Photo: Patrick Denker via flickr
From time to time, we find it very useful to take stock of conventional wisdom. That’s not because conventional wisdom is especially useful, but rather it gives you a sense of how events are deviating from said wisdom.The last time we did this was February, when markets were surging and Europe was riding high.
If you look at what we identified as the new conventional wisdom then, it seems like a lifetime ago.
So here’s our sense of where conventional wisdom stands right now.
- The US economy is very weak, but not yet heading into a recession. However, political gridlock is a major threat and could easily cause a recession.
- The Fed is the only entity that could act and save the economy.
- Spain is a huge threat, and the ECB (which was for a while a hero post-LTRO) is now dangerously behind the curve.
- If Greece leaves the Eurozone, Europe is likely to move much more quickly on fiscal integration.
- China is dangerously close to a hard landing.
- All of the BRICs and broader emerging markets are rolling over, which makes this downturn especially pernicious.
- The election right now is a toss-up, but Romney has the momentum.
- Markets will respond positively to any evidence that Romney is going to win.
- A Romney win would be great for the economy, because it takes the fiscal cliff crisis off the table.
- The tensions in the Mideast aren’t a huge deal like they were thought to be a few months ago.
- The US will have low interest rates forever.
Any that are wrong or should be added? Let us know.
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