Jan 15, 2007

A View From Across The Pond

It’s good to know that when comparing the U.S. ecomony to the worst statistics in the bunch, that we’re just not that bad. Let’s do better guys. With a little work and help from Uncle Sam, we can get to the top of the worst performers list.

Nariman Behravesh of
The Financial Times, a major UK business news outlet, printed an article “The gloom about America's economy is overdone”. Some interesting comparisions are presented in this article to the other major players in the Group of Seven. The Group of Seven are the countries that control the World Bank.

Here’s a quote that symbolizes the current populists view of the US economy: “To begin with, in the past decade the resilience of the US economy in the face of repeated shocks has been remarkable. The shocks have included the emerging markets crisis, the meltdown of Long-Term Capital Management, the worst bear market since the Great Depression, one of the worst terrorist attacks in history, corporate scandals, war, hurricanes and record high oil prices. Now, the worst housing recession since the late 1980s does not seem to be dragging down the rest of the economy.”

Some of the interesting statistics in the article are:
1. That the US savings rate is and has has been lower than Finland, Denmark, Australia, Italy, Japan, Canada, South Korea and Australia.
2. Indebtedness of the much-maligned US consumer is ONLY 130 % of the average US after-tax income.
3. In 2006 the US budget deficit is expected to have been 1.9 per cent of gross domestic product compared with 2.1 per cent for the eurozone, 3 for the UK and 4.6 for Japan.
4. Gross government liabilities as a share of GDP were about 65 % compared with 50 % for the UK, 63 for Canada, 77 for the eurozone and 175 % for Japan. The US fiscal situation is better than the Group of Seven average.
5. However, there is a problem - the US current account deficit. At about 6.5 % of GDP, it is much larger than in any other advanced economy except Spain. While most economists would agree that this deficit is unsustainable at current levels.