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The writer, Morgan Stanley Investment Management’s leading global strategist, is the author of “The Ten Rules of Successful Nations”
Driven by the successful implementation of vaccines in the United States and massive government stimulus, the U.S. economy is expected to grow to 7% this year and is currently leading the global recovery. The commentary speaks of an “American Renaissance” in a nation that celebrated its 245th Independence Day on Sunday.
But there is a problem: America has just experienced an economic renaissance. It is unlikely to be reborn.
A decade ago, in the wake of the 2008 financial crisis, Standard & Poor’s downgraded U.S. government debt for the first time, triggering terrible U.S. decline forecasts. In contrast, the 2010s saw an expansion of US economic power, driven by its technical capacity and its relatively rapid resolution of the debt crisis.
The U.S. share of global gross domestic product rose from a 2011 low of 21% to 25% last year. Average revenues started the decade 26% higher in the United States than in Europe in real dollars and ended more than 60% higher. The U.S. revenue advantage over Japan grew even more dramatically. In early 2020, despite talking about “despairIn the jobless middle classes, the confidence of American consumers and small businesses reached record highs since the 1960s.
As a financial superpower, the United States reached even greater heights. Its share of global stock markets increased in the 2010s from 42% to 58%. He dollar it emerged more dominant than ever, helping the U.S. extend its leadership over other developed nations.
At the end of 2019, 75 percent of all foreign loans to individuals and corporations were denominated in dollars, compared to 60 percent before the 2008 crisis. Six out of ten countries used the dollar as a “ anchorage ”, the currency against which to measure and stabilize the value of its own currency, almost to the maximum. China’s efforts challenge the dollar as the world’s preferred reserve currency also completely failed during the 2010s.
After a decade back, the U.S. is unlikely to rise again in the 2020s. Like me he argued at the onset of the pandemic, powerful booms are almost always followed by a long hangover.
The American economy led the world in the 1960s, but in the 1970s it worried about falling behind the oil-fueled Soviet Union. In the 1980s, an upward Japan worried. The United States roared again during the technology boom of the 1990s, but the 2000s saw the rise of China-led emerging markets.
Forecasts for another increase in the United States are based in part on faith that it can continue to expand its technology advantage. But American internet giants are already facing challenges in emerging markets, from Asia to Africa, where local entrepreneurs are building national and regional market leaders in e-commerce, e-banking and search. Europe closes the innovation gap in fields such as robotics and artificial intelligence and European start-ups attract more private equity money than ever before.
Complements are often killed by complacency, which now seizes the United States. Significant voices from both political parties have argued that the United States should continue to borrow and spend freely, thanks to the unmatched position of the dollar as the world’s most desired currency.
But the easy money coming out of the Fed threatens to weaken the dollar and fuel the rise of zombies, companies that earn too little to pay even the interest on their debt. They barely existed in the U.S. 20 years ago, but accounted for 6% of listed companies in 2010 and nearly 20% last year.
Now the federal government and businesses have such a deep debt that it’s hard to imagine how they can further boost the economy. In 2010, the United States owed the rest of the world $ 2.5 million, a sum equal to 17% of US GDP. Early last year, these liabilities it had risen to $ 10 billion and more than 50 percent of GDP, a threshold that has often led to monetary crises in the past. They are currently $ 14 billion and 67% of GDP.
None of this means that American decliners, so wrong in the 2010s, will finally be right. China’s growing share of the world economy has largely come at the expense of Europe and Japan. Decliners, still convinced that the United States will soon be overtaken by China, overlook the fact that China also has huge debt problems.
The United States is likely to have a mediocre decade, weighed down by the excesses of its recent boom. In relation to other markets, US stocks are in a maximum of 100 years. Valuations that reflect the new optimism: After a decade of unforeseen success in the United States, many analysts now expect more of the same. Unfortunately, this can be as good as for America.
This article has been modified to clarify the measure used for average income in the US, Europe and Japan.
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