Doubtful debt transaction, the growing fear of recession, the threat of long-term stagnation: in front of America opened bleak outlook
Last week was supposed to be good for the American economy. The country's leaders finally finished their outrageously irresponsible debate on the brink of fiscal war, and brought the world from financial Armageddon, agreeing to raise the federal debt limit. However, investors were relieved, however, they get into a fuss even more. Stock indexes around the world have fallen. And second of August, the day of signing the agreement, the S & P 500 experienced the most rapid daily decline in the last year, while the yield on ten-year government bonds fell to 2.6% - the lowest level for the past nine months, as investors sought to find a safe haven for their assets. Of course it's not just in America: The euro zone is in ruins, and the growth of manufacturing in the world to slow down. But over the American horizon, unexpected storm clouds thickened. Revised statistics and more unfavorable indicators suggest that economic recovery is not just a slower than anticipated, but may stop at any time. As soon as her refuge station, there is a stone's throw to the recession, especially if you break out a new shock associated with fiscal tightening, which is stipulated in the agreement on the limit state. debt. Likelihood of re-fall in the coming year uncomfortably high, perhaps even 50%. Restoring the American economy after the balance sheet recession always promised to be dull and brittle. But her problems do not necessarily have to come down calamities on the world economy, thanks to good growth in emerging markets. However, the superficiality of the transaction - in particular, the lack of real solutions of real America's fiscal problems, such as the cost of benefits - a serious cause for concern. Can we trust politicians who are in such sharp opposition that they are willing to bet their country's economy, can we be sure that they do not will bring the economy to long-term stagnation?
Fin on the surface
Let's start with the state of the recovery process. Twenty ninth July the U.S. Bureau of State Statistics has published revised GDP data for the past few years. They showed that the recession of 2008 was deeper than originally anticipated, and followed her recovery - less active. The volume of production has not yet reached pre-crisis highs. A miserable recovery is gradually eroding. Over the last year output grew by only 1.6%, much lower than most economists expected base rate of growth. In addition, the recession, industrial output recovers more quickly. Over the past six months the U.S. economy could grow by only 0.8%. Even columnists like us, who believed that the U.S. economy will stay near the lows for some time, do not expect such a negative indicator.
Temporary factors played a role. Rising oil prices led to a decline in consumer spending. The earthquake in Japan has violated the supply chain. In some industries, particularly in the automotive, recovery is painfully slow. But on the whole economy is so weak that it takes a long time to return it to relatively acceptable growth rates. Moreover, there is reason to believe that temporary factors have left a deep emotional mark on the companies and consumers. That is why the new data seem so alarming. Consumer spending fell in June, consumer confidence fell in July, followed by the same orders for manufactured goods. Of course, these data are preliminary indicators, however, they indicate that a second recession, which until recently seemed somewhat unlikely, it is now looming. If this happens, the fault of American politicians. They prescribed a weakened economy, a large dose of fiscal consolidation. In December, due to expire tax breaks and extended unemployment benefits, which will lead to fiscal reduction of about 2% of GDP next year. This will be the biggest decline among the developed economies and strong enough shock that can plunge the country into another recession.
Agreement on raising the debt limit, which implies only a slight reduction in costs in the short term, can not be blamed for this. However, Congress could and should stop the movement of the country on a dangerous path. That's what was supposed to be an agreement: to save costs in the short term, with an emphasis on much-needed investment in infrastructure, but also to extend temporary tax breaks in exchange for a significant reduction in the deficit over the medium term-oriented fiscal and social reforms. Congress did just the opposite, he failed to support the economy now and could not find opportunities to reduce debt in the U.S. over the next decade. All tough decisions were deferred for later - such delays are sentenced workers and business executives to eternal uncertainty about how the country will be scratching their fiscal Augean stables. Would you build a factory today, knowing that taxes will be raised, but do not know what? Worse, the toxic political decisions and actions of the past few weeks just caught the new fog. Supporters of the tea party has successfully used the threat of default as a political weapon, there is no doubt that they will resort to it again. The refusal to compromise, which is perceived as an object of pride for both sides, causing widespread damage to the economy. For example, it led to the dissolution of the Federal Aviation Administration and the postponement of the adoption of laws on trafficking. Policies, at best, slowed down the economic recovery. At worst - they killed him and caused enormous damage.
In a country of blind men and the one-eyed king is
Is there no other way out. There. Barack Obama or one of his Republican opponents can still find the strength to tell the truth about the state of the U.S. economy during the upcoming campaign. But, given the futility of modern politicians, the only institution capable of removing trouble, is the Federal Reserve System. In the zero interest rate it means again to resort to quantitative easing. Printing money is completely justified in the circumstances, however, remember that this tool - a stick about the spirit of the ends. Would not prevent fiscal assistance. If America can avoid a recession, if it starts to slowly get out of the swamp, the economic advantages of the country will undergo a severe test of strength. In U.S. is still superior to other developed countries: young, not burdened by taxes on people, innovative economy and, at least until the dollar as world reserve currency. It would be good political leaders were able to pull themselves together and behave with dignity, it would be more likely.
