The American Economy: Caution, Fragile!

What a pleasant surprise: The punch bowl is still on the buffet! Ben Bernanke, the president of the United States’ central bank, announced it Wednesday evening. It is not a question of taking away the alcohol and no longer buying $85 billion of public bonds and American mortgage titles. At this point, the whole world’s investors, taken by a sweet drunkenness, have pushed a number of stock indexes to new records. But in reality, they have surprised themselves. Four months earlier, the boss at the Fed evoked the possibility of moderating his action. The mere mention of it made long-term interest rates jump by more than half (passing from 1.7 percent to 2.7 percent) — a rise too rapid for such a fragile country. There was no need to follow through. The word of Bernanke was enough.

Of course, growth is taking place faster and stronger in the United States than in Europe. The unemployment rate barely hit 7.3 percent for the Americans, a rate about which François Hollande and the French can only dream. America has become more competitive with shale gas and cut salaries. Businesses have never seen so much profit. But despite these signs of dynamism, economic activity has only progressed 1.6 percent in the last year. The only truly healthy component was housing investment (up 15 percent). However, it is also the most sensitive to long-term interest rates. The most recent indicators of American building already point to a weaker market. Here we find the heart of the contradiction of the model chosen by Washington to get the economy out of its rut. Even though the financial crisis was provoked by excessive debt, the government, like the central bank, wants to get out of it by taking on new debt, first from the state, then from individuals. The state was able to take on massive debt at a good price because the Fed bought its bonds. It is obviously difficult to do the same for households. And without recourse to debt, the mechanism of a self-sustaining recovery cannot begin to work. If profits are higher, it is because salaries are lagging. The median income in the United States (one half of households earn more, the other less) had the same purchasing power a quarter century ago. With consumer demand languishing, businesses limit their investments. And their productive base is not sufficient for exports to take the reins.

In accordance with his mission, Ben Bernanke fights against inflation as well as unemployment. But as powerful as his word may be, he cannot reinvent a model of growth.