Since the beginning of the Greek crisis in late 2009, it has become increasingly common to compare Greece today with Argentina's situation ten years ago. Given Argentina's post-crisis economic recovery, some go as far as to predict, or even recommend, that Greeks opt for an identical shock therapy by exiting from the euro zone, reintroducing a severely devalued national currency and going into a unilateral default. Nevertheless, comparisons are often misleading. We see several major differences that make the Greek situation unique and that require extreme caution when considering the best remedy to be used to end the crisis.
During the crisis, governments managed to avoid meltdown by setting themselves up as a rampart against a possible collapse of the financial system and standing in for faltering private demand. By coming to the rescue of markets and growth, those same governments have built up huge liabilities which will, of course, need to be purged. Given the high levels of debt reached in these industrialised countries, fiscal consolidation is now a necessity for all, and only its timing and, above all, its scale are open to question.
The 2 November 2010 midterm elections are a good time to assess the economic record of Barack Obama during his first two-years in office. We first took a look back at the origins of the 2007-2009 crisis before turning to the economic situation in a second part. We conclude now with a third part focused on the issues raised by the crisis and some of the longer-term challenges the US faces, including the viability of the American economic model, the impact of the crisis on potential growth, the (un)sustainbility of US public finances, the financial and regulatory reform.
The 2 November 2010 midterm elections are a good time to assess the economic record of Barack Obama during his first two-years in office. We first took a look back at the origins of the 2007-2009 crisis. We now turn in a second part on the economic situation. When he was elected in November 2008, Barack Obama inherited an economy mired in recession, a consequence of the burst of the credit bubble which developed from 2001 to 2007. Two years later, repeated efforts of the government and the Federal Reserve have born fruit and pulled the US out of recession. But the robustness and the strength of the ongoing recovery are still debatable.
The 2 November 2010 mid-term elections are a good time to assess the economic record of Barack Obama during his first two-years in office. We first take a look back at the origins of the 2007-2009 crisis. With the benefits of hindsight, one can say the roots of this crisis go back to the management of the dotcom bubble burst in 2001. That bubble was followed by another, this time a credit bubble, characterized by the growing subprime market. But starting at the beginning of 2007, its collapse led the whole financial system in a long, severe and evolving crisis.