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The US economy: weakness of the "strong" recovery

Author

Listed:
  • Wynne Godley

    (University of Cambridge, CERF - Cambridge Endowment for Research in Finance, Cambridge (Great Britain))

  • Alex Izurieta

    (University of Cambridge, CERF - Cambridge Endowment for Research in Finance, Cambridge (Great Britain))

Abstract

The strategic prospects for the US (or any) economy can be evaluated by reference to the financial balances of its main sectors, which are related to one another by a consistent accounting system. The 1992-2000 expansion, accompanied by a rising budget surplus, was greeted by a storm of self-congratulation in the US and widely expected to last indefinitely. But inspection of the balances revealed that the configuration of driving forces was unsustainable and that the fiscal stance should drastically change at some stage. Eventually, there has indeed been a huge fiscal expansion which warded off an incipient recession. But the new configuration of financial balances again reveals an unsustainable situation, with government, foreign and private debt all rising excessively fast. Sustained growth in the medium term can only be achieved if there is now a prolonged expansion in net export demand--for which the rest of the world does not seem to be well prepared.

Suggested Citation

  • Wynne Godley & Alex Izurieta, 2004. "The US economy: weakness of the "strong" recovery," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(229), pages 131-139.
    • Handle: RePEc:psl:bnlqrr:2004:22
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9824/9709
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    References listed on IDEAS

    as
    1. Wynne Godley, 2001. "The developing recession in the United States," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 417-425.
    2. Wynne Godley, "undated". "Kick-Start Strategy Fails to Fire Sputtering U.S. Economic Motor," Economics Policy Note Archive 02-1, Levy Economics Institute.
    3. Wynne Godley & L. Randall Wray, "undated". "Can Goldilocks Survive?," Economics Policy Note Archive 99-4, Levy Economics Institute.
    4. Wynne Godley, 2001. "The developing recession in the United States," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 417-425.
    5. Wynne Godley, "undated". "Drowning In Debt," Economics Policy Note Archive 00-6, Levy Economics Institute.
    6. Wynne Godley, "undated". "Fiscal Policy To The Rescue," Economics Policy Note Archive 01-1, Levy Economics Institute.
    7. Wynne Godley & George McCarthy, 1998. "Fiscal Policy Will Matter," Challenge, Taylor & Francis Journals, vol. 41(1), pages 38-54, January.
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    Cited by:

    1. Yilmaz Akyuz, 2006. "From Liberalization To Investment and Jobs: Lost in Translation," Working Papers 2006/3, Turkish Economic Association.
    2. Ugo Sacchetti, 2005. "The US economy: an update," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(232), pages 3-20.
    3. Ugo Sacchetti, 2005. "The US economy: an update," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 58(232), pages 3-20.

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    More about this item

    Keywords

    Expansion;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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