The topic of political assassination in the United States is not one typically associated with normal discourse, yet recent events have compelled such discussions. Following the tragic shooting in Arizona over the weekend, which critically wounded U.S. Rep. Gabrielle Giffords, resulted in the death of a federal judge, and left many others either dead or injured, the phrase “morning in America” carries a much graver significance today.
● Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System
By Barry Eichengreen
Summary via publisher, Oxford University Press
For more than fifty years, the U.S. dollar has not only been the currency of America but has also held the position of the world’s primary currency. Global entities—importers, exporters, investors, governments, and central banks—all heavily rely on the dollar. This widespread reliance provides the United States with a unique advantage known as its “exorbitant privilege.” However, recent developments have sparked fears that this privilege may soon diminish. Factors such as the financial crisis and resulting Great Recession, which brought about high unemployment and unprecedented federal deficits, alongside the rise of competitors like the euro and China’s renminbi, have stirred these worries. Many speculate that the dollar may soon lose its standing as the world’s standard currency, which could adversely affect American living conditions and reduce the nation’s international influence.
In Exorbitant Privilege, noted economist Barry Eichengreen examines the dollar’s ascent to international dominance throughout the 20th century, illustrating how its prominence mirrored the U.S.’s global economic leadership. Yet, as emerging economies like China, India, and Brazil rise, the U.S. may no longer hold a singular position in the global marketplace. Eichengreen argues that while the dollar’s supremacy may wane, the transition might be gradual rather than abrupt or catastrophic.
In December, private-sector payrolls witnessed an increase, marking the twelfth consecutive month of growth, as reported by the Labor Department reports. While this trend is certainly positive, the specifics reveal a contrasting narrative. The actual job growth fell short of what ADP’s estimate suggested for December. Unfortunately, the net increase of 113,000 nonfarm private payroll jobs, while higher than November’s revised figure of 79,000, remains weak by historical standards. The pace is significantly below what experts believe is necessary to establish a sustainable growth curve that extends beyond merely avoiding the next recession.
The labor market along with the housing sector remains a central challenge affecting the economy’s recovery. While job growth shows signs of improvement, bolstered by ADP’s recent payroll estimates, the housing sector presents a more complex and ongoing struggle.
Initial applications for unemployment benefits saw an uptick of 18,000 to reach 409,000 during the last week of 2010, according to a report released by the Labor Department update. This increase is somewhat disappointing, especially following last week’s news when initial claims finally dropped below 400,000 for the first time since the summer of 2008. Nonetheless, it is premature to lose hope for the labor market’s ongoing improvement.
Predictions for 2011 by BlackRock’s Bob Doll
● U.S. stocks are expected to generate triple-digit gains for a third consecutive year.
● U.S. Real GDP is projected to reach an all-time high in ’11, indicating a shift from recovery to expansion.
“Our projections for equity market returns in 2011 align closely with what we anticipated for 2010,” Doll noted. “The key difference for 2011 lies in our belief that market risks are skewed more favorably compared to last year.”
Potential drivers for positive outcomes include a surge in job creation, stronger-than-expected real GDP, continued robust earnings similar to 2010, and governmental measures in Washington addressing national debt and budgetary concerns. Conversely, the risks Doll identified include the possibility of renewed credit issues (pertaining to U.S. housing, national debt, and state budgets), rising commodity prices that could squeeze profit margins, inflation fears, a steeper interest rate increase than anticipated, excessive tightening in emerging markets to prevent asset bubbles, and international capital flow dynamics potentially leading to trade wars.
Blackrock, Jan 5
US Economic and Interest Rate Outlook, January 2011
For the fourth quarter of 2010, we now anticipate a year-over-year real GDP growth of 2.9%, an increase from the 2.3% forecasted in November. Preliminary estimates suggest real GDP growth in 2010 approximating 3.6%, a revision from the previously anticipated 1.9%. Additionally, the Commerce Department has adjusted third quarter 2010 real GDP growth from 2.0% to 2.6%.
Northern Trust, January 2011
The year 2010 proved to be exceptionally fruitful for individual stock markets around the globe. Nearly all major exchanges concluded the year on a positive note, with only five of the 40 markets in the Russell Global Index reflecting a decline.
In the previous month, the economy generated a substantial net increase of 297,000 jobs in the private sector, according to the ADP National Employment Report. This noteworthy increase represents the largest monthly number of jobs added in the ten years since the report’s inception. The significant rise suggests that the forthcoming employment report from the U.S. Bureau of Labor Statistics may reflect even more positive trends.
When projections for the economy and markets arise, discussions inevitably shift to the topic of inflation. This is somewhat perplexing, given that current official measurements indicate a lack of inflationary pressure at the moment. According to the U.S. Labor Department, consumer price inflation is currently hovering around 1% annually, representing one of the lowest rates in decades.
The Great Recession versus the Great Depression: Stylized Facts on Siblings That Were Given Different Foster Parents
Karl Aiginger/May 2010/Economics-ejournal.org
This paper aims to examine whether the decline in economic activity during the recent crisis has mirrored the severity of the Great Depression of the 1930s. The data indicates that the contraction in recent times has indeed been less severe. However, the recent crisis had the potential to escalate to levels similar to the Great Depression. Swift and coordinated international policy responses significantly mitigated the crisis effects.
