G. Keating Defines Enduring The Current Recovery

By Author: Alfonso Tuor
Total Articles: 62
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Political and monetary authorities of Western countries argue that the economy is picking up in the United States and in Europe. This truly is a recovery or just trying to stabilize the economy at low levels mainly due to the exceptional fiscal and monetary policies of governments?
"Will increasing signs that the recovery is sustainable and can continue even when the fiscal and economic incentives will be gradually withdrawn. For example, in the United States sets a trend of positive creation of jobs (temporary workers, which are a leading indicator, show a growth trend for several months). The increase in the employment rate should generate its own dynamics of growth, regardless of government stimulus. Another positive sign is the fact that the balance between expenditure and income of U.S. households (and the United Kingdom) is moving towards a more sustainable level. The study conducted by the ECB on the banks shows that access by these loanable funds is improving for the first time since the advent of the crisis. Currently, excess inventory have greatly restricted. The finances of the major emerging countries of Asia ...
... and Latin America have been affected to a limited extent from the crisis and, consequently, consumer demand has shown an acceleration, so that the increase in vehicle sales has largely offset the contraction in developed countries.
Currently discussions are underway to find an exit strategy (exit strategy). If these measures were gradually suspended, there is no real risk of a relapse into recession?
"If the exit strategy should be implemented too soon or too drastic, it could put the economy into a spiral of recession - but on the other hand, acting too late may lead to overheating economy and inflation . This is the dilemma facing politicians in every period of economic recovery. The data indicate that with increasing frequency the recovery is self-sustaining, so that the moment seems appropriate to begin to move in the direction of an exit strategy. "
Public debt is exploding everywhere. And sustainable level of public debt of countries like the United States and Great Britain which must enlist the help of foreign investors?
"The level of public debt in the United States and Great Britain and other large countries, already very high and further growth is not sustainable. Investors in financial assets be watching very closely the political and macroeconomic developments in these countries and if the political will to reduce the deficit seem inadequate, the price of government bonds and currencies of these countries probably will decline. The recent experience of Greece shows what can actually happen. "
The U.S. dollar and the British pound could not be the first indicators of the crisis of confidence in the U.S. and British government bonds?
"It is likely that the currency markets weaken and bond more or less simultaneously."
Euroland has exploded in the case Gre-cia. There is a risk that the peripheral countries of Europe (Greece, Portugal, Spain and Ireland) will have to adopt restrictive fiscal policies to avoid an increase in spreads on their securities, which would have negative consequences on their economies?
"These countries must adopt restrictive fiscal policies to stabilize their markets debt. Ireland has already announced the steps in this regard, Greece has taken some steps although it is unclear whether sufficient or not, Spain has begun to take action, while Portugal has manifestly not to do on this floor. It is likely that these measures will slow down to a certain extent these economies (although economic theory shows that a stimulus could be recorded at least partial compensation, as the waning of the threat of a crisis stimulates a climate of trust). Even if these economies do indeed slow down, they are relatively small in European and global context, so it is unlikely that an economic recovery and defeat larger internationally.
Financial markets have closed in 2009 in complete euphoria. This exceptional performance is not substantially due to the huge liquidity in circulation?
"The financial markets have increased markedly for most of 2009, but started from exceptionally low levels. At the end of 2009, valuations of shares in the major markets appeared mostly close to fair value rather than at high values and the Credit Suisse Risk Appetite Index has not reached the "zone of euphoria." Recovery scored from bags was certainly helped by vast amounts of financial incentives provided by the authorities, including the low level of interest rates - but these factors have also made possible an improvement in the underlying economy and this in turn has helped to justify the growth of markets. "
How is the prospect for the 2010 European bor-se?
"I am mostly optimistic about the direction taken by the European equity markets in 2010. This prediction is based on my expectations of a continued economic expansion and the view that markets, already close to fair value, tend to negotiate on this level during periods of recovery. However, it is likely that the scope of a possible increase will be much smaller than those observed in the nine months, during which prices have bounced back from levels well below fair value. Moreover, a possible uptrend could be much more erratic and potentially exposed to regular and significant setbacks, not least when markets begin to anticipate imminent increase in interest rates. "
One last question: the financial world has taken to operate as in previous periods to the crisis. They are not creating the conditions, as fears the Bank for International Settlements, a deeper crisis than the autumn of 2008?
"Very often the measures taken to resolve a crisis are laying the foundations of the next. That's what seems to have happened after the DotCom bubble burst in 2001 - 2003, when very low interest rates have helped to mitigate the effects of the recession, but have also fueled the credit boom and residential property, then arrived at the terminal with the fall of 2007 to 2008. There is a very real danger that the current financial and fiscal incentives, including interest rates extremely low, gradually giving rise to new imbalances and excesses, and that these will result over time in a new crisis, although this is likely to happen only between different years. "
Alfonso Tuor