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Jobs Up

Job growth improvingnumerous signsGreg Gardner 9/9/12, Job growth remains tepid,http://www.freep.com/article/20120909/BUSINESS07/309090151/Job-growth-remains-tepid?odyssey=mod|newswell|text|FRONTPAGE|s, CMRThere are several encouraging signs in the latestjobs data. The number of people unemployed for 27 weeks orlonger fell 16% to slightly more than 5 million in August from a year earlier. The number of discouraged workers -- thosewho have stopped seeking work -- dropped 14% to 833,000 from August 2011.Construction jobs are growing slightly -- up1,000 from July to August, but a year ago, they were disappearing at a rate of 10,000 or more each month.

http://www.freep.com/article/20120909/BUSINESS07/309090151/Job-growth-remains-tepid?odyssey=mod|newswell|text|FRONTPAGE|shttp://www.freep.com/article/20120909/BUSINESS07/309090151/Job-growth-remains-tepid?odyssey=mod|newswell|text|FRONTPAGE|shttp://www.freep.com/article/20120909/BUSINESS07/309090151/Job-growth-remains-tepid?odyssey=mod|newswell|text|FRONTPAGE|shttp://www.freep.com/article/20120909/BUSINESS07/309090151/Job-growth-remains-tepid?odyssey=mod|newswell|text|FRONTPAGE|s

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1nc alt causes

Alt causes

Gas pricesAP 9/15/12, Fed actions may cause further hikes at pump,http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20120915/NEWS90/209150325/-1/NEWS01,CMR

WASHINGTONHigher gas prices are crimping consumer spending and slowing the already-weak U.S.

economy . And they could get worsein the coming months. The Federal Reserve this week took steps to boost economic growth.But those stimulus measures are also pushing oil prices up. If gas prices follow, consumers will have less money to spend elsewhere. The impactof the Fed's actions "is likely to weigh on the value of the U.S. dollar and lift commodity prices," said Joseph Carson, U.S. economist atAllianceBernstein. "We would not be surprised if (it) fueled more inflation in coming months, squeezing the real income of U.S. workers."

Americans are already feeling pinched by high unemployment, slow wage growth and higher gas prices. Consumersincreased their spending at retail businesses by 0.9 percent in August, the Commerce Department reported Friday. But that was largely becausethey paid more for gas. Excluding the impact of gas prices and a sizeable increase in auto sales, retail sales rose just 0.1 percent. Perhaps moretelling is where Americans spent less. Consumers cut back on clothing, electronics and at general merchandise outletsdiscretionary purchases

that typically signal confidence in the economy. Up 50 cents in 2 monthsGas prices have risen more than 50 cents per gallon inthe past two months. The national average was $3.87 a gallon on Friday. Most of the increase took place in August, which drove thebiggest one-month increase in overall consumer prices in three years, the Labor Department said Friday in a separate report. "Consumers werenot willing to spend much at the mall since they are feeling the pump price pinch," said Chris Christopher, an economist at IHS Global Insight.Weaker retail sales will likely weigh on growth in the July-September quarter. Economists at Bank of America Merrill Lynch slashed their third-quarter growth forecast to an annual rate of only 1.1 percent, down from 1.5 percent. That's not nearly fast enough to spur more hiring, which haslanguished since February. The Fed is hoping to kick-start growth with a series of bold steps announced Thursday that could make borrowingcheaper for years. It plans to spend $40 billion a month to buy mortgage bonds to make home buying more affordable. It also pledged to keepshort-term interest rates near zero through at least mid-2015. The announcement ignited a two-day stock market rally that sent the Dow Jonesindustrial average to its highest level since December 2007, the first month of the Great Recession. But the Fed's actions also helped move oilprices briefly above $100 a barrel Friday for the first time since May. Carson noted that the Fed's previous rounds of bond-buying pushed upcommodity prices and fueled greater inflation. That weakened the ability of U.S. consumers to spend and likely slowed growth, he said. Heexpects the same thing to happen again. How this happens The Fed's moves can push up oil prices in several ways. The Fed creates new moneyto pay for its mortgage bond purchases. That increases the amount of dollars in circulation and can lower their value. Oil is priced in dollars, sothe price tends to rise when the dollar falls. That's because it costs more for overseas investors to purchase dollars to buy oil. Lower interest rates

also push investors out of safer assets, such as bonds, and into riskier investments, such as oil, in hopes of a greater return. And if the Fed's movesaccelerate growth, that would increase demand for oil and gas and also raise their prices. Higher gas prices are eating up a bigger share ofAmericans' incomes than in previous years. Spending at the pump accounts for 8.2 percent of the typical family's household income, according toFred Rozell of the Oil Price Information Service. That's just below last year's 8.3 percent. Those represent the biggest slice of household incomespent on gas since 1981. The typical household spends about $342 per month on gasoline. Before gasoline prices began rising in 2004,households spent less than $200 per month, Rozell said, under 5 percent of median income. Average gas prices are higher this year than lastyear. But Americans are using less by driving more fuel-efficient cars and driving less. Meanwhile, average wages, adjusted for inflation, havebeen flat for the past year, the Labor Department said Friday. That adds to the squeeze on consumers. One silver lining is that weakness should

eventually push prices back down, economists note. That's because people cut back on oil and gas consumption when prices rise. "Unless theeconomic data rapidly improve, the gains in oil ... prices are unlikely to be sustained," Julian Jessop, an analyst CapitalEconomics, said.

Euro-zone crisisReuters 9/11/12, European crisis darkens Asian growth outlook further,http://www.reuters.com/article/2012/09/11/us-wef-china-wrapup-idUSBRE88A0KF20120911, CMR(Reuters) - The downside risks to the global economy from Europe's debt crisis should not be

understated and Asian export growth could be in particular jeopardy, Zhu Min, deputy managing director of the International MonetaryFund, said on Tuesday. Zhu, speaking at a World Economic Forum meeting in the Chinese port city of Tianjin, said the crisis still had a long

way to go and that the risk ofa second European recession in three years would be bad news for global growth. "Weshould not underestimate the negative impact from the European crisis to the whole world. This is very important," he told an audience ofinternational business leaders gathered for an annual meeting in China. Europe's debt crisis has festered for more than three years, and investorswidely expect the 17-member euro zone economy to slide into recession in 2012 as a result of the failure to solve the crisis and engineer a

recovery. "The growth side (ofEurope's crisis) has a profound impact on the global economy," Zhu said, adding that IMF

http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20120915/NEWS90/209150325/-1/NEWS01http://www.reuters.com/article/2012/09/11/us-wef-china-wrapup-idUSBRE88A0KF20120911http://www.reuters.com/article/2012/09/11/us-wef-china-wrapup-idUSBRE88A0KF20120911http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20120915/NEWS90/209150325/-1/NEWS01

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models predicted as much as 1.5-2.0 percent being cut from economic activity in the U.S. and Japan and 1 percent from activity in China if therewas a further deterioration in Europe.

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2nc alt causeslaundry list

Numerous alt causesEuro-zone, oil prices, fiscal problems, and unemploymentF2F, 9/10/12, http://www.fibre2fashion.com/news/daily-textile-industries-news/newsdetails.aspx?news_id=115537,CMR

The global economy is slowing, with key European countries entering a recession that is now having animpact worldwide, the Organisation of Economic Cooperation and Development (OECD) said in its latest Interim Economic Assessment.The Assessment, presented in Paris by Chief Economist Pier Carlo Padoan, says that the G7 economies are expected to grow at an annualised rateof just 0.3 percent in the third quarter of 2012 and 1.1 percent in the fourth. It warns that the continuing euro area crisis is dampening globalconfidence, weakening trade and employment and slowing economic growth for OECD and non-OECD countries alike.Our forecast showsthat the economic outlook has weakened significantly since last spring, Mr Padoan said. The slowdown will persist if leaders fail to address themain cause of this deterioration, which is the continuing crisis in the euro area.The OECD projects that the euro areas three largesteconomiesGermany, France and Italywill shrink at an annualised rate of 1 percent on average during the third quarter and at 0.7 percent inthe fourth. Seen individually, the German economy is expected to contract at an annualized rate of 0.5 percent in the third quarter and at 0.8percent in the fourth. The French outlook is slightly better, with contraction at an annualised rate of 0.4 percent in the third quarter followed by aslight pick up in growth at 0.2 percent in the fourth. In Italy, the deep recession will continue with contraction at an annualised rate of 2.9 percentin the third quarter and 1.4 percent in the fourth.The weak growth outlook is expected to push unemployment beyond todays already high

levels. Resolving the euroareas banking, fiscal and competitiveness problems is still the key to recovery , Mr Padoan said.

While the United States is affected by the euro area slowdown, growth is nonetheless projected at an annualised rate of 2 percent in the thirdquarter and a 2.4 percent pace in the fourth. Canada is set to grow at a rate of 1.3 percent during the third quarter and 1.9 percent during thefourth. The Japanese economy is projected to contract at an annualised rate of 2.3 percent during the third quarter and hover around a zero growth

rate in the fourth.A number of downside risks threaten the outlook, including the potential for further increases toalready high oil prices, excessive fiscal contraction, notably in the United States in 2013, and further declines in consumerconfidence linked to persistent unemployment, Mr Padoan said.

Stagnation inevitable6 headwindsgrowth limitations will last for decades.Thomas Mucha, CNBC, The US Economy and the Future of Growth: Well This is Depressing,Global Post, 8-29-2012, http://www.cnbc.com/id/48822618,DZ.The United States has produced one of the most successful economic stories in human history.We've had a lot of inherent advantages: abundant natural resources, favorable demographic trends, relative political stability supported by the

protective benefit of two oceans, to name a few. But from colonial times to the present, our happy economy has also been

powered by three separate industrial revolutions: 1) the introduction of steam engines and railroads, 2) the inception and widespreaduse of electricity and the combustion engine, and 3) the invention of computers, the web and mobile communications. As Northwesterneconomist Robert Gordon points out in a new paper, these three interlocking events gave rise to a widespread assumption that "economic growth

is a continuous process that will persist forever." That's because each of these industrial revolutions produced a virtuous economiccircle. Each advance built upon the innovations of the previous ones, along the way boosting productivity and revving the American economy,which in turn made American consumers richer and more able to buy stuff. Well, guess what? Gordon writes that future growth inconsumption per capitathe main engine of the consumer-based US economycould fall below 0.5 percent

a year for what he calls "an extended period of decades ." Yes, that would be a big deal. For some context, between 1860 and 2007 thatannual growth rate was 1.9 percent. What's driving this structural economic s lowdown, according to Gordon? He argues that six"headwinds" are buffeting the US economy, and that these factors were in place even before the Great Recession of 2008. Count'em: 1) changing and unfavorable demographics, 2) rising education costs and poor secondary school performance, 3)growing economic inequality, 4) increased competition due to globalization, 5) energy and environmental costs andchallenges, and 6) high levels ofconsumer and government debt. More on CNBC.comKashkari: Bernanke Leaning Forward on QE3What Markets Really Think Bernanke Will Say on Friday Taken together, these headwinds will slow growth dramatically

into the foreseeable future . Here's the money quote of Gordon's paper, which is titled "Is U.S. Economic Growth Over? FalteringInnovation Confronts the Six Headwinds":Doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated toone century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988. But then

doubling is predicted to slow back to a century again between 2007 and 2100.This slowdown is happening because theproductivity gains associated with computers and mobility have been far less dramaticat least so farthan the two

http://www.fibre2fashion.com/news/daily-textile-industries-news/newsdetails.aspx?news_id=115537http://www.fibre2fashion.com/news/daily-textile-industries-news/newsdetails.aspx?news_id=115537http://www.cnbc.com/id/48822618http://www.cnbc.com/id/48822618http://www.fibre2fashion.com/news/daily-textile-industries-news/newsdetails.aspx?news_id=115537http://www.fibre2fashion.com/news/daily-textile-industries-news/newsdetails.aspx?news_id=115537

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previous industrial revolutions, all of which leads Gordon to his depressing theme: "Economic growth may not be acontinuous long-run process that lasts forever."

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2nc alt causeseuro-zonelink

New wave of euro-zone crisis comingMoscow Times, 9/15,Global economy: four years of crisis,http://english.ruvr.ru/2012_09_15/Global-economy-four-years-of-crisis/, CMR

The European Stabilization Mechanism and the QE3 from the US Federal Reserve demonstrate that politicians and economists havelearned to address only short-term issues. In the meantime, the situation is alarmingly unstable , Yakov Mirkinsays. "The current state of global financial systems can be compared to a vehicle that trudges through a snow-covered road in nearly impassableterrain with a driver who hasnt driven for a long time." The global economy has seen two waves of financial crisisthe first in 2008 which hit

Asia the hardest, the second in 2010, which inflicted irreparable damage on the eurozone. This autumn, economists say, should see a

third wave of the crisis . Europe will bear the brunt of the blow, as Greece may quit the eurozone in October. No wonder then thatcountries are trying to cut contacts with Europe and reroute their financial resources to other markets. US experts speak of the need to transfercapitals to the BRICS countries. Russia made it clear during the recent APEC summit that it would prefer to work with countries of the Asia-Pacific region to cut its dependence on Europe.

Euro is downSpain is close to requesting rescue loansinvestors are hesitant.

AP, Uncertainty over economy, action by central banks sees many stock markets slide, WashingtonPost, 8-29-2012, http://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.html, DZ.Investors are meanwhile trying to read the tea leaves on the European Central Bank, which has indicated it is ready to interveneto push borrowing costs lower for struggling countriesbut hasnt spelled out how or when it will act. On Tuesday, President Mario Draghi

canceled his trip to Jackson Hole, leading many to speculate the bank is drafting a plan of action.Hopes for central bank action in Europe,however, were mostly overwhelmed by bad news. On Tuesday, the Spanish region ofCataloniaasked for a 5 billion rescueloan. Thats an added burden on the government in Madrid, which is trying to prop up sinking banks and restart growth and some fear it

could push Spains economy into its own bailout .For most of August little has been able to disturb the narrative of ECBaction that is expected in September, but this morning that theory is under threat as one of the largest Spanish regions makes a request for

assistance from Madrid, said Chris Beauchamp, a market analyst at IG Index.The euro fell 0.1 percent to $1.2544, while the yield, or

interest rate, on Spains benchmark10-year bond stooduncomfortably at 6.42 percent. Thats close the 7 percent mark thathas pushed other countries to seek rescue loans .

http://english.ruvr.ru/2012_09_15/Global-economy-four-years-of-crisis/http://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://www.washingtonpost.com/world/asia_pacific/asia-stocks-mostly-up-as-hopes-grow-for-stimulus-measures-by-the-us-federal-reserve/2012/08/29/649e78de-f19e-11e1-b74c-84ed55e0300b_story.htmlhttp://english.ruvr.ru/2012_09_15/Global-economy-four-years-of-crisis/

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2nc alt causeseuro-zoneimpact

EU recession tanks global economyno solutionsClarfeld 12Rob Clarfeld, Contributor, CPA, CFP, is the Founder and CEO of Clarfeld Financial Advisors, a wealthmanagement firm; and ranked by Barron's as NY's #1 Independent Investment Advisor for the thirdconsecutive year. Forbes. Decouple This. January 25, 2012.http://www.forbes.com/sites/robclarfeld/2012/01/25/decouple-this/

During the first few weeks of 2012, the markets are following the prevailing narrative that the U.S. economy hasdecoupled from the widely known troubles ofEurope, and the somewhat less discussed prevailing risks from China. In adecoupling scenario, a country or region is deemed to be able to withstand the troubles going on outside of its own borders because of

its own internal economic strength. I see two major problems with this thesis. First, the U.S. economy is not growing atthe recently predicted robust rate of 4-5%; rather it is struggling to achieve a rate of 2-2.5%. This leaves little cushion towithstand the contagion from a major economic fallout from either Europe or China, or for that matter,economic shocks that have yet to surface. A significant European debt default, banking failure, natural disasters orgeopolitical events, would surely impact the U.S. economy and markets beyond the current level of fragilegrowthwe simply dont have the levels of productivity requisite to absorb a major blow . Second, itwas only a few years ago when the decoupling thesis was widely espoused following the U.S. banking crisis and ensuing recession. Atthe time the thinking was that the robust growth experienced in the emerging markets would be able to withstand the U.S. slowdown andpick up some of the slack in the global economy. We now know how that worked outit didnt! When the U.S. went into a major

recession it dragged down the rest of the world with it. We need to deal with it the global economy remains highlyinterdependent . Ifa number ofdominoes begin to fall, it is highly unlikely that any individual country or

region will be able to escape the carnage. Again, any financial crisis would be occurring from levels of growth that have notyet fully recovered from their recessionary lows. In relative terms, some countries and regions will do better than others, but thedecoupling thesis is highly flawed. So which dominoes will we need to contend with in 2012? The most obvious answer

has been, and continues to be, Europe. If 2011 has proven anything, it was that the European debt situation, far frombeing contained, is actually much more difficult to controlthan previously imagined. Throughout the yearthe market reacted with wild gyrations to the endless meetings, summits, bailouts, photo-ops, rumors, rumors about rumors, headlines,and refutations of headlines. The one thing that did not come out of Europe was a credible long-term solution to their solvency and

competitiveness issues. Often, we would see high expectations preceding major meetings between European heads of state,

followed by disappointment, as the market digested the stunning lack of details or credible solutions to the coreproblems. While there have been major liquidity facilities put into place via the Fed and the EuropeanCentral Bank (ECB) to relieve short-term funding pressures, everybody continues to wait for the ECB to pull a Bernanke and startprinting Euros in order to purchase the debt of mostly insolvent countries. However, there is a huge difference betweenliquidity and solvency. It remains to be seen how this situation will unfold; some believe that the Euro as we know it will notexist in the not-to-distant future; others believe the seemingly untamable monster known as the European Monetary Union (EMU) willsurvive by coalescing fiscally and politically. I dont see this happening any more than I see fiercely nationalistic member states ceding

their fiscal autonomy to other nations or institutionsespecially led by the Germans! I believe that all signs point to aEuropean recession with steep risks to the downside. Currently, although the financial markets are not backing Europeaneconomic stabilitythey, do seem to be on the side of the U.S. economy being significantly (although not totally) decoupled fromEuropean contagion. With that in mind, I remain perplexed by those pundits who still are willing to brush off the European debt crisis as

just a minor annoyance. If those Europeans could just get their act together and fix their issues, global economies and the markets

would take off is a common and highly naive refrain. First, ifEuropes problems were easy to fix, they would have been fixed

already. The

problems are persistingbecause

they require short-term pain(which nobody wants)

and politicalwill (which nobody has). I dont expect solutions any time soon. Second, the core of these problems is not uniquelyEuropean. Over-indebtedness is a very fundamental global issue. The complexity of a single currency supported byhighly divergent sovereign economies makes Europes problems more acute, and perhaps more interesting, but not unique. The U.S. isrunning deficits of approximately 10% of GDP, with gross debt over 100% of GDP; Japan has a debt-to-GDP ratio of over 200%, with

declining savings rates and an aging demographic profile; and China, which once was thought could do no economic wrong, seemsto have propagated a massive real estate bubble and shadow banking system of its own, threatening toreduce the main source of growth in Asia. One needs to look no further than the Shanghai Stock Composite, down nearly30% from its April high, to see that all is not well with China.

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Europe takes down the global economyFreeman 1/16 - Communications Manager, W. P. Carey School of BusinessDebbie, New year for the Euro: What could happen and why Americans should be concerned, Press Zoom,

http://presszoom.com/story_170741.html

Despite a slowly improving U.S. economy, Americans have watched the stock market continue on its roller coasterride, in large part because ofuncertainty about the economic future ofEuropean countries, such as Greece, Portugal,Ireland, Spain and Italy, experiencing well-publicized problems. An international finance expert from the W. P. Carey School of

Business at Arizona State University explains what we can expect as we enter the new year in the future of the Eurozone. Plan tosee ongoing high volatility and deteriorating credit ratings for countries in the Eurozone for 2012, which willkeep influencing the American economy, says Werner Bonadurer, a professor and Swiss native who served as a formerboard member and global head of trading and sales at financial giant UBS, and who was nominated a Global Leader of Tomorrow at the

World Economic Forum in Geneva in the mid-1990s. Our financial markets are interconnected and now generallymoving in the same directions at the same times, following the same risk-on/risk-off patterns. Bonadurer says the European Union(EU) is the largest market in the world and a huge recipient of American exports, as well as alocation of many U.S. multinational companies. Therefore, if the Eurozone gets in enough trouble, it will

really damage the still-recovering U.S. economy. Less demand from European buyers alsowill cause problems for China and emerging markets. Globally, we could suffer even more in the formofpersistent unemployment, weak domestic and international growth, and elevated risk. Ongoing global balance-sheet problems already are stalling the economic pace.

And, a Eurozone collapse would be at least as bad as 08, if not worse.Roubini 11Professor of Business @ NYU

Nouriel Roubini. 11/11/2011. Too Big to Fail, Too Big to Save, Slate,

http://www.slate.com/articles/news_and_politics/project_syndicate/2011/11/the_euro_is_doomed_how_the_collapse_of_italy_and_greece_will_destroy_the_currency.html

The eurozone crisis seems to be reaching its climax, with Greece on the verge of default and an inglorious exit fromthe monetary union, and now Italy on the verge of losing market access. But the eurozone's problems are much deeper. Theyare structural, and they severely affect at least four other economies: Ireland, Portugal, Cyprus, and Spain. For the last decade, thePIIGS (Portugal, Ireland, Italy, Greece, and Spain) were the eurozone's consumers of first and last resort, spending more than theirincome and running ever-larger current-account deficits. Meanwhile, the eurozone core (Germany, the Netherlands, Austria, and France)comprised the producers of first and last resort, spending below their incomes and running ever-larger current-account surpluses. Theseexternal imbalances were also driven by the euros strength since 2002, and by the divergence in real exchange rates and

competitiveness within the eurozone. Unit labor costs fell in Germany and other parts of the core (as wage growth lagged that of

productivity), leading to a real depreciation and rising current-account surpluses, while the reverse occurred in the PIIGS (and Cyprus),leading to real appreciation and widening current-account deficits. In Ireland and Spain, private savings collapsed, and a housing bubblefueled excessive consumption, while in Greece, Portugal, Cyprus, and Italy, it was excessive fiscal deficits that exacerbated externalimbalances. The resulting build-up of private and public debt in over-spending countries became unmanageable when housing bubblesburst (Ireland and Spain) and current-account deficits, fiscal gaps, or both became unsustainable throughout the eurozone's periphery.Moreover, the peripheral countries large current-account deficits, fueled as they were by excessive consumption, were accompanied by

economic stagnation and loss of competitiveness. So, now what? Symmetrical reflation is the best option for restoringgrowth and competitiveness on the eurozone's periphery while undertaking necessary austerity measures and structural reforms. Thisimplies significant easing of monetary policy by the European Central Bank; provision of unlimited lender-of-last-resort support toilliquid but potentially solvent economies; a sharp depreciation of the euro, which would turn current-account deficits into surpluses; and

fiscal stimulus in the core if the periphery is forced into austerity. Unfortunately, Germany and the ECB oppose thisoption, owing to the prospect of a temporary dose of modestly higher inflation in the core relative to the periphery. The bittermedicine that Germany and the ECB want to impose on the peripherythe second optionis recessionarydeflation: fiscal austerity, structural reforms to boost productivity growth and reduce unit labor costs, and real depreciation viaprice adjustment, as opposed to nominal exchange-rate adjustment. The problems with this option are many.

Fiscal austerity, while

necessary, means a deeper recession in the short term. Even structural reform reduces output in the short run,because it requires firing workers, shutting down money-losing firms, and gradually reallocating labor and capital to emerging newindustries. So, to prevent a spiral of ever-deepening recession, the periphery needs real depreciation to improve its external deficit. Buteven if prices and wages were to fall by 30 percent over the next few years (which would most likely be socially and politicallyunsustainable), the real value of debt would increase sharply, worsening the insolvency of governments and private debtors. In short, theeurozone's periphery is now subject to the paradox of thrift: Increasing savings too much, too fast leads to renewed recession and makesdebts even more unsustainable. And that paradox is now affecting even the core. If the peripheral countries remain mired in adeflationary trap of high debt, falling output, weak competitiveness, and structural external deficits, eventually they will be tempted by athird option: default and exit from the eurozone. This would enable them to revive economic growth and competitiveness through a

depreciation of new national currencies. Of course, such a disorderly eurozone breakup would be as severe a shock as the

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collapse ofLehmanBrothers in 2008,if not worse. Avoiding it would compel the eurozone's core economies to embracethe fourth and final option: bribing the periphery to remain in a low-growth uncompetitive state. This would require accepting massivelosses on public and private debt, as well as enormous transfer payments that boost the peripherys income while its output stagnates.Italy has done something similar for decades, with its northern regions subsidizing the poorer Mezzogiorno. But such permanent fiscaltransfers are politically impossible in the eurozone, where Germans are Germans and Greeks are Greeks. That also means that Germanyand the ECB have less power than they seem to believe. Unless they abandon asymmetric adjustment (recessionary deflation), whichconcentrates all of the pain in the periphery, in favor of a more symmetrical approach (austerity and structural reforms on the periphery,combined with eurozone-wide reflation), the monetary union's slow-developing train wreck will accelerate as peripheral countries

default and exit. The recent chaos in Greece and Italy may be the first stepin this process. Clearly, the eurozonesmuddle-through approach no longer works. Unless the eurozone moves toward greater economic, fiscal, and political integration (on apath consistent with short-term restoration of growth, competitiveness, and debt sustainability, which are needed to resolve

unsustainable debt and reduce chronic fiscal and external deficits), recessionary deflation will certainly lead to adisorderly break-up. With Italy too big to fail, too big to save, and now at the point of no return, the

endgame for the eurozone has begun. Sequential, coercive restructurings of debt will come first, andthen exits from the monetary union that will eventually lead to the eurozones disintegration.

It collapses consumer and business confidence in the U.S.overwhelms theirinternal link.Lowrey 11/1111/11/2011. Europes Woes Pose New Peril to Recovery in the U.S., NY Times,

http://www.nytimes.com/2011/11/12/business/global/european-turmoil-could-slow-us-recovery.htmlFor the second time in two years, European debt troubles threaten to slow the momentum of the fragile recovery inthe United States. Although American financial institutions have taken steps to protect themselves from Europes long-simmeringproblems, the likely slowdown in Europe could damage consumer and business confidence inAmerica and strengthen the dollar, making United States exports less competitive. Financial

contagion can lead to the very rapid global spread of recession, said Chris Varvares, seniormanaging director for Macroeconomic Advisers, a forecasting company. If trouble intensifies and spills over to equit ies and other U.S.risk assets, we could see a soft patch.

Collapse the U.S. recovery.AP 12/7CBS Money Watch. U.S. pushes EU leaders to fix debt crisis, fast. December 7, 2011. http://www.cbsnews.com/8301-500395_162-57338208/u.s-pushes-eu-leaders-to-fix-debt-crisis-fast/

The United States has plenty at stake. A still-fragile U.S. economy remains vulnerable to any financialcontagion that might erupt in Europe. If banks that are sitting on piles of European governmentdebt cut off lending, the global economy would suffer. The flow of U.S. exports would slow. Apanic could send stocks tumbling worldwide.

Its the only scenario for a US collapseBaker 10-10Dean, Don't believe the hype on US jobless numbers, Guardian, http://www.guardian.co.uk/commentisfree/cifamerica/2011/oct/10/hype-

jobless-numbers

With one exception, there really is not a plausible story whereby the US economy goes into asecond recession. The exception, of course, is the meltdown of the eurozone from a disorderly defaultof one or more of the heavily indebted countries. But this outcome will be determined by the greed and ineptitude ofthe IMF, the European Central Bank and the European commission, the troika managing negotiations with the debt-troubled

governments. The current strength of the US economy has little direct bearing on the willingness andability of the troika to bring about an orderly resolution of the crisis.

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1nc no war

Economic decline doesnt cause warMiller 1Professor of Economics [Morris, Professor of Economics, Poverty: A Cause of War?,http://archive.peacemagazine.org/v17n1p08.htm, CMR]

Library shelves are heavy with studies focused on the correlates and causes of war . Some of the leading scholars inthat field suggest that we drop the concept of causality, since it can rarely be demonstrated. Nevertheless, it may be helpful to look at the motives of war-prone political leaders and the ways they

have gained and maintained power, even to the point of leading their nations to war. Poverty: The Prime Causal Factor? Poverty is most often named as theprime causal factor. Therefore we approach the question by asking whether po verty is characteristic of the nations or groups that have engaged in war s. As we shall see,poverty has never been as significant a factor as one would imagine. Largely this is because of thetraits of the poor as a group - particularly their tendency to tolerate their suffering in silence and/orbe deterred by the force of repressive regimes. Their voicelessness and powerlessness translate intopassivity. Also, because of their illiteracy and ignorance of worldly affairs, t he poor become susceptible to t he messages of war-bent demagogues and o ften willing to become cannonfodder. The situations conductive to war involve political repression of dissidents, tight control over media that stir up chauvinism and ethnic prejudices, religious fervor, and sentiments of

revenge. The poor succumb to leaders who have the power to create such conditions for their own self-serving purpo ses. Desperately poor people in poor nations

cannot organize wars, which are exceptionally costly. The statistics speak eloquently on this point. In the last

40 years the global arms trade has been about $1500 billion, of which two-thirds were the purchasesof developing countries. That is an amount roughly equal to the foreign capital they obtained through official development aid (ODA). Since ODA does not finance armspurchases (except insofar as money that is not spent by a government on aid-financed roads is available for other purposes such as military procurement) financing is also required to control themedia and communicate with the populace to convince them to support the war. Large-scale armed conflict is so expensive that governments must resort to exceptional sources, such as drugdealing, diamond smuggling, brigandry, or deal-making with other countries. The reliance on illicit operations is well documented in a recent World Bank report that studied 47 civil wars that

took place between 1960 and 1999, the main conclusion of which is that the key factor is the availability of commodities to plunder. For greed to yield war, there

must be financial opportunities. Only affluent political leaders and elites can amass such

weaponry, diverting funds to the military even when this runs contrary to the interests of the population. In most inter-state wars the antagonists were wealthy enough to build up theirarmaments and propagandize or repress to gain acceptance for t heir policies. Economic Crises? Some scholars have argued that it is not poverty, as such, thatcontributes to the support for armed conflict, but rather some catalyst, such as an economic crisis. However, a study by Minxin

Pei and Ariel Adesnik shows that this hypothesis lacks merit.After studying 93

episodes of economic crisis in 22 countries in Latin American and Asia since World War II, they concluded that much of the

conventional thinking about the political impact of economic crisis is wrong: "The severity of

economic crisis - as measured in terms of inflation and negative growth - bore no relationship to the collapse of regimes ... or (in democratic states,

rarely) to an outbreak of violence... In the cases of dictatorships and semi-democracies, the ruling elites responded t o crises by increasing repression (thereby using oneform of violence to abort another)."

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2nc no warExtend our Miller evidencerobust studies based off 93 cases proves theres no linkbetween economic decline and warpoor populations endure suffering and theirgovernments cant effectively organize wars

--No global collapse and it wouldnt cause conflictDrezner 11 (Daniel Drezner, professor of international politics at t he Fletcher School of Law and Diplomacy at T ufts University, 8-12-2011, Please come down off the ledge, dearreaders, Foreign polivy, http://drezner.foreignpolicy.com/, CMR)

So, when we last left offthis debate, things were looking grim. My concern in the last post was that the persistence of hard times would cause governmentsto take actions that would lead to a collapse of the o pen global economy, a spike in ge neral riots and disturbances, and eerie echoes of the Great Depression. Let's assume that theglobal economy persists in sputtering for a while, because that's what happens after major financial shocks. Why won't these other badthings happen? Why isn't it 1931? Let's start with the obvious -- it's not gonna be 1931 because there's some passingfamiliarity with how 1931 played out. The Chairman of the Federal Reserve has de voted much of his academic career to studying the Great Depression. I'm gonnago out on a limb therefore and assert that if the world plunges into a another severe downturn, it's not gonna be because central bank heads replay the same set of mistakes. The legacyof the Great Depression has also affected public attitudes and institutions that provide much stronger

cement for the current system . In terms of publuc attitudes, compare the results of this mid-2007 poll with this mid-2010 poll about which economic system is best.I'll just reproduce the key charts below: 2007 poll results 2010 poll results The headline of the 2010 results is that there's eroding U.S. support for the global economy, but a few other things standout. U.S. support has declined, but it's declined from a very high level. In contrast, support for free markets has increased in other major powers,such as Germany and China. On t he whole, despite the worst global economic crisis since the Great Depression, public attitudes have notchanged all that much. While there might be populist demands to "do something," that something is not areturn to autarky or anything so drastc. Another big difference is that multilateral economic institutions are much more robust nowthan they were in 1931. On t rade matters, even if the Doha round is dead, the rest ofthe World Trade Organization'scorpus of trade-liberalizing measuresare still working quite well. Even beyond the WTO, the complaint about trade is not t he deficit of free-trade agreements but the surfeit o f them. The IMF'sresources have been strengthened as a result of the 2008 financial crisis. The Basle Committee on Banking Supervision has alreadypromulgated a plan to strengthen capital requirements for banks. True, it's a slow, weak-assed plan, but it would be an improvement over the status quo. As for the G-20, I've been pretty skeptical

about that group's abilities to collectively address serious macroeconomic problems. That is setting the bar rather high, however. One could argue that the G-20's most usefulfunction is reassurance. Even if there are disagreements, communication can prevent them from growing into anything

worse . Finally, a note about the possibility of riots and other general social unrest.The working paper cited in myprevious post noted the links between austerity measures and increases in disturbances. However, that paper contains the followingimportant paragraph on page 19: [I]n countries with better institutions, the responsiveness of unrest to budget cuts is

generally lower . Where constraints on the executive are minimal, the coefficient on expenditure changesis strongly negative -- more spending buys a lot of social peace. In countries with Polity-2 scores abovezero, the coefficient is about half in size, and less significant. As we limit the sample to ever moredemocratic countries, the size of the coefficient declines. For full democracies with a complete range of civil rights, the coefficient is still negative,but no longer significant. This is good news!! The world has a hell of a lot more democratic governments now than it did in1931. What happened in London, in other words, might prove to be the exception more than the rule. So yes, the recent economic news might seem grim.Unless political institutions and public attitudes buckle, however, we're unlikely to repeat the mistakes of the 1930's. And, based on t he data we'vegot, that's not going to happen.

Theres just no impactrecession proves economic decline has no effect on world stabilityBarnett 9WPR columnist and editor for Esquire, senior managing director of Enterra Solutions (8/24, Thomas, World Politics Review, The New Rules: Security Remains StableAmid Financial Crisis, http://www.worldpoliticsreview.com/articles/4213/the-new-rules-security-remains-stable-amid-financial-crisis, CMR)

When the global financial crisis struck roughly a year ago, the blogosphere was ablaze with all sorts ofscarypredictions of, and commentary regarding, ensuing conflict and wars -- a rerun of the Great Depression leading to world war, as it were. Now, as globaleconomic news brightens and recovery -- surprisingly led by China and emerging markets -- is the talk of the day, it's interesting to look back over thepast year and realize how globalization's first truly worldwide recession has had virtually no impact whatsoeveron the international security landscape. None of the more than three-dozen ongoing conflicts listed by GlobalSecurity.org can be clearly

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attributed to the global recession . Indeed, the last new entry (civil conflict between Hamas and Fat ah in the Palestine) predates theeconomic crisis by a year, and three quarters of the chronic struggles began in the last century. Ditto for the 15 low-intensity conflicts listed by Wikipedia (where thelatest entry is the Mexican "drug war" begun in 2006). Certainly, the Russia-Georgia conflict last August was specifically timed, but by most accounts the opening ceremony of the BeijingOlympics was the most important external trigger (followed by the U.S. presidential campaign) for that sudden spike in an almost two-decade long struggle between Georgia and its two

breakaway regions. Looking over the various databases, then, we see a most familiar picture: the usual mix of civilconflicts, insurgencies, and liberation-themed terrorist movements. Besides the recent Russia-Georgia dust-up, the only two potential state-on-state wars

(North v. South Korea, Israel v. Iran) are bot h tied to one side acquiring a nuclear weapon capacity -- a process wholly unrelated to global economictrends . And with the United States effectively tied down by its two ongoing major interventions (Iraq and Afghanistan-bleeding-into-Pakistan), our involvement elsewhere around theplanet has been quite modest, both leading up to and following the onset of the economic crisis: e.g., the usual counter-drug efforts in Latin America, the usual military exercises with allies across

Asia, mixing it up with pirates off Somalia's coast). Everywhere else we find serious instability we pretty much let it burn,occasionally pressing the Chinese -- unsuccessfully -- to do something. Our new Africa Command, for example, hasn't led us to anything beyond advising and training local forces. So, to sumup: *No significant uptick in mass violence or unrest (remember the smattering of urban riots last year in places like Greece, Moldova andLatvia?); *The usual frequency maintained in civil conflicts (in all the usual places); *Not a single state-on-state war directly caused(and no great-power-on-great-power crises even triggered); *No great improvement or d isruption in great-power cooperation regarding the e mergence of new nuclear powers (despite all that

diplomacy); *A modest scaling back of international policing efforts by the system's acknowledged Leviathan power (inevitable given the strain); and *No serious efforts byany rising great power to challenge that Leviathan or supplant its role. (The worst things we can cite are Moscow's occasional deployments of strategic assetsto the Western hemisphere and its weak efforts to outbid the United States on basing rights in Kyrgyzstan; but the best include China and India stepping up their aid and investments inAfghanistan and Iraq.) Sure, we've finally seen global defense spending surpass the previous world record set in the late 1980s, but even that's likely to wane given the stress on public budgets

created by all this unprecedented "stimulus" spending. If anything, the friendly cooperation on such stimulus packaging was the most

notable great-power dynamic caused by the crisis . Can we say that the world has suffered a distinct shift to political radicalism as a result of theeconomic crisis? Indeed, no. The world's major economies remain governed by center-left or center-rightpolitical factions that remain decidedly friendly to both markets and trade. In the short run, there were attempts across the board toinsulate economies from immediate damage (in effect, as much prot ectionism as allowed under current t rade rules), but there was no great slideinto "trade wars." Instead, the World Trade Organization is functioning as it was designed to function, and regional efforts toward free-trade agreements have not slowed. Canwe say Islamic radicalism was inflamed by the economic cr isis? If it was, that shift was clearly overwhelmed by the Islamic world'sgrowing disenchantment with the brutality displayed by violent extremist groups such as al-Qaida. And looking forward, austere economic times are just aslikely to breed connecting evangelicalism as disconnecting fundamentalism. At the end of the day, the economic crisis did not prove to be sufficientlyfrightening to provoke major economies into establishing global regulatory schemes, even as it hassparked a spirited -- and much needed, as I argued last week -- discussion of the continuing viability of the U.S. dollar as the world's primary reservecurrency. Naturally, plenty of experts and pundits have attached great significance to this debate, seeing in it the b eginning of "economic warfare" and the like between "fading" America and

"rising" China. And yet, in a world of globally integrated production chains and interconnected financial markets, such "diverging interests" hardly

constitute signposts for wars up ahead. Frankly, I don't welcome a world in which America's fiscal profligacy goes undisciplined, so bring it on -- please!Add it all up and it's fair to say that this global financial crisis has proven the great resilience of America's post-World War IIinternational liberal trade order. Do I expect to read any analyses along those lines in the blogosphere any time soon? Absolutely not. I expect the fantasticfear-mongering to proceed apace. That's what the Internet is for.

--History disproves causality between crisis and warFerguson 6Prof of History @ Harvard[Niall, The Next War of the World, Foreign Affairs 85.5, Proquest, CMR]

There are many unsatisfactory explanations for why the twentieth century was so

destructive. One is the assertion that the availability of more powerful weapons caused bloodier conflicts. But there is no correlation between the sophistication of militarytechnology and the lethality of conflict. Some of the worst violence of the century -- the genocides in Cambodia in the 1970s and central Africa in the 1990s, for instance -- was perpetrated with

the crudest of weapons: rifles, axes, machetes, and knives. Nor can economic crises explain the bloodshed. What may bethe most familiar causal chain in modern historiography links the Great Depression to the rise of fascism and the outbreak ofWorld War II. But that simple story leaves too much out. Nazi Germany started the war inEurope only after its economy had recovered. Not all the countries affected by the GreatDepression were taken over by fascist regimes, nor did all such regimes start wars of

aggression. In fact, no general relationship between economics and

conflict is discernible for the century as a whole. Some wars came after periods of growth, others

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were the causes rather than the consequences of economic catastrophe, and some severe

economic crises were not followed by wars.

--No escalationFerguson 9, Professor of History @ Harvard, 2/23 (Niall,http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/home/?pageRequested=all, CMR)

Niall Ferguson: There will be blood, in the sense thata crisis of this magnitude is bound to increase political as well as economic [conflict].It is bound to destabilize some countries. It will cause civil wars to break out , that have been dormant. It will topple governments that were moderate and bringin governments that are extreme. These t hings are pretty predictable. The question is whether the general destabilization, the return of, if youlike, political risk, ultimately leads to something really big in the realm of geopolitics. That seems a lesscertain outcome. We've already talked about why China and the United States are in an embrace they don't dare end.IfRussia is looking for trouble the way Mr. Putin seems to be, I still have some doubt as to whether it can really make this trouble,because of the weakness of the Russian economy. It's hard to imagine Russia invading Ukraine without weakening its economic plight. They'redesperately trying to prevent the ruble from falling off a cliff. They're spending all their reserves to prop it up . It's hardly goingto help if they do another Georgia.I was more struck Putin's bluster than his potential to bite, when he spoke at Davos. But he made a really good point, whichI keep coming back to. In his speech, he said crises like this willencourage governments to engage in foreign policy aggression. I don't think he was talking about himself, but he might have been. It's true, one of the things historically that we see, and alsowhen we go back to 30s, but also to the depressions 1870s and 1980s, weak regimes will often resort to a more aggressive foreign policy, to try to bolster their position. It's legitimacy that youcan gain without economic disparityplaying the nationalist card. I wouldn't be surprised to see some of that in the year ahead.

It's just that I don't see it producing anything comparable with 1914 or 1939. It's kind ofhard toenvisage a world war. Even when most pessimistic, I struggle to see how that would work, because the U.S., for all its difficulties inthe financial world, is so overwhelmingly dominant in the military world.

--More recent examples disprove their impactsBlackwill, 9senior fellow at RAND (Robert, The Geopolitical Consequences of the World EconomicRecessionA Caution,http://rand.org/pubs/occasional_papers/2009/RAND_OP275.pdf)

Earlier slumps that have affected the United States may hold lessons regarding the present one.Including this recession, from 1945 to 2009, the National Bureau of Economic Research has

identified 12 U.S. recessions; excluding the current recession, their average duration was ten months (peak to t rough).8 Did any of these postWorld War II U.S. economic downturns result in deep structural alterations in the internationalorder, that is, a fundamental, long-term change in the behavior of individual nations? None isapparent. Indeed, on some occasions geopolitical events caused international economic dips,but not the other way around. For example, the Iranian Revolution in 1979 sharply increasedthe global price of oil, which in turn produced an international energy crisis and, abetted by tight monetary policy bythe Federal Reserve, a U.S. recession.

--Their causality arguments are wrongpsychological biasBlackwill, 9senior fellow at RAND (Robert, The Geopolitical Consequences of the World Economic RecessionA Caution,http://rand.org/pubs/occasional_papers/2009/RAND_OP275.pdf)

Will there be corresponding substantial modifications in the art and practice of power in worldpolitics as a consequence of the current economic crisis? With Chou Enlais alleged comment on the significance of the FrenchRevolutionits too soon to tellin mind, are there signs t hat consequent geopolitical changes are underway? Many who prophesy such elementalinternational shifts either use examples at the periphery of world politics (the government inHungary falls, a growing humanitarian tragedy in Sudan) or foresee geopolitical spasms thatmight happen (China implodes, America retreats) but have not occurred. Moreover, humans often naturally tend toexaggerate the importance of what is happening to them at any particular time. Since this is also

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true of international politics, Marcel Proust provides a useful admonition: The only thing thatdoes not change is that at any and every time it appears that there have been great changes.13

--Claims that economic collapse lead to catastrophe are falseNAM 10editor in chief of Foreign Policy [MOISS NAM, It Didn't Happen, Jan/Feb,

http://www.foreignpolicy.com/articles/2010/01/04/it_didnt_happen?page=full, CMR]

Just a few months ago, the consensus among influential thinkers was that the economic crisiswould unleash a wave of geopolitical plagues. Xenophobic outbursts, civil wars, collapsingcurrencies, protectionism, international conflicts, and street riots were only some of the dire consequences expected

by the experts. It didn't happen. Although the crash did cause severe economic damage andwidespread human suffering, and though the world did change in important ways for the worse -- the International Monetary Fund, for example,

estimates that the global economy's new and permanent trajectory is a 10 percent lower rate of GDP growth than before the crisis -- the

scary predictions for the most part failed to materialize. Sadly, the same experts who failed to foresee the economic crisis were alsoblindsided by the speed of the recovery. More than a year into the crisis, we now know just how off they were. From telling us about the imminent collapse of the international financial system toprophecies of a 10-year recession, here are six of the most common predictions about the crisis that have been proven wrong: The international financial system will collapse. It didn't. AsLehman Brothers, Bear Stearns, and Fannie Mae and Freddie Mac crashed, as Citigroup and many other p illars of the financial syst em teetered on the brink, and as stock markets everywhereentered into free fall, the wise men predicted a total system meltdown. The economy has "fallen off a cliff," warned invest ment guru Warren Buffett. Fellow financial wizard George Sorosagreed, noting the world economy was on "life support," calling the turbulence more severe than during the Great Depression, and comparing the situation to the demise of the Soviet Union. The

natural corollary of such doomsday scenarios was the possibility that depositors would lose access to the funds in their bank accounts. From there to visions of martial law imposed to controlstreet protests and the looting of bank offices was just an easy step for thousands of Internet-fueled conspiracy theorists. Even today, the financial system is still frail, banks are still failing, creditis scarce, and risks abound. But the financial system is working, and the perception that it is too unsafe to use or that it can suddenly crash out of existence has largely dissipated. The economiccrisis will last for at least two years and maybe even a decade. It didn't. By fall of 2009, t he economies of the United Stat es, Europe, and Japan had begun to grow again, and many of the largestdeveloping economies, such as China, India, and Brazil, were growing at an even faster pace. This was surely a far cry from t he doom-laden -- and widely echoed -- prophecies of economistNouriel Roubini. In late 2008 he warned that radical governmental actions at best would prevent "what will now be an ugly and nasty two-year recession and financial crisis from turning into asystemic meltdown and a decade-long economic depression." Roubini was far from the only pessimist. "The danger," warned Harvard University's Kenneth Rogoff, another distinguishedeconomist, in the fall o f 2008, "is that instead of having a few bad years, we'll have anot her lost decade." It turned out t hat radical policy reactions were far more effective than anyone hadexpected in shortening the life o f the recession. The U.S. dollar will crash. It didn't. Instead, the American currency's value increased 20 percent between July 2008 and March 200 9, at the heig htof the crisis. At first, investors from around the world sought refuge in the U.S. dollar. Then, as the U.S. government bailed out troubled companies and stimulated the economy with aggressivepublic spending, the U.S. fiscal deficit skyrocketed and anxieties about a dollar devaluation mounted. By the second half of 2009, the U.S. currency had lost value. But devaluation has not turnedout to be the catastrophic crash predicted by the pessimists. Rather, as Financial Times columnist Martin Wolf noted, "The dollar's correction is not just natural; it is helpful. It will lower the riskof deflation in the U.S. and facilitate the correction of the global 'imbalances' that helped cause the crisis." Protectionism will surge. It didn't. Trade flows did drop dramatically in late 2008 andearly 2009, but they start ed to grow again in the second half o f 2009 as economies recovered. Pascal Lamy, director-general of t he World Trade Organization, had warned that the g lobal financialcrisis was bound to lead to surges in protectionism as governments sought to blame foreigners for their problems. "That is exactly what happened in the 1930s when [protectionism] was the virusthat spread the crisis all over the place," he said in October 2008, echoing a widely held sentiment among trade experts. And it is true that many governments dabbled in protectionism, includingnot only the U.S. Congress's much-derided "Buy American" provision, but also measures such as increased tariffs or import restrictions imposed in 17 of the G-20 countries. Yet one year later, areport from the European Union concluded that "a widespread and systemic escalation of protectionism has been prevented." The protectionist temptation is always there, and a meaningfulincrease in trade barriers cannot be ruled out. But it has not happened yet. The crisis in rich countries will drag down developing ones. It didn't. As the economies of America and Europescreeched to a halt during the nig htmarish first quarter of 2009, China's economy accelerated, part of a broader trend in whi ch emerging markets fared better through t he crisis than the world'smost advanced economies. As the r ich countries entered a deep recession and the wo es of the U.S. financial market affected banking systems everywhere, the idea that emerging economies could"decouple" from the advanced ones was widely mocked. But decouple they did. Some emerging economies relied on their domestic markets, others on exports to other growing countries (China,

for example, displaced the United States last year as Brazil's top export market). Still others had ample foreign reserves, low exposure to toxic financial assets, or, like Chile, had taken measuresin anticipation of an eventual global slowdown. Not all developing countries managed to escape the worst of the crisis -- and many, such as Mexico and Iran, were deeply hurt -- but many othersmanaged to avoid the fate of the advanced economies. Violent political turmoil will become more common. It didn't. Electorates did punish governments for the economic hard times. But this

was mostly in Europe and mostly peaceful and democratic. "There will be blood," prophesied Harvard historian NiallFerguson last spring. "A crisis of this magnitude is bound to increase political [conflict] ...It is bound to destabilize some countries. It will cause civil wars to break out that have been dormant. It will topplegovernments that were moderate and bring in governments that are extreme. These things

are pretty predictable." No, it turns out: They aren't.

--Countries turn inwardcreates peacedeMause 2[Lloyd deMause, director of The Institute for Psychohistory, Nuclear War as anAnti-Sexual Group Fantasy Updated December 18th 2002,

http://www.geocities.com/kidhistory/ja/nucsex.htm, CMR]

The nation "turns inward" during this depressed phase of the cycle . Empirical studies have clearlydemonstrated that major economic downswings are accompanied by "introverted" foreignpolicy moods, characterized by fewer armed expeditions, less interest in foreign affairs in thespeeches of leaders, reduced military expenditures, etc. (Klingberg, 1952; Holmes, 1985). Just as depressedpeople experience little conscious rage--feeling "I deserve to be killed" rather than "I want to kill

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others" (Fenichel, 1945, p. 393)--interest in military adventures during the depressed phase wanes, armsexpeditures decrease and peace treaties multiply.

--No escalationits all just rhetoricBoehmer 7 [Charles Boehmer (political science professor at the University of Texas) 2007

Politics & Policy, 35:4, The Effects of Economic Crisis, Domestic Discord, and State Efficacyon the Decision to Initiate Interstate Conflict, CMR]

The theory presented earlier predicts that lower rates of growth suppress participation in foreign conflicts,particularly concerning conflict initiation and escalation to combat. To sustain combat, statesneed to be militarily prepared and not open up a second front when they are already fighting, ormay fear, domestic opposition. A good example would be when the various Afghani resistance fighters expelled the Soviet Unionfrom their territory, but the Taliban crumbled when it had to face the combined forces of the United States and Northern Alliance insurrection.

Yet the coefficient for GDP growth and MID initiations was negative but insignificant. However,considering that there are many reasons why states fight, the logic presented earlier should holdespecially in regard to the risk of participating in more severe conflicts . Threats to use militaryforce may be safe to make and may be made with both external and internal actors in mind, but

in the end may remain mere cheap talk that does not risk escalation if there is a chance to backdown. Chiozza and Goemans (2004b) found that secure leaders were more likely to becomeinvolved in war than insecure leaders, supporting the theory and evidence presented here. We should find that leaderswho face domestic opposition and a poorly performing economy shy away from situations that couldescalate to combat if doing so would compromise their ability to retain power.

--Even if conflicts occur they wont escalate.Bennett & Nordstrom 2k [D. Scott Bennett and Timothy Nordstrom, February 2000.Department of Political Science Professors at Pennsylvania State. Foreign PolicySubstitutability and Internal Economic Problems in Enduring Rivalries, Journal of ConflictResolution, Ebsco, CMR]

When engaging in diversionary actions in response to economic problems , leaders will bemost interested in a cheap, quick victory that gives them the benefit of a rally effect withoutsuffering the long-term costs (in both economic and popularity terms) of an extended confrontation or war.This makes weak states particularly inviting targets for diversionary action since they may beless likely to respond than strong states and because any response they make will be lesscostly to the initiator. Following Blainey (1973),a state facing poor economic conditions may in fact be the target of an attackrather than the initiator. This may be even more likely in the context of a rivalry because rival states are likely to be looking for anyadvantage over their rivais. Leaders may hope to catch an economically challenged rival looking inward in response to a slowing economy.

Following the strategic application of diversionary conflict theory and states' desire to engagein only cheap conflicts for diversionary purposes, states should avoid conflict initiation against target

states experiencing economic problems.

--Economic decline doesnt cause warBennett & Nordstrom 2k [D. Scott Bennett and Timothy Nordstrom, February 2000.Department of Political Science Professors at Pennsylvania State. Foreign Policy

Substitutability and Internal Economic Problems in Enduring Rivalries, Journal of ConflictResolution, Ebsco, CMR]

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Conflict settlement is also a distinct route to dealing with internal problems that leaders in rivalries may pursue when faced with internal

problems. Military competition between statesrequires large amounts of resources, and rivals require evenmore attention. Leaders may choose to negotiate a settlement that ends a rivalry to free up important resources that may be reallocated to the domestic economy. In a "guns versus butter" world of economictrade-offs, when a state can no longer afford to pay the expenses associated with competition ina rivalry, it is quite rational for leaders to reduce costs by ending a rivalry. This gain (a peacedividend) could be achieved at any time by ending a rivalry. However, such a gain is likely to be mostimportant andattractive to leaders when internal conditions are bad and the leader is seeking ways toalleviate active problems. Support for policy change away from continued rivalry is morelikely to develop when the economic situation sours and elites and masses are looking forways to improve a worsening situation. It is at these times that the pressure to cut militaryinvestment will be greatest and that state leaders will be forced to recognize the difficultyof continuing to pay for a rivalry. Among other things, this argument also encompasses the view that the cold war endedbecause the Union of Soviet Socialist Republics could no longer compete economically with the United States. Hypothesis 2: Poor economicconditions increase the probability of rivalry termination. Hypotheses 1 and 2 posit opposite behaviors in response to a single cause (internaleconomic problems). As such, they demand a research design that can account for substitutability between them.

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AT: Heg/Defense MPX

Defense cuts will target nation-buildingwont affect overall hegemonyMandelbaum, 11 [Michael, Christian A. Herter Professor of American Foreign Policy,Americas Coming Retrenchment, 8-9, http://www.foreignaffairs.com/articles/68024/michael-mandelbaum/americas-coming-retrenchment?page=show, CMR]

So the United States will be able to afford to do less in the world in the future than it has in thepast. Which parts of U.S. foreign policy will be -- and which should be -- discontinued? As I argue in my 2010 book, The Frugal Superpower,the feature of twenty-first-century foreign policy likeliest to be eliminated, and the one withwhich the country can most easily do without, is the type of military intervention that theUnited States has conducted in the first two postCold War decades in Somalia, Haiti, Bosnia, Kosovo,Afghanistan, and Iraq. Different as these operations have been, they have all saddled the United States with theunwanted, protracted, expensive, and frustrating task ofnation-building -- that is, restoring the institutions of governmentwhere they had collapsed or building them where they never existed. The policy of nation-building has three drawbacks. First, it is not popular

with the American people, who are willing to pay to defend themselves but not to govern others, or to help others govern themselves. Second, it

has enjoyed modest success at best because neither the United States nor any other country knowshow to create working, competent, democratic institutions quickly and cheaply. Third, howeversuccessful postCold War American nation-building has been, it has not contributed much to the well-being orsecurity of the United States. Should Afghanistan be appreciably more peaceful and prosperous when American troops leave than itwas when they arrived, it will certainly be of great benefit to the people of that country but it will do little for the people of the country fromwhich the troops came. Together, these drawbacks make nation-building the leading candidate to disappear from the repertoire of U.S. foreignpolicy, which would make carrying out that foreign policy less expensive. The Obama administration inherited ongoing interventions and nation-building exercises in Afghanistan and Iraq and has begun to wind them down. Although it launched a similar intervention in Libya in March2011, the way it has conducted that operation --promising not to insert U.S. ground troops and emphasizing NATOs role -- shows that it is

determined to minimize its costs. Eliminating interventions for nation-building would still leave theUnited States with a major global role -- and an important one. Indeed, today the United States provides to other countries some,although by no means all, of the services that governments furnish to the societies that they govern. The United States functions, that is,as the worlds de facto government. It supplies the worlds leading currency, the dollar. It hasthe worlds richest and most open market. Its navy safeguards the worlds two most important traderoutes, the Atlantic and the Pacific Oceans. U.S. military power helps assure the free flow of oil from the Persian Gulf,which is vital for the global economy. The U.S. military presence in East Asia and Europe reassures the countries of those regions, which are notformal adversaries but in many cases do not fully trust one another, that the United States will be on hand to deal with any serious threat to peace.

Most of the U.S. defense budget goes to support these beneficial missions. As the country comes to spendless on defense, some of them will be in jeopardy. Just how endangered the American role as the worlds government will be in the coming era ofeconomic constraint will depend on how deeply the relevant spending is reduced. That, in turn, will depend on how much defici t reduction theU.S. political system is able to deliver from other sources, above all by reining in the cost of entitlements and raising taxes. What is certain is that,because U.S. foreign policy is so important for the whole world, the consequences of the inevitable budget-cutting in Washington will reverberatefar beyond the United States.

http://www.foreignaffairs.com/articles/68024/michael-mandelbaum/americas-coming-retrenchment?page=showhttp://www.foreignaffairs.com/articles/68024/michael-mandelbaum/americas-coming-retrenchment?page=showhttp://www.foreignaffairs.com/articles/68024/michael-mandelbaum/americas-coming-retrenchment?page=showhttp://www.foreignaffairs.com/articles/68024/michael-mandelbaum/americas-coming-retrenchment?page=show

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AT: Royal

No diversionary warscooperation more likelyFravel 10[M. Taylor Fravel is the Cecil and Ida Green Career Development Associate Professor of Political Science and member of the Security Studies

Program at the Massachusetts Institute of Security Studies, The Limits of Diversion: Rethinking Internal and External Conflict, May,informaworld]

The diversionary hypothesis offers one of the most powerful alternatives to rationalist explanations of war based on the state as a unitary actor.

Strong empirical support for diversion would identify a more complete set of causal mechanisms underlying international conflict.The casesinvestigated in this article, however, raise doubts about the strength of the diversionary hypothesisas well as the empirical validity of arguments based on diversionary mechanisms, such as Mansfield and Snyder's theory about democratizationand war.126 In Argentina and Turkey, the hypothesis fails to pass two most likely tests. In neither case was domestic unrest a necessary conditionfor the use of force as proponents of diversionary theory must demonstrate. Instead, external security challenges and bargaining over disputedterritory better explain Argentine and Turkish decision making. The historical record, including leadership statements and re asoning, offersstronger evidence for a standard realist model and the dynamics of coercive diplomacy. Drawing definitive conclusions about diversion from justtwo cases is impossible. Nevertheless, the modified most likely research design used in this article weakens confidence in the strength of

diversionary arguments.Diversion as a principal or primary source of some conflicts may be much lessfrequent than scholars assert. These two episodes should be among the easiest cases for diversion to explain. Not only did embattled leaders escalate disputes intocrises and then use force, but scholars have also viewed these cases as being best explained by diversionary mechanisms. If diversion cannot account for these decisions, it is unclear what thehypothesis can in fact explain. My findings have several implications for the literature on diversionary war theory. At the most general level of analysis, the lack of support for the diversionhypothesis in Argentina and Turkey complements those quantitative studies of diversion that do not identify a systematic and significant relationship between domestic politics and aggressiveforeign policies, including the use of force.127 In addition, the modified most likely research design used in this article raises questions about those quantitative studies that do provide empiricalsupport for diversion because it demonstrates that despite the presence of domestic unrest, the underlying causal mechanisms of diversion may not account for the decisions to use force. The lackof support for diversion raises a simple but important question: why is diversion less frequent than commonly believed, despite its plausible intuition? Although further research is required,several factors should be considered. First, the rally effect that leaders enjoy from an international cr isis is generally br ief in duration and unlikely to change permanently a public's overallsatisfaction with its leaders.128 George H. W. Bush, for example, lost his reelection bid after successful prosecution of the 1991 Gulf War. Winston Churchill fared no better after the Alliedvictory in World War II.129 Leaders have little reason to conclude that a short-term rally will address what are usually structural sources of domestic dissatisfact ion. Second, a selection effectmay prevent embattled leaders from choosing d iversion. Diversionary action should pro duce the largest rally effect against the most powerful target because such action would re flect a leader'sskills through coercing a superior opponent. At the same t ime, leaders should often be deterred from challenging stro nger targets, as the imbalance of military forces increases the risk of defeatand thus the probability of losing office at home. Although the odds of victory increase when targeting weaker states, success should have a much more muted effect on domestic support, if any,

because victory would have been expected.130 Third, weak orembattled leaders can choose from a wide range of policy optionsto strengthen their standing at home. Although scholars such as Gelpi and Oakes have noted that embattled leaders can chooserepression or economic development in addition to diversionary action, the range of options is even greater and carries less risk than the failure of

diversion. Weakleaders can also seek to deepen cooperation with other states if they believe it willstrengthen their position at home. Other studies, for example, have demonstrated that political unrest

facilitated detente among the superpowers in the early 1970s, China's concessions in its manyterritorial disputes, support for international financial liberalization, and the formation of regionalorganizations such as the Association of Southeast Asian Nations and the Gulf CooperationCouncil.131

Economic interdependence doesnt prevent war 4 reasonsinsecurity due to resource mobilization, weakens deterrence, undermine cred of alliances, risks of states not constrained by econKrishnan 8 Prof for Security StudiesArmin Krishnan, Visiting Professor for Security Studies at the University of Texas at El Paso, 2008, War as business: technological change andmilitary service contracting

This means Western armed forces will only go to war under circumstances in which the military, political andeconomic risks can be minimized (Shaw 2005, 72). Wars involving the most modern armed forces will most likely become 'virtual' inthe sense that they will be waged with few combatants and result in relatively few casualties like the Kosovo air campaign (Ignatieff 2000, 4). Onthe other hand, the armed forces and their high-tech societies rapidly move far away from equilibrium towards criticality. They are highlyvulnerable to terrorism and other forms of asymmetric warfare, which 'can be described as a less complex force* strategy for exploiting the

vulnerabilities of a more complex opponent' (Elhefnawy 2004, 169). Complexity generally leads to instability and unpredictability of a system.Growing global complexity caused by interconnectedness and interdependence does not imply that themost advanced nations will never again go to war with each other. It rather makes the global systemmore unstable. David Rowe has pointed at the fact that the world economy was similarly globalized at the eveof the First World War, but globalization did not prevent the war and even contributed to its

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outbreak (Rowe 2005,447). According to Rowe. globalization can lead to systemic instability because it can'(1) generate systemic insecurity as all major powers become less able to mobilize the countries'abundant resources for defense; (2) undermine the ability of powers to practice effectivedeterrence; (3) magnify the importance of alliances to a state's security while undermining thecredibility of the promises on which the alliance rests; and (4) magnify the threat posed by states

that are least constrained by deepening integration into the world economy* (Rowe 2005, 433).

No transition warsthere arent any resources.Bennett & Nordstrom 2kD. Scott Bennett and Timothy Nordstrom, February 2000. Department of Political Science Professors atPennsylvania State. Foreign Policy Substitutability and Internal Economic Problems in EnduringRivalries, Journal of Conflict Resolution, Ebsco.

In this analysis,we focus on using economic conditions to understand when rivalries are likely to escalateor end. Rivalries are an appropriate set of cases to use when examining substitutability both because leaders in rival states have clearlysubstitutable choices and because rivalries are a set of cases in which externalization is a particularly plausible policy option.7 In particular,

when confronted with domestic problems, leaders in a rivalry have the clear alternatives of escalatingthe conflict with the rival to divert attention or to work to settle the rivalry as a means of freeing up a substantial amount of resources t hat can be directedtoward solving internal problems. In the case of the diversion o ption, rivals provide logical, believable actors for leaders to target; t he presence of a clear rival may offer unstable elites aparticularly inviting target for host ile statements or actual conflict as necessary. The public and relevant elites already consider t he rival a threat or else the rival ry would not have continuedfor an extended period; the presence of disputed issues also provides a casus belli with the rival that is always present. Rivals also may provide a target where the possible costs and risks ofexternalization are relatively controlled. If the goal is diversion, leaders willwant to divert attention without provoking an actual (and expensive)war. Over the course of manyconfrontations, rival states may learn to anticipate response patterns, leading to safer disputes or at least to leaders believing that they can control the risks of conflict when they initiate anew confrontation. In sum, rivals provide good targets for domestically challenged political leaders. This leads to our first hypothesis, which is as follows: Hypothesis 1: Poor economic

conditions lead to diversionary actions against the rival. Conflict settlement is also a distinct route to dealing with internalproblems that leaders in rivalries may pursue when faced with internal problems. Military competitionbetween states requires large amounts of resources, and rivals require even more attention. Leaders maychoose to negotiate a settlement that ends a rivalry to free up important resources that may bereallocated to the domestic economy. In a guns versus butter world of economic trade-offs, when

a state can no longer afford to pay the expenses associated with

competition in a rivalry, it is quite rational for leaders to reduce costs by

ending a rivalry.This gain (a peace dividend) could be achieved at any time by ending a rivalry.However, such a gain is likely to be most important and attractive to leaders when internal conditionsare bad and the leader is seeking ways to alleviate active problems.Support for policy change awayfrom continued rivalry is more likely to develop when the economic situation sours andelites and masses are looking for ways to improve a worsening situation. It is at these times that thepressure to cut military investment will be greatest and that state leaders will be forced to recognizethe difficulty of continuing to pay for a rivalry. Among other things, this argument also encompasses the view that the coldwar ended because the Union of Soviet Socialist Republics could no longer compete economically with the United States.Hypothesis 2:

Poor economic conditions increase the probability of rivalry termination. Hypotheses 1 and 2 posit oppositebehaviors in response to a single cause (internal economic problems). As such, they demand a research design that can account forsubstitutability between them.