(...) compared to the rest of the world the U.S. is in reasonably good shape. Our economic fundamentals are sound: Manufacturing levels are up and interest rates and inflation are low. The broader economy's recovery is also finally translating into meaningful employment improvements—recent employment reports show increases in average hourly earnings and hours worked—and I believe this trend will continue.
The recovery that took root last summer with the help of government stimulus now seems to be evolving into a self-sustaining expansion. In the first quarter of 2010, nominal GDP reached an all-time high. Real GDP will reach a new high either late in the second quarter or early in the third.
Compared with historic trends, these developments are extraordinary. Following the Great Depression, the U.S. took 15 years to return to its previous GDP level. Japan's growth took nearly as long to recover following its "lost decade" of the 1990s. But in just a few quarters, our economy has taken monumental steps toward health.
Now consider Europe, grappling with significant sovereign debt and deflation, and an inflexible currency system straining its governments. In Japan, economic recovery is evident, but the pace is much slower. Deflation and a declining population remain real concerns, a strong yen has slowed exports, and the banking system is pressured.
(...)
What about emerging markets? The largest of the emerging economies (Brazil, Russia, India and China) have advanced their global GDP share to 15% from 7% since 1995. But their relative economic expansion has come at the expense of Europe and Japan—not the U.S. Fifteen years ago, the U.S. accounted for 25% of global GDP. Today? Still 25%.
(...)
Corporate profits could reach a new record high in this year's third quarter. Free cash flow for nonfinancial American companies is also exceptionally high—cash on the balance sheet is close to 11% of assets, a 60-year high. And high cash levels are already generating dividend increases, share buybacks, capital investments and M&A activity—all extremely shareholder friendly.
The importance of improving America's productivity growth can't be overstated. High productivity tends to lower unit labor costs and boost corporate profits.
According to Citigroup, U.S. unit labor costs are dropping at their fastest pace in 40 years. We last saw a similar surge in U.S. productivity in the late 1990s. Then, U.S. corporations were heavily investing in their own businesses, and foreign investors were increasing their U.S. allocations. This sparked a rise in the dollar. Improving productivity, a strengthening currency, and rising equity markets are linked. We saw that synchronization 15 years ago, and we are seeing it today.
(...) The bottom line is that the U.S. has generally performed better on the upside this year and held its ground better on the downside.
The relative strength of U.S. stocks is no accident. Since the credit crisis struck, we have taken quicker action and demonstrated greater innovation than our competitors.
Potential risks—trade complications, escalating credit contagion, overly aggressive financial regulation, and tax increases—clearly remain. But for the moment, our nation seems poised to remain a City Upon a Hill.
La percezione di un'Europa confusa e inconcludente è molto forte negli USA: eccovi altri due assaggi dal Wall Street Journal di oggi:
- il piano di salvataggio dell'eurozona non ha garanzie: Is the euro zone's €440 billion ($524 billion) new funding facility more than a very large mirror and an industrial quantity of smoke?It is hard to avoid the suspicion that if the special purpose vehicle (SPV) is truly needed, implying markets have refused to fund several euro-zone countries, it won't work as planned. One fear is over demand for the SPV's bonds.
(...) Ultimately, the only surefire solution to a major funding crisis may be a common euro-zone bond backed by federal taxation. The SPV proposal is a step in that direction. Completing the journey requires a sacrifice of sovereignty few, if any, are willing to make. For now, austerity to avoid being forced to use the SPV seems the more likely outcome.
- la nebbia della BCE: So what do investors want? More information as to how much the central bank will spend on a controversial government-debt-purchase program, the widening chasm between the ECB and Germany's Bundesbank, and the ECB's views on the euro's steep slide.They aren't alone in thirsting for clarity. Financial-market fears have driven overnight deposits at the ECB to records, showing banks figure it is better to accept a paltry 0.25% interest rate than lend to other banks.
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