Recessions in sight!

Publié le par Jean-Pierre Chevallier

Americans continue to increase their saving: M2-M1 increased at September 27 by 8.74% compared to the previous year,
Graph 1:


They increase their saving because they anticipate a degradation of their situation in the near future, and they are increasingly pessimistic of week in week!
The increase in M2-M1 has been about 8% for these 3 last weeks, more important than during previous weeks,
Graph 2:


As the GDP growth is inversely proportional to the increase in the free money supply (which depends on the variation of M2-M1), the GDP growth was very weak in the third quarter, around zero, positive even negative,
Graph 3:

The growth rate of the GDP selected here is 1.7% year-on-year, i.e. 0.3% compared to the previous quarter in rate annualized.
Americans decrease their expenditure and the amount of their deposits on their bank accounts,
Graph 4:

They thus increase their saving which is now higher than $6,000 billion,
Graph 5:

For these last years, Americans have considerably increased their saving which was assembled to $5,000 billion 3 years earlier, in October 2004.
The behavior of the Americans is logical: the increase in the saving involves a drop of their expenditure, therefore demand, therefore supply.
The GDP growth then decreases to be negative as well as the creations of jobs.
4,000 employment were removed in August during which the increase in M2-M1 higher than 8% had lasted only 2 weeks.
The suppressions of employment should thus be higher in September…
The cause of the deceleration of the GDP growth is the maintenance of too high rates of the Fed during too a long time.
One needs a 6 months deadline so that the growth sets out again after a significant fall of the rates of the Fed.
This is why Alan Greenspan anticipates to him also a recession which he evaluates the probability with 50%.
The crisis of the sub-prime is only a consequence of the maintenance of the high rates of the Fed, and not the cause of the deceleration of the GDP growth.
American companies can continue to make benefit because they invested much abroad during these last years, in particular in the emergent countries where the growth is very strong.
Zero growth in the United States can thus be accompanied by an increase in the benefit of American companies, but it is worrying for Americans!
Zero growth of the United States is transmitted in France.
The economic, social and political situation will be degraded considerably in the months to come. It is worrying for the French!

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