The new wildcard of political uncertainty.

• Author: Smick, David M.
• Position: FROM THE FOUNDER

The world is an economic mess, and political uncertainty has become the global economy's new wildcard. Consider some facts.

In Germany, a typical retired person receives a public pension equivalent to 40.5 percent of average earnings. In the United Kingdom, the figure is 28.9 percent. For Greece? 93.6 percent. No wonder the European man on the street is so angry.

America's situation isn't much better. The salary package of a typical private sector worker is nearly $70,000. A public sector worker? Nearly $110,000, according to data from the Bureau of Labor Statistics.

In early May, European governments and the International Monetary Fund announced a bailout package for Greece. The austerity measures demanded in return--massive cost increases for the middle class and the poor--are arguably tougher than the measures attempted by Heinrich Bruning, the Chancellor of Germany in 1931-32, which paved the way for Adolph Hitler.

Roughly 50 percent of Greece's sovereign debt is held by foreign nonbanks (insurance companies, hedge funds, and others). What this means is that Greek pensioners are being asked to work longer for less so that foreign pensions holding Greek debt can be protected. No wonder there are riots in the streets.

German and French banks account for roughly half of the $900 billion lent to Spain by all European banks. As part of the European rescue package, Spain is being told to reduce its labor costs to become more competitive with the stronger economies led by Germany and France. The problem: Spain already faces a 20 percent unemployment rate. How much higher can it go without leading to political chaos?

Americans are also worried about jobs. The Federal Reserve anticipates unemployment will remain above 9 percent until well into 2011. That's because the U.S. economy for 2010 will likely have returned to trend growth of only 3-3.5 percent.

Yet during America's last deep recession of comparable magnitude, the 1981-82 downturn, the outcome was decidedly different: During the first quarter of 1983, real GDP jumped by 5.1 percent, the second quarter by 9.3 percent, the third by 8.1 percent, and the fourth by 8.5 percent. During the first quarter of 1984, the economy was still growing at an 8 percent pace. What's holding back today's economy? Probably...