The Hows and Why of Economic Optimism

The recovery from the financial crisis is now one of the longest in U.S. history, and economists don’t see it running out of steam anytime soon. But why are they so confident?

U.S. Stocks Slump as Germany Damps Optimism on Crisis Solution

U.S. stocks declined, after the biggest weekly gain in the Standard & Poor’s 500 Index since 2009, as financial shares slumped and the German government damped optimism of a quick fix to Europe’s debt crisis.

Banks in the S&P 500 tumbled 6.3 percent as a group. Citigroup Inc. (C) and Wells Fargo & Co. (WFC) slipped at least 1.6 percent as revenue dropped amid economic weakness and market turmoil linked to Europe. Alcoa Inc. (AA) and Caterpillar Inc. (CAT) retreated more than 3 percent to pace losses among companies most-tied to the economy. Gannett Co. sank 8.7 percent after profit fell as newspaper advertising declined.

U.S. economic recovery tied to European debt crisis

The political intrigues in Brussels and Berlin over Europe’s debt crisis are as foreign to most Americans as the languages spoken there. U.S. exports to Europe don’t even amount to a fiftieth of what Americans produce. And American banks have at best a modest toehold in the European countries facing possible default.

But the waves of anxiety caused by the European debt crisis are taking a significant toll on the United States — not just palpitations in financial markets but darkening prospects for the broader U.S. economy.