Help From An Unlikely Source

Even as Republicans seek to exploit the “meh” August jobs report to convince Americans to forget everything they heard at the national political conventions and just join the Referendum, there was other economic news this week. Here’s Matt Yglesias’ summary:

It’s a bit of a cliché at this point to note that events in the Eurozone may have a bigger impact on U.S. politics than anything at the conventions, but it’s true nonetheless. And so far this week has brought some very good news. Mario Draghi’s plan for potentially unlimited conditional bond purchases by the European Central Bank has sent stocks soaring and yields plummeting on peripheral bonds even as German debt yields rise slightly on economic optimism….

Some will dismiss this noting that we’ve seen ECB rallies before. And so we have. But these rallies are telling us something important. Market participants are firmly convinced that the ECB can solve this problem if it wants to. Not solve all problems. Not turn southern Europe into a magical paradise of unicorns and prosperity. But solve the particular problem that’s been afflicted Europe for the past few years. Whenever it looks like the ECB has decided definitively to solve the problem, markets soar.

Matt goes on to note that ECB’s “solutions” may not be accepted by its supposed southern European beneficiaries, and there are many other long-term pitfalls of an approach that makes central bankers a daily player in decisions normally made by democratically-elected governments. But for the short-term–i.e., for American political animals who tend to view history as ending on November 6–this week’s developments in Europe probably mean stable and/or rising financial markets there and here, and a significantly lowered possibility of some negative economic “October Surprise” that will change what is a very close U.S. national election.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.