The States economic recovery, good speed Mr. President

The States is taking its long run economic track, as economic data shows, american economy starts to face  a decreasing figures on unemployment rate and higher GDP growth rate. This recovery is not by chance, it was the result  of hard work of economic advisors, they increased money supply and government expenditure as economic theory suggest, therefore the States is growing, moreover they mede sure that global economy got money liquidity to get out of 2008 financial crisis, they did their work not just in America, they did it around the World. Mr president Obama should be so happy for this result and this hard work will get its result on 6th of november through a victory. Good speed.  

Author: Humberto Bernal,  

Economist

e-mail: zhumber@gmail.com

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Fortunately the States is out of financial crisis that begun around  2008 first quarter (q1). It is important  look at how was its economic decisions to sort out this crisis. Figure 1 shows GDP cycle from 1959 to 2011 quarterly, the gray bar point out data when crisis stated and the green bar when it finished, this crisis took approximately two years to the end, from 2008q1 to 2010q1, it was a well drove recovery, for instance Colombian crisis spend four yeas to come to the end. The economic authorities in the States as soon  realized the 2008 crisis has started, they took the decision to increase money supply (M1) and increase the government expenditure as business cycle theory suggest. This increase on M1, from my point of view, gave money liquidity to whole World and let to increase the States gross demand, the mechanisms to give this money were through Foreign Direct Investment, loans and hiring professional services through whole World, for instance economic researches about commodity prices, financial sector, gross demand and so, this researches took place for instance in Colombia, Chile, Argentina, Panama and Peru. 

Figure 1. Gross Domestic Product cycle 1959-2011 

(quarterly data US$ billion 2005)

Source: own calculations and Bureau of Economic Analysis, Department of Commerce.

The amount of M1 supplied was too much as World demanded, as figure 2 shows, M1 shared 9.7% of States GDP in 2008q1 and 14.2% in 2011q4, this increase was 4.5% of its GDP, it is important to highlight as soon 2008 crisis came, M1 as a share of GDP changed its decreasing trend to increasing trend, this increasing trend  show a high positive slope that means no doubt by authorities to get out quickly of this crisis. The States government expenditure contributed to this recovery also as one can see on figure 3, expenditure cycle started to increase by crisis time and kept this track until the end of crisis on 2010q1, then it started to decrease, therefore Mr president Obama recently decision to cut expenditure is welcome to keep government deficit on equilibrium.   

Figure 2. Money supply as a share of GDP 1959-2011 

(quarterly data %)

Source: own calculations and Bureau of Economic Analysis, Department of Commerce and Board of Governors of the Federal Reserve System.

Figure 3. Government expenditure 1959-2011 

(quarterly data US$ billion)

Source: own calculations and Bureau of Economic Analysis, Department of Commerce.

In conclusion this year the States will face an economic increase, its economic track will be recovered, therefore unemployment rate will face a decrease and gross demand will increase to get back to nicely track of consumption to americans and World citizens. Mr president Obama will be too happy this year due to american economy recovery and I hope he will pick up his harvest on 6th of november, it will be a nice gift for these five years of hard work on the States and around World including, of course, Colombia. Good speed Mr president.