Why another dominant decade for America is so unlikely
Driven by the successful deployment of vaccines in the United States and massive government stimulus measures, the U.S. economy is expected to grow as fast as 7% this year and is currently leading the global recovery. The commentary spoke of an “American Renaissance” as the nation celebrated the 245th anniversary of its independence on Sunday.
But there is a problem: America has just experienced an economic renaissance. He is not likely to be reborn again.
Ten years ago, in the wake of the 2008 financial crisis, Standard and Poor’s lowered the US government rating for the first time in its history, triggering grim forecasts of US decline. Instead, the 2010s saw an expansion of US economic strength, driven by its technological prowess and relatively rapid resolution of the debt crisis.
The United States’ share of global GDP fell from a low of 21% in 2011 to 25% last year. Average incomes at the start of the decade were 26% higher in the United States than in Europe and ended up over 60% higher. The advance of US revenues over Japan has increased even more dramatically. At the start of 2020, despite discussions on “despairIn the jobless middle classes, US consumer and small business confidence has reached record highs since the 1960s. Unemployment has fallen to its lowest level in 50 years.
As a financial superpower, the United States has reached even greater heights. Its stock market grew 250%, far surpassing all of its competitors over the decade, and its share of global stock markets rose from 42% to 58%. the we dollar has become more dominant than ever, helping the United States extend its lead over other developed countries.
At the end of 2019, 75% of all foreign loans to individuals and businesses were denominated in dollars, up from 60% before the 2008 crisis. Six in ten countries used the dollar as an “anchor” – the currency against which they measure and stabilize the value of their own currency – near an all time high. China’s efforts challenging the dollar as the world’s preferred reserve currency also failed completely during the 2010s.
After a decade of returning, America is unlikely to recover in the 2020s. As I argued at the onset of the pandemic, powerful booms are almost always followed by a long hangover.
The US economy dominated the world in the 1960s, but in the 1970s it feared it was falling behind the oil-fueled Soviet Union. In the 1980s, he worried about an ascending Japan. The United States made a strong comeback during the tech boom of the 1990s, but the 2000s saw the rise of emerging markets led by China.
Predictions of another US push rest in part on faith that it can continue to expand its technological lead. But America’s internet giants are already facing challengers in emerging markets from Asia to Africa, where local entrepreneurs are building national and regional market leaders in e-commerce, online banking and online banking. the research.
Europe bridges the innovation gap in fields such as robotics and AI, and European startups are attracting more private equity money than ever before. Europe’s share of global venture capital has also grown steadily, and its tech sector is worth four times what it was just five years ago.
Booms are often killed by appeasement, which is gripping the United States now. Important voices on both sides argued that America should continue to borrow and spend freely, thanks to the dollar’s unrivaled status as the world’s most sought-after currency. Pushed up by stimulus measures to tackle pandemic lockdowns, US government debt soared last year from 109% to 131% of GDP – well above the average for developed countries.
The easy money coming out of the Fed threatens to weaken the dollar and fuel the rise of zombies – companies that earn too little to pay even interest on their debt. They barely existed in the United States 20 years ago, but accounted for 6% of listed companies in 2010 and almost 20% last year.
The federal government and businesses are now so in debt that it is hard to imagine how they can further stimulate the economy. In 2010, the United States owed the rest of the world $ 2.5 trillion, an amount equal to 17% of US GDP. At the beginning of last year, these Liabilities had risen to $ 10 trillion and over 50% of GDP – a threshold that has often triggered currency crises in the past. Currently, they represent $ 14 trillion and 67% of GDP.
Optimists believe American consumers will spend freely as the pandemic passes, leading to another boom, but so far they have used a large chunk of their stimulus checks to pay down debt or speculate in the markets.
None of this means that the American declinists, so wrong in the 2010s, will finally be right. China’s growing share of the global economy has come largely to the detriment of Europe and Japan. Declineists, still convinced that the United States will soon be overtaken by China, overlook the fact that China also has huge debt problems.
What is more likely is that the United States will experience a mediocre decade, weighed down by the excesses of its recent boom. Relative to other markets, US stocks are at a 100-year high. Such high valuations reflect the new optimism: After a decade of unexpected success in the United States, many analysts are now expecting the same. Alas, it can be as good as it gets for America.
The opinions expressed above are those of the author.
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