The end of the crisis in the US

The latest US economic data is encouraging.?The 243000 increase on the nonfarm payroll and the creation of 257000 jobs in the private sector very clearly shows a more upbeat job market.?With this trend already lasting a few months, it's not unrealistic to express cautious optimism about the direction the US economy is taking.?? Even if we revise job data downward to take account of an inflated first reading,?there has still been a respectable monthly increase in the number of jobs which points to modestly stable economic growth and job creation.US growth over the next few years will be slower than during the the prosperous first five years of the last decade.?That prosperity was based on interest rates being kept low for too long and on the property bubble.?Today conditions are much less growth friendly especially because the US are struggling with a markedly higher public debt which not only has to be serviced but it has to be reduced in GDP terms.?Moreover, the conclusions from the financial crisis are clear enough - holding interest rates low for too long will lead sooner or later to an excessive growth in the price of assets which inevitably leads to a new crisis.?If this optimism is confirmed by macroeconomic data, the Fed will be have to backtrack on its promise of further financial support.?? They may also after a while change their position on freezing interest rates until 2014.?The current optimism is not only due to the latest job figures but also to GDP and other indicators of an economic upturn.?It will however be months before its possible to speak of an unmistakeable trend.The Fed's volte face on monetary easing and freezing interest rates would be a major factor in changing market parameters.?The States could become the most attractive market with growing interest rates and a strengthening dollar.?That change would also help Europe by increasing its relative competitiveness and by sowing optimism amongst european businesses who have been impatiently scrutinising the horizon for sturdy green shoots.Regarding the timeline, events in the USA have preceded was happening in Europe by three to six months.?It would be a very optimistic sign if a positive assessment of the US situation were reflected in the latest analyses.?Unfortunately, comparisons of the economic situation of both continents puts Europe in a particularly bad light and this is not just because the ECB is not as active on the market as the FED (as some people contend), but mainly because in the USA, the banking sector has been restructured and recapitalised.?In Europe it is not enough that we have only just started that process, the problem of indebted countries has still not been resolved.?While the ECB's supplying liquidity to the commercial banks has minimised the risk of a credit crunch, there is still the imminent danger from Greece followed by Portugal which hangs over Europe like Damocles sword like a dark storm cloud poised to drown the continent at any moment (to mix metaphors).?? The best example of this are the current negotiations with the Greek government which must urgently decide on the scale of the reduction of the Greek debt vis a vis private investors.But even after this agreement, there is no way we can expect that a heavily indebted Greece will return to the financial markets. Greek debt will in fact continue to grow as remedial measures in that country centre on increased taxation and this, coupled with a correction of excessively high growth for at least the last decade means that over the next few years the word "recession"?will be the adjective most frequently applied to the world's oldest democracy.?Judging by the rate at which decisions are taken in Europe, I do not expect 2012 to see significant inroads into the resolution of the debt crisis.This will be a very important year for Europe because of elections, particularly in France.?I fear however that the pace of decision making on the old continent will stay as it is which means crawling out of the recession at a snail's pace compared with the United States' approach.?Business will react to political decision making and hold back from significant investing in the face of helplessness, not to mention chaos and muddled strategy.Whichever way you look at it, positive signs from the USA are good for the world.?But it will be a long time before we will see similar positive signs in Europe.?Certainly not in 2012.?The only consoling thought is that the next move has a chance of being a move in the right direction.

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