The Origin of Great Recession Part.II

While exports of European companies were able to maintain their share of 17% of the global market since 2000, from their American rivals fell 17% to 11% over the same period. The element that is reflected in the very healthy trade balance of Europe. Of the 100 largest multinationals in the world, the EU has raised its share from 57 to 61 between 1991 and 2009. Conversely, of 26, the U.S. does boast more than 19. The key to this success: the European companies were the most highly globalized, their share of sales outside the EU up 39% against 30% for the United States.


In terms of production, American superiority is another myth. Between 1995 and 2005, if the data are attuned to replicate differences in economic cycles, trend efficiency growth in the euro area is slightly more than the U.S., said Kevin Daly, an economist at Goldman Sachs N, 2010.Concernant in undersized and intermediate enterprises, as their productivity is comparable to those of the New Continent. And their rate of globalization is very high, as the share of their sales abroad often reaches 80%. Especially, their degree of innovation is actually much higher: most industrial innovations of the last decade has occurred in Europe, while they have virtually disappeared from the U.S., where the focus is almost exclusively on technological innovation (Apple, Google, Facebook).

In addition, countless industrial producers of niche and major automakers and high-speed trains (Renault, Fiat, Volkswagen, Alstom) are European, and now dominate the trade with the emerging giants (Brazil, Russia, India, China).

The Origin of Great Recession Part.I

The origin of the "Great Recession" World 2008 - 2009, there is a drift of American finance practices resulting from the dismantling in the 1980s, dozens of laws protecting savings, followed an unprecedented collapse of ethical standards and minimum care in the world of banks and businesses. These developments have led to a culture of excessive leverage and the institutionalized cheating accountant who has infected the global financial system public and private, only too happy to expose himself, but too ill-prepared to extricate them. Despite this, the United States remains more than ever seen as the yardstick of economic success and financial Europe is declared the loser in all competitions. That of the currency and interest rate policy, that of economic growth, the hourly productivity, wage levels and labor market reforms, the fiscal discipline. And when the U.S. subprime crisis erupted, is actually Europe that has suffered most, because it undertakes to settle all problems with printing money.

This obvious bias was reflected in the outperformance of the Dow Jones U.S. index relative to the European index Euro Stoxx 50 between 2003 and today, the market penalizes the more conservative policies that emphasize the long term. But again, the myth trumps reality. The commonplace on U.S. growth is inhibited by greater numbers. On the one hand, GDP per capita grew slightly more European than the United States since 2000. On the other hand, European companies are more competitive in many ways, than their American counterparts. Recall that according to the World Economic Forum on the 20 most competitive economies in the world, 12 are européennes12 (7 of which use the euro).

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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