A global financial crisis is becoming more likely, as American political and media elites bury their heads in the sand.  The presumptive leader of the world economy is not even leading from behind.  

The members of Congress and President Obama, having exhaled a sigh of relief over extending the debt ceiling, are tripping over themselves in the mad rush to get out of Washington before the relentless heat, often mixed with overbearing humidity, sets in.  However the world and U.S. economy and markets are in the throes of a summer of discontent with a real possibility of genuine global panic in the fall.

In Europe, equities are down for the year, investors are fleeing European bank shares (as their exposure to the debts of Greece and other debtor nations becomes more precarious), bond spreads are widening on Spanish, Italian, and now French debt (which relative to Germany, has doubled in a month).  There is now a silent run on the banks in Greece, and Spain cannot pass and sustain a viable austerity program, and France, similar to the United States, has been slow to cut a chronic budget deficit.  The latest Eurozone rescue package was far too small as a solution to calm spirits for more than a matter of days and the scale of the overall dilemma grows by the day.

The debt ceiling crisis in the US revealed to the world two disconcerting realities: 1) Barack Obama is inept and incapable of being a leader and 2) the debate brought out the overwhelming scale of the fiscal challenges in the world's largest economy.  This was further exacerbated by a dramatic revision of the nation's Gross Domestic Product in the previous two quarters to virtually stagnant levels.  A report that consumer spending (which accounts for 70% of US economic activity) had dropped to its lowest level since September 2009 -- in the midst of the 2008-2009 recession.  Lastly there was a surprising drop in the manufacturing index in July indicating a significant decline in that sector.  

The United States is not alone in the receipt of bad economic news.  Across the developed world there has been a tidal wave of nasty surprises.  The Citigroup economic surprise index (which reflects how recent economic reports have been trending versus expectations) is at its worst level since February 2009.

At the moment this is not yet a financial crisis, as the markets are functioning, governments are borrowing and corporations can acquire loans very cheaply.  Thus far economies are slowing, not falling.  However the political leadership extant in the Western world is perhaps the most incompetent and unsure in more than a generation and therein is the trigger that could turn the current downturn into a full-blown crisis.

The current Spanish government is unlikely to agree on a tough austerity program triggering further uncertainty.  Silvio Berlusconi, in Italy, could fall and leave a political vacuum.  The leaders of the largest economies in the Eurozone, having continually relied on the tactic of trying to solve the continent's problems by throwing money at them, have begun to realize that they cannot continue this self-destructive strategy; but how to extricate themselves from the abyss in which they find themselves?

In the past the world could look to the United States for leadership and financial stability.  Unfortunately that option is no longer available.  The current occupant of the White House hasn't a clue, except to find a way to win reelection through obfuscation and class warfare, while promoting his fiscally disastrous policies.  The Federal Reserve, having essentially printed trillions of dollars to no avail, is out of options except to reprise the same policy, thereby exacerbating an already precarious situation.

When will this current situation turn into a crisis?  The more investors fear such an outcome, the more likely they are to make it happen.  Confidence has become the key issue factored into the equation as the rise of the value of the Swiss Franc and gold are clearly indicating.  Overzealous demands for Eurozone austerity and a desertion of the dollar by US creditors would most certainly spawn a genuine global panic and a devastating financial crisis.

There could not have been a worse time to have as the President of the United States someone so self-absorbed, incompetent, and without coherence in his personal beliefs as the titular leader of the free world.  The odds of the United States and the world experiencing another recession and a far worse financial upheaval than in 2008 increase exponentially as long as he remains in office and the American economy is held hostage.