In recent days quantitative easing in the USA has got to the US dollar. It has started to fall against other currencies. I guess the US authorities are relaxed about that. It will correct the balance of payments more quickly, and put more pressure on the exporting countries.
Over the last year the US economy has fallen much less than the European economies, less than the UK and much less than Japan. The US still has strengths from its huge continental market, and from the energy and productivity of its workforce and from the entreprenuerial nature of many of its people. The successful exporters, led by Japan and Germany have hit worse turbulence, as they were very dependent on western demand for their range of products.
Even China has struggled. The impact of the collapse in demand must have been quite severe in the first quarter of 2009. The world can only make economic progress when the big exporters spend more of their savings, and borrow more to finance more consumption. That is happening very slowly, if at all.
In the meantime, it is quantitative easing which is providing the only drink at the wake. Today Sterling, the other QE currency, fell back from its recent rises. A ratings agency has said “We have revised the outlook on the UK to negative due to our view that, even assuming fiscal tightening the net general governemnt debt burden could approach 100% of GDP and remain near that level in the medium term”.
If only that were the limit of it. As readers of this website know, the true indebtedness and liabilities of the UK state are well above £1,500,000,000,000 already. It now costs £80,000 a year to insure £10 million of UK government bonds against default!