As the Great Recession was easing, the consensus held that China, not the United States, would lead the world out. This would be a tectonic shift from a century of American economic power. But things didn’t turn out that way.
China was badly mauled by a drop in demand during the downturn and more recently has faced slower growth, a real-estate bust, debt overhang, shaky financial system and overcapacity in factories.
Anemia is widespread: Abenomics hasn’t jumpstarted the Japanese economy, the BRICS are sickly and Europe, pushed by an austerity-crazed Germany, is poised to enter yet another recession. Germany’s economy is stagnating.
In a weak posy-recession world, America is doing best among major economies. For all its very real flaws and injustices, the Obama stimulus and the Federal Reserve’s aggressive actions kept the downturn from being much worse and prevented the double- and triple-dip facing Europe.
What else helped? Having the world’s reserve currency. The fracking boom (total price to be paid later). Military Keynesianism as we spend more than the next 10 (or 13) biggest defense spenders combined. The Kook Kaukus in Congress stopped the default brinksmanship. One would hope that it also has to do with having, for all its wounds, rule of law and an open society. Those certainly help make Seattle real estate attractive to Asian investors.
But here’s the problem:
As you can see, America’s recoveries aren’t what they once were. So even though we’re doing relatively well, it is not enough to fill the jobs gap or give most Americans meaningful raises. Our persistent trade deficit represents millions of lost jobs. And lack of investment in infrastructure is also holding us back:
The International Monetary Fund singled out the United States and Germany as needing to invest more in infrastructure. (Here’s the IMF section in full). It’s a great time to do it, with borrowing costs low. But don’t expect the austerians in gridlocked D.C. to do anything. This even though the deficit is under 3 percent of GDP, arguably falling too fast. That puts America’s fragile growth at risk. If anything, we’re facing headwinds of potential deflation.
Today’s Econ Haiku:
Bye, Bill the Butcher
Hope the boss enjoyed her manse
While workers got chopped