Inflation and US Economy

The Fed has chosen to focus on core inflation (core inflation), which excludes food and energy, ignoring the historically high commodity prices. It kept interest rates low and fueled the subprime bubble that has "poisoned" the financial sector in all developed countries. In contrast, the ECB has chosen to focus on overall inflation, reflecting the influence of emerging markets on rising commodity prices. This resulted in a much more accommodative monetary policy for the Fed, which will be maintained during the decade 2000 - 2010, real interest rates negative to zero half the time, conduct unthinkable in Europe, where the rate interest of the ECB held steady over the decade in a range of 2% to 4.25% and is down below 1% since May 2009.

In short, Europe was characterized by a more responsible economic management and a long term vision that contrasts with the choice of U.S. policies rewarding in the short term but long term suicidal. In doing so, Euroland has been repeatedly sanctioned as less effective by a financial community hungry for "chips" to power the "casino", and anabolic steroids to boost the stock market. United States, this meant a policy of overstimulation leading to the forced expansion of an economy that was completely retract, the time to cleanse themselves and go on a diet. So these last twenty years, Europe has been seen and experienced as rigid and boring by market operators constantly claiming she is aligned with the U.S. monetary policy, "more growth-oriented," and that it manages to stimulate consumer debt, ideal dictated by the U.S. model. "Always behind," Europe is less than the U.S. in times of euphoria, facial expression does one, and falls into a recession more severe in times of crisis, even when these crises have their origin the United States.

And one pretends to ignore that Europe, with less cheating because its economy is suffering as long as she finds herself infected, its territory by U.S. banks toxic. Indeed, the same "solutions doping" that Goldman Sachs sold to Greece have been used in the early 2000s by various regional banks and public entities in Europe, including Italy, Portugal, in the German Länder, and Eastern Europe. But the national authorities and community were not ready to provide remedies as extreme as their American counterparts.

The Dollar May End!!!

Favre appeared recently in "The End of the dollar" of Myrette Zaki is certainly better than what we hear from those who take the title literally. It's not about death or disappearance of the U.S. currency. Just the story, and especially the news of his slow decline in stages. Some passages seem suddenly very enlightening. Like this, this reflects the European perception of two irreconcilable approaches to the economy.

Ala expansionist policy and unconventional Federal Reserve opposed the plan cautiously and strictly European. Europeans are resisting the American vision, which is also that market. They seek to reduce budget deficits and considered, rightly, that the austerity efforts today will be rewarded in the future. Conversely, the word "austerity" has disappeared from the American vocabulary long ago, the latter being perceived by investors as "bad for growth."

So that even if U.S. growth in 2011 is higher than that of Europe, the price paid by the United States to have postponed indefinitely a return to austerity is incalculable long-term. Although more conservative, the ECB has chosen to limit as much as possible in November 2010, liquidity injections, such as practice shots at the Fed redemptions of government securities. With regard to redemptions of bonds of countries in difficulty by the ECB, they are limited to 72 billion euros at the end of 2010, 90 billion dollars. Including the purchase of private debt securities, the ECB is the guarantor of some 200 billion euros. In comparison, the Fed has made, by June 2011, the repurchase of securities amounting to 2.3 trillion dollars in its two programs of "quantitative easing" (QE I and II), 1000000000000 toxic securities, earning the nickname the passage of "financial shock". In other words, the comparison is almost absurd because the interventions totaled U.S. tenfold. Despite this, the ECB believes it has made a major concession by buying back shares because it has derogated from article 123 of the Treaty on the Functioning of the EU which outlaws "monetizing the debt", ie the process "run the printing press".

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Still bad news for U.S. economy

The U.S. economy suffered further bad news. First, the Commerce Department left unchanged its estimate for growth in the fourth quarter, to 0.6% only. However, analysts expected a 0.8% enhancement.

These figures are 2.2% growth over the whole year, from 2.9% in 2006, which is the lowest rate since 2002. Household consumption fell sharply in the last quarter (+1.9% instead of 2% estimated earlier, and after 2.8% in the third quarter) and investment in the stone has indeed fallen by 25, 2% (instead of -23.9%), the largest decline recorded since 1981. Business investment grew by only 6.9% (instead of 7.5%).

Inflation is well above normal

The index measuring prices related to consumption expenditures (PCE) increased 4.1% (instead of 3.9%), and the PCE core index (excluding food and energy) increased 2.7 %, as in the first estimate. Now the Fed wants to keep it normally from 1% to 2%.
Finally, the weekly claims for unemployment benefits rose 19,000 to 373,000 in the United States during the week ended Feb. 23. Analysts had forecast 350,000 jobless.

Bad news for the U.S. economy

A bad news for the U.S. economy: This could impact on New York and the other European stock exchanges also. According to official figures released Friday, found hiring a standstill for the second successive month in the U.S. in June, the joblessness rate for its enduring his climb. According to the employment report from the Labor Department during the month just ended, the U.S. economy created only 18,000 more jobs than it destroys.

Hopeful, analysts expected for their hiring of 80 000 net. The situation is particularly alarming that these new posts will not ensure employment for young people entering the labor market. As a result, the official redundancy rate of the country continues to rise which began in April, now stands at 9.2%, and its peak level since the beginning of the year.

The balance in May was also revised down from 54,000 to 25,000. Note that the figures from the Ministry are in total opposition to the satisfactory results of the survey published Thursday on the ADP private employment, destroying almost the wave of hope born yesterday.

The accord reached by Bloomberg on tables and 105,000 new jobs, the agency has raised its estimate of 83,000 initially, given the good figures released by ADP. But now the situation has heightened concerns about the continuing slowdown in the U.S. economy, new support measures being considered. A circumstance for the turn down in financial markets: for example, at the close on Friday, the Dow Jones fell by 0.49% to 12,657 points, the Nasdaq dropping 0.45% to 2860 points and the S & P 500 falling 0.70 % to 1344 points.