Just as manufacturing is giving a lift to the US economy, it is doing the same to the global economy. How can this be happening given all the dire predictions for Europe? The answer in a word is “Globalization.” The end of the Cold War marked the beginning of Globalization, which is the integration of national economies through rapidly proliferating and rising free trade.
That process was briefly (and painfully) interrupted in late 2008 and early 2009 as the US financial crisis morphed into a global credit crunch that shut off the availability of trade credits. I suppose it could happen again if the European financial crisis morphs into another global credit crunch. That’s not happening so far. The flood of liquidity provided by the world’s major central banks is keeping global capital markets wide open for business, helping to offset the impairment of lending by banks, especially in Europe. (More for subscribers.)