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1022. Breaking Up Is Hard To Do: Global Co-dependency, Collective Action, and the Challenges of Global Adjustment
- Author:
- Catherine L. Mann
- Publication Date:
- 01-2005
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Global imbalances have continued, indeed deepened, far longer than both researchers and pundits would have thought. On the US side, the current account deficit at about $630 billion (2004q1-3, AR) and 5.5 percent of GDP (2004q3) falls outside the oft-quoted range of 4-5 percent after which, research on industrial countries suggests, economic forces tend to narrow the imbalance. There is some-what less research on the persistence of global imbalances from the standpoint of the rest of the world, in part because individually most of those imbalances are not so notable. Clearly though, collectively growth in the rest of the world has come to be co-dependent on US demand patterns.
- Topic:
- International Relations, Development, Economics, and Industrial Policy
- Political Geography:
- United States
1023. Japan Moves toward Sustainable Recovery
- Author:
- John H. Makin
- Publication Date:
- 10-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Japan's stock market, one of the world's strongest this year, is up about 20 percent since spring. It is doing remarkably well for a country whose nominal GDP is still below its 1997 level. By contrast, the U.S. stock market has been drifting lower all year. The S 500 Index is down about 4 percent in the last five months, even more when the highflying energy sector is excluded. This is the case despite U.S. nominal GDP having grown by a cumulative 46 percent since 1997. Clearly, stock markets are looking ahead and seeing a brighter future for Japan than for the United States.
- Topic:
- International Relations, Development, and Economics
- Political Geography:
- United States, Japan, Israel, and East Asia
1024. Can Disasters Be Good for Growth?
- Author:
- John H. Makin
- Publication Date:
- 10-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The U.S. economy was in recession when the 9/11 terrorist attacks struck New York and Washington, D.C. Yet within a few months, despite fears of a collapse in confidence, consumption growth surged to a fourth-quarter annualized rate of nearly 5 percent, up sharply from a 1 percent rate during the third quarter. That consumption surge was enough to drag the economy out of what turned out to be a mild recession. By the first quarter of 2002, overall growth reached a booming 5 percent rate.
- Topic:
- Development, Economics, Environment, and Terrorism
- Political Geography:
- United States, New York, and Washington
1025. America's Resilient Consumers
- Author:
- John H. Makin
- Publication Date:
- 08-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Among the more remarkable features of the U.S. economy over the past five years—through a tech-stock collapse (from which we have still not recovered), the 9/11 disaster, and numerous chastening corporate scandals —has been the extraordinary resilience of American consumers. To paraphrase H. L. Mencken, no one has ever gone broke (at least not recently) by overestimating the willingness of Americans to spend money.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States and America
1026. Can the Fed Achieve a Goldilocks Tightening?
- Author:
- John H. Makin
- Publication Date:
- 08-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The persistence of annualized economic growth of about 3.5 percent—despite crude oil prices between $50 and $60 per barrel—has led many analysts to claim that the U.S. economy has already "absorbed" the shock of $2.35-plus-pergallon prices for self-serve regular gasoline along with a rise in heating oil costs of more than 30 percent over the last year. As if to underscore their insouciance over energy costs, American consumers accelerated the volume of vehicle purchases in June, especially those of light trucks that get only twelve or thirteen miles per gallon.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States and America
1027. What Markets Are Saying
- Author:
- John H. Makin
- Publication Date:
- 06-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Paul Samuelson once quipped elegantly that (falling) stock prices had predicted seven out of the last three recessions. There is indeed wisdom in the suggestion to ignore wiggles in the financial markets as indicators of the behavior of the real economy that produces goods and services.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States
1028. The Difficult Search for "Neutrality"
- Author:
- John H. Makin
- Publication Date:
- 05-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The Federal Reserve's measured move toward a "neutral" federal funds rate, the short-term rate that keeps the economy growing at about 3.5 percent, is a tricky process. No one knows with certainty what the neutral fed funds rate is, and it changes over time. As long as the Fed keeps raising rates and the economy keeps growing at or above trend, it is reasonable to infer that the neutral fed funds rate is higher than the current rate. The corollary to that proposition is that rates have to be boosted above the neutral rate, inducing an asset market collapse, a real economy slowdown, or both to infer that the neutral rate has been exceeded. It is beginning to appear as though the current rate of 2.75 percent is at or above neutral. If so, that would be about a full percentage point below what many were guessing.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States
1029. Slower Growth
- Author:
- John H. Makin
- Publication Date:
- 02-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The average forecast for 2005 U.S. growth is 3.5 percent, with some prognosticators hoping for 4 percent. This forecast is predicated upon the assumption that the economy is on a sustainable expansion path, where consumption will be supported by steady growth of employment and household incomes. The 3.5 percent growth forecast for 2005 is identical to the mean growth rate of the U.S. economy since 1947. However, there is good reason to believe that the consensus forecast is too high. This possibility has important consequences because U.S. growth must be sustained at least at average levels to avoid a sharp drop in global growth. There are no signs of higher growth in Europe and Asia. Growth in Japan is looking weaker, while Chinese growth is moderating.
- Topic:
- Economics, International Trade and Finance, and Political Economy
- Political Geography:
- United States, Japan, China, Europe, and Asia
1030. What Determines Interest Rates?
- Author:
- John H. Makin
- Publication Date:
- 01-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The pundits who have been predicting higher interest rates based on large U.S. budget and current account deficits have some explaining to do. Beyond the fact that very little systematic empirical evidence exists of a close link between deficits of any kind and interest rates, many high-profile commentators such as Robert Rubin and Pete Peterson, not to mention Pimco's Bill Gross, have consistently warned that long-term interest rates would rise as America's budget and current account deficits rose. Actually, U.S. longterm interest rates have been falling-from 4.8 percent in early June to 4.1 percent at year-end. Despite this stellar performance, Gross has even gone so far as to suggest that U.S. government liabilities should be downgraded from their top rating of AAA to AA.
- Topic:
- Economics, International Trade and Finance, and Political Economy
- Political Geography:
- United States