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US-Wirtschaft geht die Puste aus

Amerikas Wirtschaft ist im ersten Quartal so langsam gewachsen wie seit zwei Jahren nicht mehr.

Hilarious. All indicators in April were that the fear of a down-tick were unfounded by the third week of the month...

great news for the united states. in 2 years, i will graduate from uni with a masters degree in economics. anybody know what my chances are on the US job market?

Ray D

You forgot to mention the constant talking down of the economy by the Dems and their propaganda arm (MSM). Since expectations are paramount in any given economy, I believe this deserves a mention.

This article reminded me of that article on a book about the "Wir wollen keine amerikanische Verhältnisse hier" mantra in the german press.

The Fed will likely raise interest rates at the next meeting fearing inflation. Rates that are still higher than those in Europe. Jobs will continue to grow here.

This article reminded me of that article on a book about the "Wir wollen keine amerikanische Verhältnisse hier" mantra in the german press.

Yes, wouldn't it be terrible if Germany had a thriving economy again?

I am not sure whether Ray's note "despite $60+ prices for oil, September 11 and the military expense of the war on terror" is fully justified.

One could argue that you should replace "despite" with "because."

According to the Economic Policy Institute:
"The private sector has 1.2 million fewer non-defense-related jobs today than it had four years ago. Only as a result of increases in government spending over the past four years, mostly on defense, does the private sector have more jobs now than it did before the recession.

Federal, state, and local government spending has created 2.1 million jobs in the last four years.1 According to the administration's budget report, defense spending is generating 1.33 million more jobs in the private sector this fiscal year (for a total of 3.85 million jobs) than it did four years ago (2.52 million). At the same time, government jobs have increased by 760,000. "
http://www.epi.org/content.cfm/webfeatures_snapshots_20050803

Still, I agree that the US economy is doing better than the German economy, of course. Obviously, German can learn a lot from the US. Though, I am not sure if more government spending is the solution to Germany's economic problems.

Note from David: The Economic Policy Institute is a research institute of U.S. unions. Just check the board of directors.
That doesn`t necessarily make their conclusions worthless, but I`d expect a certain bias.
I don`t have the time right now to search for other explanations of the U.S. job growth (other than union based explanations, that is). Maybe later today...

Obviously, German can learn a lot from the US.

Germany doesn't need to learn from the U.S. It wasn't that long ago that West Germany knew.

I am not sure that the EPI data means ANYTHING.

First, what is the point about excluding defence related jobs in the private sector. There are all sorts of jobs in the private sector that are related to governmental spending: road construction crews for example. Why are those construction crews not excluded as well? That is, without some explanation of why some private sector jobs related to government spending are to be excluded but not others, it is difficult to determine whether the data have meaning. Maybe they do, but it is not self-evident.

Second, EPI's estimate "does not include private-sector jobs resulting from more spending for homeland security, health, education, and other purposes." OK, it excludes private sector jobs in the health industry for example by its own admission. Now it is even wierder. Oh my, x (excluding unspecified w) is down compared to several years ago, when it was y (excluding unspecified z.)

Am I alone in wondering whether this is meaningful or mere spin? (Of course, lefties don't like people to have defence related jobs if those jobs are actually going to be used for something useful. Maybe that is the point.)

JeffM

Jeff and many of those are well paid union jobs and jobs that pay 80,000 plus a year. Why do they exclude health care, because if they include it the US economy looks even better. Seditious TRANZI bastards.

Yes, the Dems poo-poo defense related jobs but just try to close a military base in a heavily Democratic jurisdiction. They scream blue murder that the DoD doesn't know what they are doing. They form task forces to prove how valuable and indespensible their military installation is to the defense of the country. The hypocracy is astounding.

Doug says. "It wasn't that long ago that West Germany knew." Correct. Unfortunately, they forgot it after emerging from the Reunification Daze. And I don't blame it solely on the assimilation of 18m far-from-completely-reformed socialists. It was the West that forgot. They forgot who their friends are. They forgot the principles that brought them from ground zero in 1945 to Europe's economic gorilla in 1989. Quite simply, they forgot how to differentiate between right and wrong, good and evil, friend and foe. They joined the other Euro lovers of greyness that attempt to put everything into relative terms... the Euros love grey because then they can talk about it forever and not actually face the potential dilemma of having to do anything.
Trouble is, I don't see them relearning the lesson anytime soon, and I say that with absolutely no sense of satisfaction or smugness. I've got too much time, energy, and emotion invested in this country to wish her ill.
@JaneM: In fighter pilot lingo, I would say, "That's a shack."

What do you think about the double deficit?

I mean, the US-governement's ebts are increasing. The war in Iraq was quite expensive und the tax cuts might have been too big. Deficit spending is something that is very dangerous as the debts increase with the interests and the compound interests.

The United States are importing more goods and services than they export. Amercans themselves have made a lot of debts, too. They consume a lot. This might be good for the economy (also in Germany and all over the world), but I doubt that in the long term, this will be good for the American people and economy.

Another point is the dollar: Its rate price has been sinking for years. The new international superstar could soon be the Euro.


So, the Bush administration might have done a great job at fighting against unemployment and for a growing economy. But there are a lot of problems and I'm not sure if the Bush administration has the right solution for them...

"I mean, the US-governement's ebts are increasing. The war in Iraq was quite expensive und the tax cuts might have been too big. Deficit spending is something that is very dangerous as the debts increase with the interests and the compound interests."

Yes, the debts of the US government are still increasing. As are the debts of any government which is running an deficit. The trend is down however. That is the size of the yearly deficit is rapidly falling as the US grows out of a recession.

Deficit spending can be dangerous in some circumstances. Perhaps the US was running too high a deficit last year - but with the deficit falling this is less of a worry than it was.

I think Germany needs to focus on it's own problem right now - which is a lack of demand. The policy prescription for Frau Merkel is quite simple - engineer a boom. Run a large deficit and accellerate German growth rates. Don't try to reform Germany immediately, create the boom. With a vibrant jobs market a lot of the reforms Germany will need in the long term will become much easier to implement. Perhaps in a couple years, or possibly in a second term.

@Köln: Whilst I agree with your assertions that deficit spending can be dangerous and that Iraq is expensive, I personally draw different conclusions. The Bush administration felt that the tax cuts were necessary to stimulate the economy, and that in the long run, tax revenues would be greater than allowing the economy to suffer along in the doldrums for a decade. I agree with this assessment and believe it will be proven in the long run. Nevertheless, it is interesting and telling that the US was willing to take on such a financial burden in Iraq (as well as the other more obvious burdens) to further freedom and liberty; risking the economy if you will to effectively pursue the War on Terror, and so very few others were willing to do so.
It's true that the US has a negative balance of payments; what the effect of this is -- and will be -- remains to be seen as many serious economists whose opinions I respect seem to disagree. Moreover, measurement of this statistic only in goods (and not goods and services) as well as the problem of determining which country is "profiting" when dealing with multi-national corporations render using this statistic difficult at best. Yes, I also would like to see less consumer debt in the US, but I'm not going to lecture my countrymen on the virtues of thrift, and besides, when they carry credit card balances, then my bank is making lots of money, and paying me better dividends. Moreover, better the optimistic view of the future than the mixed signals the German gov't sends to the population (Save! No, don't save, Spend! Wait! Save again, otherwise you'll have nothing in old age!).
Your statement, "Another point is the dollar: Its rate price has been sinking for years. The new international superstar could soon be the Euro" is not only inaccurate, it sounds like reheated Euroleft babble. Sorry, but exchange rates are cyclic for the most part. I've seen the highs and lows over the last 24 years I've lived in Europe (but been paid in dollars). The exchange rate now is not appreciably different than the 1.16 at the Euro's introduction. I have not seen any evidence that other nations were wholesale exchanging Dollars for Euros as their reserve currencies, if you have evidence of this, I would appreciate a link. Moreover, the Euro has its own, unique problems that have been well documented -- even in the German press.
As far as your stipulation, "But there are a lot of problems and I'm not sure if the Bush administration has the right solution for them..." I can only say at least he is leading and not just blindly following fickle (and often biased) opinion polls. Moreover, the ultimate reason for the existence of a gov't is to protect its population (... that to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed) and I daresay that although many may disagree with the course of action taken in Iraq, it is at least designed to take the fight to the Enemy instead of sitting on our hands waiting around for another 9/11. Or worse, appeasement of the terrorists, which it seems many of the Euros would prefer.

Uh-oh, here comes the dreaded double deficit.

The US ran a trade deficit for the entire 19th century and had the fastest growing economy in the world as a result. It comes from people wanting to invest in the US.

So long as major parts of the world want to live in a mercantilist dreamworld, the US will do just fine because those parts of the world will finance US consumption and investment.

But wait: what if the rest of the world wants its money back, wants to disinvest? Then the US will be in trouble, right?

No. If the rest of the world wants to disinvest, they do not get to take back the factories, buildings, etc, that have been built. They get paid back in dollars, which the US government simply prints. The value of the dollar may crater relative to other currencies, but then the rest of the world will get paid back, quite legally, at pfennigs on the mark or centimes on the franc. The decline of the dollar will be perceived by Americans as an increase in the prices of imports and the cost of foreign travel. The decline of the dollar for the rest of the world will represent a big haircut on their investments in the US. And what will the rest of the world do with all those dollars on their hands when they are unwilling to invest them? Buy US exports of course. In which case, the balance of trade evens out over time.

But I doubt any of this will happen. The US dollar is the world's reserve currency, and essentially the rest of the world pays the US to use the dollar that way. If Germany, for example, wants to disinvest in the US, then Germany has to become a net importer from the US and pay for it by liquidating its investments in the US at a loss.

JeffM

@JeffM: Well explained, thanks for the assist. The problems with trade deficits that I do recognise are that if more and more of the US means of production, R&D, etc are foreign-owned then not only is the big money not going into the hands of my countrymen (unless indirectly) but also there is a potential for political blackmail. Imagine if Rockwell or Boeing were foreign-owned and managed.
Generally though, I agree with your assessment.

@ Scout

You're welcome.

You are undoubtedly correct that trade deficits do have the POTENTIAL to cause problems. You are also correct that whatever profits accrue to Daimler from owning Chrysler ultimately tend to benefit primarily German stockholders, not American ones. The idea that ownership of domestic firms by firms domiciled in a hostile country represent a political threat is, however, usually overstated. Twice in the 20th century, the US government nationalized German investments in the US without compensation: eg Koppers, Rohm and Haas, GAF, Bayer, etc. The net result was that the Germans made a "gift" of those assets to the US. In any case, the rest of the world is primarily investing in US government debt, leaving Americans to invest in productive assets. It is perfectly reasonable to say that China, Germany, France, etc. are financing the war in Iraq while the US citizenry continues to invest productively.

JeffM

There's one big problem with all the good economic news out of the US: an awful lot of it is based on unsustainable housing price increases.


From The Economist In come the wavesJun 16th 2005


The housing market has played such a big role in propping up America's economy that a sharp slowdown in house prices is likely to have severe consequences. Over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP. And over two-fifths of all private-sector jobs created since 2001 have been in housing-related sectors, such as construction, real estate and mortgage broking.

More gloom and doom. How typical.

"Over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP."

... and this is less preferable than what? Sorry, but even a local housing "bubble" is not going to cause the US economy to implode. And I categorically reject any suggestion of a national housing bubble.

@scout

Debate the matter with The Economist, if you like. You can e-mail them at letters@economist.com. When you have convinced them of their error, I will be only too happy to retract my comment on the matter. I might add they are far from the only publication that sees a problem with current housing prices.

Many people in Japan catagorically rejected the idea of nominal declines in Japanese property in the late 1980s, although they admitteded Tokyo might decline somewhat. In fact, they backed up their convictions with a truly astounding amount of cash. We can only hope they are the wiser for it, as they are most assuredly the poorer.

There's one big problem with all the good economic news out of the US: an awful lot of it is based on unsustainable housing price increases.

Scum, the point that the Economist was making is that the housing bubble is a global phenomena. The price rise in the US was at the lower end of the middle range. Japan (-28) is still suffering from the effects of it's own housing bubble. The only other outlier on that chart was Germany with zero growth 1997-2003 - without having a housing bubble to recover from.

One could say the same thing of all the countries on that chart except Germany and Japan. All have benefitted from unsustainable rises in housing prices and all will feel the pinch when it ends. The UK more than any I suspect.

Italics, BEGONE!

Funny thing about the financial experts the MSM consult... they're routinely wrong, and the MSM nevertheless keep on consulting them. Didn't anyone ever tell them that one of the definitions of insanity is to keep repeating the same mistake, and expecting a different result?

@Don

And you will note that both Australia and the UK have seen their housing markets stagnate. Whether or not they then begin a long slow (and very nasty) slide still as per Japan remains to be seen.

More to the point, no figures were provided in the article for comparable economic growth and employment statistics for the other countries. I noticed both France and Spain had huge property price increases 1997-2005. But what real impact has that had upon the organization and growth of the economy? The article provides no data on the matter (certain Frenchmen would tell you their entire rise is due to Briton's buying the place up anyways).

As a final argument, misery may love company, but it in no way mitigates the absolute scale. I admit it changes the relative interpretation of the US growth rates against continental growth rates, but, as you point out, the germans in particular have proven immune to this particular brand of silliness.

@Jeff: Understand the nationalisation of "hostile" industries... the problem is that long period before recognising that a nation is hostile. For example, let's assume France and Germany start breaking the agreements and they sell military technology to China (wink, wink, nudge, nudge). Is that hostile? Would it justify a nationalisation of their resources in this country? Would we do it? Somehow I think not, and this type of danger would continue for a very long time. That was my point.
@Scum: I think you misunderstood my point. I was not debating the Economist's statistics, but raTHer, I was asking you what kind of growth in GDP you would think preferable to "consumer spending and housing construction." Sorry, but to me that sounds pretty good. Or would you prefer "negative growth?" The "German immunity to this silliness" as you put it may be nothing more than either an expression of (lack of) confidence in the future in Germany, or a by-product of the suicidal demographical developments in Germany. In any event, I cannot attribute the flat housing prices in Germany to any sort of fiscal restraint or uncommon wisdom.

@ Scout

I appreciate the issues that you are driving at, but ...

Option 1: The US prohibits foreign investment in US firms because there is no telling what firm may have, now or in the future, technology of military importance. (Example Zeiss was a German firm whose superior optical technology represented a military advantage for Germany in both world wars.) This is the only "safe" way to address your point. The disadvantage is that US firms would likely be prohibited from foreign investment in retaliation. Autarky meets the needs of defence but not of economic prosperity.

Option 2: The US concentrates its defence spending on domestically owned and managed firms. This is a compromise. Like all compromises, it is far from perfect.

The issue of whether Germany and France selling arms to China is unfriendly or hostile is an old one. The old view was that if neutral A was shipping goods to B when B and C were at war, C had several options. C could legally seize "contraband" such as weapons, but not food, and could legally "blockade" B, that is, use miltary means to seal B's borders. C could also declare war against A or close C's markets to A's goods. But the US is not currently at war with China. Makes it tough to seal China's borders. Nor do I think the US is about to declare war on the democratically elected governments of France or Germany any time soon; doubt you are recommending that, but in that case we could seize German and French ships and planes and blockade those countries.

That leaves economic "warfare." I must admit that that political rather than military weapon has not been used vigorously enough by the US. The Dems get cold feet whenever someone points out that it is working (some Cuban infant is not getting some medicine.) The Repubs are too ideologically committed to free trade. Personally, I think an embargo on French exports to the US and a tax of $10,000 per visit to France might be a really helpful piece of shock therapy for Europeans. No miltary violence, just a simple demonstration that actions have consequences. You get ONE miltary contract with China; you lose ALL access to US markets. We are not interfering with THEIR sovereignty; we are EXERCISING ours.

JeffM

@Jeff: No arguments, we are more or less in violent agreement. I brought up the hypothetical point to illustrate one of the POTENTIAL dangers of continuous negative balances of payments, which in turn enables foreign entities using our dollars to gain more influence in otherwise American firms, some of which can have national security implications. As you have pointed out, once it gets that far and you are already to your mentioned options 1 and 2, neither are particularly desirable options.

And you will note that both Australia and the UK have seen their housing markets stagnate. Whether or not they then begin a long slow (and very nasty) slide still as per Japan remains to be seen.

Let's not forget that The housing bubble was only one of a sea of Japanese troubles. The stock market was at least 400% overvalued. Many major banks and companies were essentially bankrupt. The Japanese economy was rotten root and branch.

More to the point, no figures were provided in the article for comparable economic growth and employment statistics for the other countries. I noticed both France and Spain had huge property price increases 1997-2005. But what real impact has that had upon the organization and growth of the economy? The article provides no data on the matter (certain Frenchmen would tell you their entire rise is due to Briton's buying the place up anyways).

Good point here. If we saw data showing that Chinese housing prices up by 70% between 1997-2003 I doubt there would be much ground for concern. China has probably grown almost that much.

US and French housing prices rose by roughly 70% in that period. If we say for the sake of argument that the US economy grew by 35% and the French economy by 25% during that period, which one has the bigger bubble relative to economic growth? The latter obviously.

Moreover I would argue that the faster-grwing economy will shake off the bad effects of a housing bust more rapidly than a slower-growing country. Italy will suffer worse effects than the US ceteris paribus.

the germans in particular have proven immune to this particular brand of silliness.

The Germans have been immune to economic growth as well as to housing bubbles. Surely they are related phenomena?

Germany was more expensive than France, Italy, Spain, and Portugal and less attractive to outsiders. QED no outsider-driven demand. With next to no economic growth there was no demand to drive a boom.

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