Economic Outlook: Modern day independence

Global markets started the week split Monday with Asian indexes pointed down and European indexes climbing in midday trading.

After a week in which the Dow Jones industrial average slid for the second consecutive week, the Nikkei average in Japan dropped 0.95 percent, while the Hang Seng index in Hong Kong fell 0.39 percent. The Singapore Straits Times turned nominally lower, off 0.03 percent. The S&P/ASX in Australia eased back 0.43 percent.

Major markets in Europe posted early gains with the FTSE 100 in London up 0.66, the DAX 30 in Frankfurt up 1.24 and the CAC 40 in Paris up 1.45 percent. The broader DJStoxx 600 gained 1.08 percent.

U.S. markets head into a holiday-shortened week tottering on the edge of a rally that may be collapsing amid familiar cries that the world’s largest economy just ain’t what it used to be. The World Bank’s prediction that the Chinese economy will grow 7.7 percent this year, while the U.S. economy shrinks, has renewed a push from Russia, India, China and Brazil for a more diversified international monetary system, The Washington Post reported.

The long-term implication is that central banks might back away from their reliance on the U.S. dollar in favor of the Chinese yuan, depressing the dollar’s value further. In turn, U.S. purchasing power would diminish and its products would become more affordable overseas.

On Sunday, U.S. President Barack Obama said the climate bill passed by the House of Representatives was an extraordinary first step, but said he was opposed to the tariffs that would be imposed on imports from nations that did not make efforts to reduce greenhouse gas emissions, The New York Times reported Sunday.

Obama applauded what appears to be shaping up as an energy policy, pushed by environmental concerns and opportunistically linked to economic concerns.

Autos and airplanes, of course, are on the front line of this twist of fate. On top of the financial crisis that sparked a recession, 2008 was marked by an extraordinary jump in oil prices that frightened automakers out of cruise-control, which is to say out of their mindset of churning out gas guzzlers. Airlines, too, were suddenly more interested in miles per gallon than they were in the past.

The climate bill passed narrowly in the House, 219-212, and appeared headed for a debate at least as intense in the Senate, the Times said.

On Sunday, Obama urged senators to seize the day, and said he would embrace a bill that included a reduction in harmful emissions, cost neutral, and included mitigation measures against sharp escalations in energy costs.

Heading towards Independence Day, I think it’s fair to say that over the first six months we’ve seen more action on shifting ourselves away from dependence on foreign oil and fossil fuels than at any time in several decades, Obama said.