Green shoots of growth?

[John]

So how come the US, where the recession started

No it didn`t. It was a rerun of the panic and repossession that we had a few years previously, and for the same reason;lending money to people who had no chance in hell of repaying it and lending at five or six times income.

"Those who ignore tha past are doomed to repeat it" by I forget who, anon maybe.

[MarvinTPA]

Pants yes - but then nobody is putting that forward.

Any idea why the US has got off so lightly in the recession? The recession was triggered above all by deregulated American financial markets and the collapse of the American sub-prime mortgage sector.

One major difference between the American economy and European economies is the lack of social care, welfare, etc. It is said that in a recession European economies react by going into deficit automatically due to decreased tax-take and increased welfare payments. And it is said that this tends to mitigate the effect of recession.

So how come the US, where the recession started and where the macroeconomic policy does not dampen the effects of recession, and where the government borrowing has in any case been less than in many other countries, is suffering only a 1.15% decline in GDP in 2009?

The US still has a sizable manufacturing industry (the aircraft one alone is huge) and the substantial devaluing of the dollar has boosted exports.

Also the US spends massively on R&D and has a big pot of global patents (inc big revenues from royalties etc) and global technology companies.

All of the above is untrue for the UK
 

[Libertarian]

The US still has a sizable manufacturing industry (the aircraft one alone is huge) and the substantial devaluing of the dollar has boosted exports.

Also the US spends massively on R&D and has a big pot of global patents (inc big revenues from royalties etc) and global technology companies.

All of the above is untrue for the UK.

That isn't a convincing explanation for the small reduction in GDP that we see in America. After all, it was the large manufacturing/exporting sector in Germany and Japan which was the cause of their large reductions because the demand for products plummetted.

Another thing that should have counted against the US in this recession is that the whole economy is built on consumer debt - more so than many other economies. The credit-crunch which prefaced the recession would have had a greater effect there and put more downward pressure on growth than it did elsewhere.

[MarvinTPA]

That isn't a convincing explanation for the small reduction in GDP that we see in America. After all, it was the large manufacturing/exporting sector in Germany and Japan which was the cause of their large reductions because the demand for products plummetted.

Nevertheless, it is true.

Defence spending (welfare) alone in the US is enough to cushion any drop in consumer spending.