The American economy today and its global implications

Discussion here touched on the significant slowdown of America’s economy. Theories to explain this turn of events abound: from the real estate bubble to the sub-prime housing crisis, to more general imbalances. Participants focused on the financial sector, but the dynamics of prices – both for the producer and for the consumer – were also a subject of interest. One fundamental difference between the current recession and other recent slowdowns lies in the role played by the Federal Reserve: today, the Fed is less able to improve the situation as the problems were not sparked by monetary policy.There was significant disagreement over how long the current crisis would last and how disastrous it might be in the long run. In this context, interventions by the Fed and by the European Central Bank are bound to prove decisive, especially in preventing – conceivably in a coordinated fashion – the most negative trends.As far as interaction between the US and the EU economies, participants agreed it was early to speak of clear “decoupling”. It was also agreed that no sector will remain unscathed by problems arising in the American economy. Nevertheless, European and Americans can fight problems in different ways, and enjoy different degrees of success.A note of caution was struck as regards the risk of triggering undesired effects with measures assumed in a panic. According to some operators, for example, the intervention to save Bear Stearns represented a dangerous precedent. Still, ample consensus appears to exist over the need to intervene – even with unconventional and temporary means – to set the global economy on the right track, resolving the complicated problems on the world’s economic horizon.