Many economists have been questioning for several months on the cyclicality of the U.S. economy. If the recovery seemed sustainable, many fear a return to recession. This uncertainty is particularly important as it signifies the European economies and their institutions and all international markets. If the U.S. economy is doing badly, then global markets will be destabilized. But what are these uncertainties?
Much of the problem is quite simple to grasp. Overall demand is very low, the effective supply can not increase (output gap) and economic growth remains too low. Meanwhile over fiscal policies seem necessary. Yet without the benefit of taxpayers, high public spending is difficult to justify when an application for bond markets and bond yields very low. The problem is that a spiral can be installed by the variable rate of unemployment higher and higher. Between economic growth, unemployment and public spending, the analysis can quickly become complex. Now all the current debate on the economy American relies on these three pillars.
A GLOBAL DEMAND LOW
One solution to this problem is to decide on a debate that is supposed to structural unemployment. Bradford DeLong spoke about it and quickly showed the falsity of the debate. Structural unemployment is a shift in labor demand across sectors leading to a cost adjustment for employees (new powers to obtain the flexibility of labor supply) as measured by higher unemployment rates. For example, a decline in demand for real estate would imply a lower demand new construction. On the other hand, the decline in real estate could be accompanied by an increase in demand for goods or services. There would be a structural change in labor supply where the bricklayers required should obtain new skills for example produce certain goods or services requested by households. This is a situation of structural unemployment. Today, however, to simplify, not a change in the demand for goods or services that we see but an overall decline in demand that affects too many important areas.
savings rates as favorable and unfavorable
Therefore, and if one accepts the idea that the U.S. aggregate demand is too low, one may wonder about its causes. Martin Feldstein examines the net saving rate of households. This ratio is generally very low in the United States of about 2% since the 90s. The tendency to slightly spared was notably driven by strong valuation of securities held by individuals and access to easy credit. These two factors encouraging Americans to save less and thus consume more. Mid-2010, the U.S. savings rate was estimated at 6.3%, well above to 2% above normal and close to the level of year 80 (9%).
This increase is rather mechanical. The high unemployment encourages individuals to save in anticipation of partial unemployment. We can cite for example the case of Modigliani's life cycle where the agent adjusts its consumption and savings so that their standard of living is maintained over several years. On the other hand the difficulties of the real estate sector made it difficult to obtain new credits. Added to this is the insolvency of the third owners of Americans with home loans following the severe decline in their assets (assets estate).
RISK OF DEPENDENCE
WITH EXTERNAL ECONOMIES THAT INCREASE
From a microeconomic point of view these behaviors create a decline in household demand. According to a macroeconomic perspective the problem is twofold. The decline in aggregate demand does not finance new investments, therefore limiting the restructuring of the economy. To remedy this decline in aggregate demand, public expenditure requires an increase in the budget including a greater tax burden on households and scope. In itself, the mechanism could balanced by a tax system that would compensate for individual behavior.
Gold is measured by the involvement of the U.S. economy vis-à-vis the rest of the world. The U.S. household savings (which fell from 10 000 billion since 2007) is insufficient to finance government spending. The use of foreign capital will quickly become a necessity. However, any dependency on the outside involves greater risk and especially autonomy of the weaker U.S. economy.
POLICY economically risky
AND DEVELOPER UNCERTAINTIES CURRENT
Barack Obama once advocated a growth based on exports. As proposed by Daniel Gros, the analogy with Germany of the 90s is not so bad. In this case, the first European economic power has developed an export strategy that has paid dividends since 2000. The problem is that unlike Germany, the United States can not derive any benefit from new opportunities. Southern Europe had resulted in support of the single currency, develop new markets including real estate in Germany. Opportunities that have strongly contributed to the development of exports. The United States will not have such opportunities and will suffer even more than the dollar to the yuan is linked with the country, China is experiencing strong economic growth. In addition to these adverse conditions the vision long term approach that requires the export strategy of the United States: the transition is usually long and requires ten years.
TO AVOID A NEW CRISIS
In this context, how to support domestic demand by limiting the length with the outer while controlling public spending is a real headache. The United States will cope, especially if no solution is found then a second recession is inevitable. These uncertainties in financial markets. Importantly, these uncertainties can lead to self behavior directors - something very desirable for our economies, including European ones where everything remains to be done.
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