Does the right honorable gentleman not realize that it’s the austerity, stupid?

BernankeABC reutersLinselus Sentralbanksjef Ben Bernanke har vært travel i det siste. Ikke bare har han vitnet med finansminister Geitner i Kongressen, han har holdt forelesninger ved George Washington University og gjort et intervju med ABC News. På spørsmål om den amerikanske økonomien:

Well, we are in a recovery. The economy’s been growing– for almost three years. And we’ve had some good news lately. We’ve– seen the unemployment rate come down. We’ve seen more jobs be created. And– consumer and household– and business sentiment have all improved, so that’s all positive,

På andre siden av Altanterhavet sitter Adam Posen. Han er medlem av styret i Bank of England, og han lurer på hvorfor det tilsynelatende ser lysere ut i USA enn i Storbritannia.
Adam Posen MPC 007

Tonight, I would like to directly compare policy and performance in the United Kingdom and the United States since the current less-than-satisfying recovery began in both countries in mid-2009. Perhaps obviously, this comparison is of great personal concern to me, given my residence and work here in London, while retaining ongoing ties personally and professionally in Washington and throughout the US.

My basic goal is to offer an explanation why the US economy has had a better recovery than the UK economy from the global financial crisis so far.

Det er fra starten på en tale fra i går (pdf).

Så la oss komme til saken: Hvorfor gjør USA det bedre enn UK, etter å ha vært, i følge Posen,

Our economies suffered largely the same type and size of shock at roughly the same time, and our respective central banks have pursued roughly the same type and size of counter-cyclical policy response – thankfully, in my view.

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One, the UK had much greater increase in net trade in the recovery than the US. This befits a more open economy whose currency depreciated more and more rapidly than its comparator.

Two, government consumption rose in the UK while contracting in the US during the recovery. This is because fiscal automatic stabilizers are much bigger in the UK, and the UK was further from growing at trend in the recovery than the US, both of which pushed up the amount of outlays (which State and Local budget constraints in the US caused cuts offsetting Federal level transfers). These factors combined add another 2% or more to the gap in growth between the UK and the US economies that has to be explained.

Hvor kom vekst i USA fra?

It is clear from figure 2 that both private consumption and investment grew much more strongly in the US than in the UK – so much more strongly that they more than offset the UK’s boost from net trade and bigger stabilizers.

Consumption grew by a whopping 3.8 percentage points in the US since mid-2009, while only growing by 0.7 percent cumulatively in the UK; investment grew by 1.7% in the US and only 0.6% in the UK over the course of this recovery (Also a factor was three times the growth from stockbuilding in the US than the UK, but that should be seen as the result of the greater growth from these domestic demand sources, amplifying them, but not even a proximate cause in and of itself). These are in the Bank of England parlance rather chunky numbers, and are what we have to explain.

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Så det er for store ‘kategorier’ til å kunne detaljert forklare hvorfor det går bedre i USA enn i UK. Posen kutter kakestykkene slik:
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Private investeringer er merkbart større i USA siden krisen. Posen sier dette:

One, I believe that there is greater misallocation of credit going on in the UK economy at present than in the US, even if aggregate lending quantities are comparable. (Posen (2011a, 2012)) This is due to the lack of competition in the UK banking system compared to the US, and the smaller proportion of non-financial businesses which have access to loans, bonds, and/or securitization thereof in the UK than in the US.

Two, I believe that the ongoing financial and macroeconomic risks to the euro area raise both the cost of credit and the need to provision for UK banks far above that for most US banks, which further inhibits reasonable allocation of risk capital. This is due to the inherent exposure of the UK economy to the euro area economies as well as the accumulated foreign lending to the euro area by UK banks during the boom years. (Broadbent (2012))

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Igjen bidrar privat konsum til langt mer i USA enn i UK. Posen forklarer:

Two big factors: first, a tightening of fiscal policy, greater than that in the US; second, a sharper rise in British energy prices than experienced by American consumers.

Similarly, I would argue, that the raising of the Value Added Tax in the UK was a relatively high multiplier form of policy, as were the cutbacks by local authorities.

Furthermore, because all of the UK’s main trading partners besides the US, making up over 70% of UK export markets, were simultaneously undertaking fiscal austerity programs to varying degrees, the amount policy leakage was less in this case – if anything, UK austerity was being reinforced.

All told the UK consumer suffered a set of severe one-time shocks to real income in 2009-2012, most of which we can hope are now coming to an end.

Til slutt – inflasjon.
Screen shot 2012 03 28 at 18 48 36Merk sommeren 2009.

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