US Little Recovery

After a long year for the world's largest economy, the end of a recession that has cost more than 7 million jobs and prompted the biggest response since the Great Depression. What should be done when the financial system proves that something was going wrong? Where do you sustain the growth?

The answer is consumer spending, residential investment and strong government spending. My point of view is more laissez-faire because it’s better for the economy and the development of a country but when it comes to these times, when the economy is questioned, you need a minimal interference by the government to start building up the system again. With this strategy US has started to get back in the growth shape. The Wall Street analysts forecast that the economy would grow by 3.2 per cent was right and this result has been the most commented news in the business sector.

The FT blames in the policy measures that were put in place in the US economy, for example some measures have been seen, like the cash for clunkers that encouraged the huge car industry in the States. “According to the White House’s Council of Economic Advisers, the stimulus added more than 2 per cent to real GDP growth in the third quarter.” (Art.1)

After you give the spark to reactivate the economy, it’s a natural effect that automobile industry (in this case) is going to start to maintain a reasonable movement of cash flow for the complementary services that it is linked to (exports, imports, Loans, Oil, tires, manufactures...), even though in the beginning the support given to General Motors and Chrysler by the Obama Administration was widely unpopular. An April Washington Post poll found that 41% of Americans approved of the actions. The truth is as Christian Menegatti, head of global economic research at Roubini Global Economics, said ahead of the report, “These types of take-it-or-leave-it incentives are very effective in the short term.” (Art.1)

But if you read in depth the FT (Art.1) coverage of the US revival it is shown that not everything that shines is gold. “Many analysts say the rate of growth will slow after the third-quarter jump, as the initial effect of the stimulus wanes”. This is also mentioned in the Telegraph, “While acknowledging that the economy has rebounded, experts are divided on how strong the recovery will be. Some reckon there is a significant risk that the economy will fall back into recession.”

The Bloomberg article (Art.2) also takes the same data from the Commerce department (same in the FT) and it is also clear that “federal assistance to the housing and auto industries, can be sustained into 2010 and generate jobs”

I think that the US economy is going to go down again, to form a W shaped recovery until issues, like unemployment has been solved. A sign of this REAL recovery will be the appreciation of the Dollar and the increase of the interest rates.

Art.1 http://www.ft.com/cms/s/0/16073bb0-c47f-11de-912e00144feab49a.html?nclick_check=1
Art.2 http://www.bloomberg.com/apps/news?pid=20601103&sid=aL3jHqTqtocU
Art.3 http://business.timesonline.co.uk/tol/business/economics/article6895362.ece
Art.4 http://www.telegraph.co.uk/finance/economics/6459950/US-emerges-from-recession.html