Chart of the Day: Synchronized Cliff Diving

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Last week I blogged about a new paper suggesting that the European and the U.S. economies are more interconnected than most people think. The basic story had to do with credit conditions: Starting around 1999, European banks began to supply (or recycle) a lot of America’s credit, and this means that when European banks start deleveraging it’s likely to produce a severe credit contraction in the U.S. as well.

That conclusion was a little speculative, but you may recall that last week I also posted a chart showing that industrial orders had plunged 6.4% in the eurozone in September. Today, Tim Duy overlays U.S. industrial orders on the same chart and produces some sobering news:

Not a perfect match, but enough to suggest the idea of substantial decoupling looks like more myth than reality, especially in the face of a severe recession….Bottom Line: Don’t take US resilience for granted this time around — Europe is getting ugly, and it is far too late to prevent severe recession. The best policymakers can hope for at this point is too avoid a depression.

Correlation is not causation. But whatever the reason, it sure looks as if the U.S. and European economies really are linked closely in some fundamental ways — which shouldn’t be too surprising since Europe is our biggest trading partner and their banks are pretty tightly joined to the U.S. market. If Europe tumbles — and it sure looks likely that it will — we’re likely to tumble too.

HERE ARE THE FACTS:

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ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

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