Why the USA grows faster than the Eurozone

The USA has for some years put in a much better economic performance than the Eurozone. Thus year its growth rate is around double that of the Euro area.Part of it stems from the monetary policy being pursued, some of it from the fiscal policy and much of it from the enterprise policies.

The Fed has twin objectives of keeping inflation down and promoting growth. It has been pragmatic about pursuing these objectives. It made bad mistakes at the end of the last decade like other advanced country Central banks,  but has done much better since 2010. It did tighten too much at the end of 2018 but has now corrected for the mistake. Despite over 2% growth in the economy the Fed has recently pumped $150bn extra liquidity into markets to facilitate bank lending and continued growth.

The ECB has ostensibly followed a more dovish stance than the Fed with lower rates and more recent Quantitative easing. It has, however, failed to get all the main commercial banks in its system to address their balance sheet and bad debt problems, so there is still difficulty in transmitting cheap money into more well based  loans to get the economies moving faster.

The President of the USA put through major tax cuts which acted as a substantial boost to US growth in the last two years. At the same time the Congress also put through various public spending increases. As a result there was an expansion of the fiscal deficit, which helped generate more activity. In the Euro area the strict application of the Maastricht rules with tough controls on debt as percentage of GDP has left little or no room for fiscal expansion.

The USA has a more enterprise oriented culture, with a very strong technology sector that has been leading the world. Lower taxes, more business and start up friendly regulations and a more plentiful supply of equity and credit for new business has ensured the US has grown faster and dominates the western digital world.


  1. Troll
    December 12, 2019

    Apart from California which I believe is doing a SNP in building a wall of deficit, the USA appears to be one entity as far as investors go. The EU cannot be one entity. Who knows what its parts will do, and when.

    1. NeilC
      December 12, 2019

      yes it’s quite a different beast and much harder to influence across the board.

  2. agricola
    December 12, 2019

    The EU is largely socialist in it’s thinking and likes to micro manage, one size fits all is a suitable phrase to describe them. Rest assured whatever the EU has or has not done it has had little effect on the unemployed where I live. For those who need to survive on a daily basis the black economy is their recourse. The costs of employing anyone or ceasing to employ anyone are so draconion that small entrepreneurs just cannot afford the luxury. They all go black. You also find that local government cheats with impunity. Three years ago they collected the annual property tax in October, now they take it from your account in September. It is symptomatic of slow decay.

    The USA on the other hand is a can do society given the right incentives. Our friend Donald appears to be doing just that. I hope his drive continues because it’s influence extends way beyond it’s own shores.

    We in the UK are inbetweeners. Enovation and enterprise with social responsibility. Characteristics we need to re-learn over the coming years to achieve social cohesion.

    December 12, 2019

    All wealth is borne from people and it is the human energy spent that drives wealth creation and material prosperity not the actions of politicians. Politicians have a habit of deliberately complicating matters in an attempt to confuse the unwary.


    All huge global American companies that were built from a minimum of capital. Apple for example started in the garage of one of the founders parents.

    This is why so many try to reach the US. It is the dreams, imagination, attitude, aptitude, drive, ideas, the determination to succeed and the entrepreneurial spirit of its people that makes the US.

    1. Edward2
      December 12, 2019

      I agree entirely Dominuc.
      All the companies you list, were not started and grown by their founders in order to just get rich.
      They did it because they had great ideas which they wanted to put into the public domain.
      We like their products and services and are happy to buy them.

      Sadly Corbyn and his followers hate all these rich people.
      They want equality.
      But it would end in us being equally poor.
      To me these wealthy leaders are modern day heroes who employ tens of thousands, make many employees millionaires, pay huge amounts of tax and improve our lives with their inventiveness.
      The simple question put to me by an American on my recent visit was, do you want to live a country with more millionaires or less millionaires?

  4. Mark B
    December 12, 2019

    Good morning.

    The USA has always been the land of opportunity and enterprise. A place where those seeking a new life, fame and fortune can be made. A very can do country.

    Past Presidents did not believe in their country as much as the current one does. President Trump has used the USA’s shale gas reserves to bring down the price of energy recognising its importance to industry. Keeping taxes low means people will spend more and help generate more wealth, this has a positive upward spiral effect.

    The EU is nothing like the USA. It may have a common currency but, no common tax regime. Money cannot be transferred elsewhere to poorer nations with differing economies unlike in the USA and the UK. This creates a downward spiral and high unemployment. The best and the brightest leave and the country cannot grow its economy with many wealth creators gone.

    Perhaps once we are no longer able to interfere in their Union they will move much quicker to full federalistion. The new EU Commissioner is very keen to do this and I can see it happening over the coming years.

  5. Ian@Barkham
    December 12, 2019

    As a generalization the EU is very tight and prescriptive in its approach to absolutely everything. Fiscal policy, laws, regulations these facilities are there to protect the centre, the establishment and not the people. Not forgetting the mantra everything is illegal unless it has approval

    The US is more open, they know one size cannot be made to fit all and thrive – it’s a contradiction. Just as we in the UK used to be before becoming a slave to EU doctrine everything is legal unless it has been explicit made illegal. The total opposite to the EU

    That subtle legal status is one of the defining differences of a free people.

    On the same lines as it is elected representatives that create laws and regulations. It is elected representatives that get to scrutinise, amend and repeal laws and regulations. The EU way it is a committee/the Commission that rules and the parliments have to rubber stamp and implement.

    While the US thrives, the EU gets more and more controlling. While the US remains as strong Democracy the EU moves Democracy aside.

    No system is perfect, but when the people through Democracy get to choose therefore control, the deterrent to the real monster remains in place.

  6. Martin in Cardiff
    December 12, 2019

    The European Union is, in many places, approaching as fully developed an economy as is possible with the models that we have. The scope for rapid growth is therefore somewhat limited.

    The US is a younger country on the other hand, with large areas of sparse population, many of whom are poor. Substantial areas of it resemble the Developing World, and the clue is in the word “developing”.

    It would be curious if it were not experiencing higher growth than say, Europe or Japan here.

    I don’t think that John would want to live in those places, however.

    1. Edward2
      December 12, 2019

      What nonsense.
      There is huge and limitless opportunities to increase the standards of living of the people of Europe and the UK.
      There is dreadful poverty and unemployment in the EU.

    2. Mitchel
      December 13, 2019

      Most of the key members of the EU had their economies shattered in WWII-they were reconstructed to suit US interests in the aftermath.

    3. libertarian
      December 13, 2019


      Total, complete and utter drivel

      The EU is light years behind in technological and innovative developments .It is a restrictive , over regulated innovation killing regime. The one leading mobile phone firm it once had was killed by the EU and the only major digital platform moved from Sweden to New York .

      Large areas of sparse population….. lol have you ever been to France? You certainly have never been to the USA

      The clue is in the word innovation. The EU is an anti innovation machine

      ps those French pensions you are so fond of seem to be causing a tad of a problem dont they ?

  7. /ikh
    December 12, 2019

    Hi Sir John,

    With all due respect, quantitative easing is addressing the symptoms and not the cause.It is the banks balance sheets that need fixing and Basel III prevents this.

    The banks had around 60 trillion of ABS ( Asset Backed Securities ) on their balance sheets as of 2008. It will take another 15 to 20 years for this debt to run off. This is absolutely screwing with their liquidity ratio. Which is why they can not lend.

    They also have a portfolio of first class mortgages, lent since 2008 ( high deposit low risk ) that they can not use to create ABS’s because of Basel III.

    Until you, the politicians, change the rules so that the banks can fix their balance sheets by being able to create new ABS’s and trade the on exchanges, you are simply tinkering at the edges of the problem.

    I wish you good luck and best wishes at the election today.


  8. Lifelogic
    December 12, 2019

    Plus the US has rather more econonies of scale, far more land per person, tax to GDP at about 25% nearly half the UKs absurdly high ratio and they have a sensible cheap energy policy.

    It still has other damaging things high crime rates, a mad litigation culture, far too many lawyers and other issues.

    As an example of the huge tax differences – Inheritance tax in the US only applies over $11 billion (each) and then only cuts in a 8% in the UK it the threshold is just £325K each and the tax cutting in a 40%! And Hammond even want to put a new probate tax on top of this too. Thanks goodness he has gone!

    1. Lifelogic
      December 12, 2019

      I doubt if many banks in the USA can get away with absurd (one size fits all high risk or low risk customer) personal overdraft rates of nearly 40% or nearly 80% as two of the large bank here do. This when paying less than 0.5% on deposits! The same banks in overseas charge far, far less. They just rip off UK customers it seems.

      When is the competition authority going to act to get some fair and real competition into the banking sector?

      A senior manager I know at one of these bank told me this one rip off overdraft rate for all customers was actually being “driven by the regulators”. Are these regulators totally mad?

  9. Dave Andrews
    December 12, 2019

    Perhaps employment law in the US isn’t so much a trap for the employer. Successful people may feel more inclined to build their business and take on staff, if they don’t feel the obligations then placed on them is too great and beyond their skill set.

    1. Lifelogic
      December 12, 2019

      Of course easy hire and fire is best for employers and indeed for employees. Good people can always find a new job. Good employees do not want to be carrying bad employees working with them for years either.

      1. Lifelogic
        December 12, 2019

        Bad employees that cannot be fired easily (in some industries) are actually killing and injuring people!

  10. Shirley
    December 12, 2019

    The US has a President who cannot be bought, bullied, or intimidated, and puts the well being of its people and country ahead of personal ambitions.

    We do not!

  11. ukretired123
    December 12, 2019

    The bonus of cheap energy from fracking has allowed them to weather the many storms they have had!

  12. Martyn G
    December 12, 2019

    Don’t forget also the beneficial effects of fracking has had on the US economy. Quite how significant that has been I know not, but it seems notable that they can now export gas, which is a bit of a significant turnaround, I’d have thought?”

  13. Alec
    December 12, 2019

    The Fed does not keep inflation down. It is the main generator of inflation since 1913 when it was imposed on the American people in a highly dubious fashion losing over 95% of the value of the dollar. In recent years growth in the US economy has ben almost entirely by financial manipulation and accounting fraud. Manufacturing has been decimated and living standards destroyed. The entire economy is a hollow shell with it’s workforce living on debt and when that fails living on the streets in California. If they get ill it’s a death sentence as the health industry is a massive wealth extraction weapon. America is an object lesson in what happens when you run an economy for the benefit of the elite. Naturally our wonderful Euro leaders and UK lackeys have been doing their best to follow the example but with a more communist twist.

  14. Mitchel
    December 12, 2019

    South China Morning Post,11/12/19:”As Beijing redraws its agricultural supply lines amid the trade wars,US farmers may have lost their China market share for good.”Brazil and Argentina are supplying soybeans,NZ increasingly the meat,that the US used to.

    Asia Times reported last week that Huawei’s new phones are “America-free” -no US components.Huawei’s Chairman,Ling Hua,was in Tokyo last month announcing that it’s purchases from Japan would hit $10 bn this year,more than double the level of two years ago and will increase further in 2020.US companies sold $11 bn worth in 2018,currently they sell zero.Their US R&D facility has been sharply cut back;their Moscow technology centre quadrupled in size with collaborative research ventures launched with eight of Russia’s top universities.Huawei’s revenues were up 24% in first nine months of 2019.

    Who’s winning the trade war?

  15. formula57
    December 12, 2019

    The Weimar inflation casts a long shadow. We will see in due course if Nixon’s closing of the gold window does the same.

  16. miami.mode
    December 12, 2019

    You seem to overlook the fact that there is far less socialism in the US than in Europe, which prompts people to strive harder. A bit like that great sport, American Football, where you have to continually move forward or relinquish control to the opposition.

  17. Fred H
    December 12, 2019

    A difference I have seen in my travels to many parts of USA is attitude to success. In USA people stand and admire the expensive sports car, the beautiful homes, the yachts. They admire what it took to reward the owner with the trappings of success. In the UK we are jealous, want it taxed, want the car scratched – suspect illegal activity. Entrepreneur here? You might be despised. Even all governments have a negative attitude.

    1. Anonymous
      December 13, 2019

      What rubbish !

      *We* do no such thing in the UK.

      Pop stars, sports stars, celebrities, entrepreneurs are much idolised… so long as they don’t become hypocrites.

      1. Anonymous
        December 13, 2019

        “No one stands and admires an expensive sports car.”

        For goodness sakes.

        We have car shows that thousands of people pay to get into in the UK. And Labour have just lost an election by a landslide.

        1. Fred H
          December 13, 2019

          I’m talking about cars in the streets, parking lots, etc – Americans Do stand and admire …..would YOU leave your Ferrari in an NCP car-park?

      2. libertarian
        December 13, 2019


        Clearly you’ve never actually owned an expensive sports car, lost count of number of times my Porsche and Aston Martin have been keyed

        Had an AMG parked in a car park in Swansea coated in gallons of gloss paint for no apparent reason

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