genius to figure out why yesterday’s press conference and announcement by Draghi was lost in the media fray. Elections make sense; central-bank announcements replete with jargon, arcane policies, and acronyms do not stir souls. Wall Street and the financial world, however, were waiting on Draghi’s appearance with all the fervor of teens at a Justin Bieber concert. And they reacted to the announcement with measured delirium, sending equities to their highest levels in nearly four years.
For the general public, however, Draghi may not have made the top 10 of important stories, well below the Giants-Cowboys game, the rollout of the new Kindle and anticipated iPhone, and certainly behind the conventions. Today, the jobs report will garner attention, and should. Even in Europe, Draghi’s decision received less focus than equivalent moves in America by the Federal Reserve, and most European media outlets led with Obama. But this is one news story whose importance is not conveyed by its prominence.
Since the spring of 2010, the financial world has been intermittently paralyzed by euro fear. The rolling crisis, spreading across Europe from Ireland to Portugal, and of course Greece, before touching down in the much larger and equally troubled markets of Spain and Italy, has crimped the global economy, hampered economic activity for companies around the world, and seemed so intractable that it has created an almost permanent climate of cynicism, short-termism, and expectations of systemic collapse. The inability of the member states of the Eurozone to manage the crisis of soaring borrowing costs for indebted governments, little or no growth, rising unemployment, and radically different perspectives on the need to spend urged by Spain, Italy and France and the need to save and reduce debt articulated by Germany has brought not just the Eurozone but the entire financial system to a standstill.
Yes, the world has other issues—the viability of China’s growth and the still-unresolved issue of rising American debt and anemic growth. The euro crisis also follows the housing and derivative meltdown of 2008, and is that much more acute because of that context. But the world always has issues, and growth nowhere is constant and linear, even if people unreasonably expect and hope that it will be. The globally interconnected world of finance that evolved between the late 1990s and 2008 is one where there are no circuit breakers, and where even a country the size of Greece can imperil systems as large as the United States and the entire Eurozone simply because no one can say with confidence where or when the financial dominoes will stop falling—once they stop.