The graph above shows both US and Eurozone GDP growth - including the second estimate of Q2 Eurozone growth that just came out. Both are real GDP growth, seasonally adjusted, quarter-on-quarter but expressed at annual rates.
Clearly both are coupled to the same set of global influences in the last few years. However in so far as there are differences: the Eurozone lagged going into the great recession (because US subprime households and lenders was where the global economic fabric of unrealistic expectations ripped first). Then the US recovered more strongly in late 2009 and early 2010 and has had a more obvious slowdown since, while the eurozone recovery has been choppier all along and hasn't obviously been getting weaker - except that the 2011 Q2 number was bad in both economies. However, other series such as retail trade are less noisy and do suggest a slowing - or even contracting - Eurozone economy.
How does this graph look if you net out all government debt?
ReplyDeleteUS subprime households and lenders was where the global economic fabric of unrealistic expectations ripped first
ReplyDeleteI gather this reflects an assumption that Peak Oil is reducing our growth possibilities.
I suspect that's true to some extent, but I think a better phrasing would be something closer to:
"US subprime households and lenders was where the global economic fabric of investment misallocation ripped first".
US housing was overbuilt. That investment could have gone elsewhere and been much more productive.