Although U.S. investments in fixed capital rose moderately this year, this growth was much weaker than the levels that had to be reached, given the impressive increase in corporate profitability, wrote in the Financial Times comment former President of Federal Reserve Alan Greenspan. Combined with the collapse in long-term illiquid investments of households that undermined economic recovery, he said. These problems – the result of widespread private sector concerns about the future of America – blurred largely if not wholly, effects of fiscal stimulus to the administration. Moreover, the implementation of similar government programs alone causes concerns. Instinctive reaction of investors and households to uncertainty is to distance themselves from anything that requires an accurate forecast for the future. For non-financial corporations (creating a half of gross domestic product of USA), distancing is best measured by the percentage of cash flow allocated to illiquid long-term fixed investments. In the first half of 2010 this share fell to 79 percent – the lowest level in 58 years, from when actually keep statistics. The corresponding growth in investments in liquid assets after the bankruptcy of Lehman, was fastest in postwar history, reaching $ 400 billion. By mid-2010’s liquid assets rose to 1.8 trillion dollars – the highest share of total assets of nearly half a century. Without this unprecedented diversion of cash flows, the growth rate of capital expenditure on non-financial corporations would be twice as high compared with moderate growth we see in the first half of the year.
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The main stock indexes in the U.S. began to decline for the first trading week, continuing losses from the previous two sessions. Literally in the last minutes before the close of the market, however, shares began to recover and could be out of positive territory, although a few hours earlier had achieved reductions of around 2%. In bearish sentiment on the day stood back to Greece worries and debt problems in other European countries. Negative forecast disclosed in the chain stores for household goods Lowe’s Cos., Also outweigh the market. “The market and its players do not believe that the plan for Europe associated with the suspension of high costs and reducing debt will work without first have a significant impact on the economy,” Kevin told MarketWatch Gidis brokerage company of Morgan Keegan. For registered gains against the backdrop of these concerns helped technology stocks and those in the field of trade. Dow Jones Industrial Average rose 0.06 percent to 10,267 points, the broad S & P 500 recorded a growth of 0.1 percent to 1137 points, and Nasdaq Composite increased in value by 0.3 percent to 2354 points. Chain Lowe’s Cos., Which is second largest sector in the U.S., announced yoy growth of 2.7 percent in profit to 489 million dollars for the first fiscal quarter ending in late April. The result was higher than average forecasts of analysts, but they remained disappointed by the export outlook for the current quarter.
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Alan Greenspan, former chairman of the Federal Reserve (U.S. central bank) has stated that the central bank and other regulators had failed during the financial crisis because they were indifferent to risk, transmit Bloomberg. “Even with the collapse of private risk management, financial system would remain stable if the second level of protection – regulatory bodies function efficiently,” he said in a speech at the Brookings Institution. “Under the pressure of the crisis, however, they failed.” Greenspan, who headed the Fed from 1987 to 2006, said that low interest rates in his time have led to a housing bubble and the failure of regulators. “Although a number of years of our biggest banks had 10-15 permanent auditors appointed spot, they nevertheless managed to take” toxic “assets that have led them to bankruptcy,” he said. Greenspan acknowledged that he and his colleagues at the Fed did not realize the extent of the housing bubble and the consequences it can have on the economy. According to him, increased requirements for capital adequacy and liquidity to banks will help prevent future crises.
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The former Federal Reserve Chairman Alan Greenspan said the U.S. believes that America does not need a new plan to stimulate the economy. Moreover, the specialist believes that before it comes to positive news about the labor market, unemployment in the country probably will reach 10 percent. Greenspan indicates that there are at least two reasons not to consider ideas for developing a new rescue plan. One is that only 40 percent of the projected under the current plan funds were allocated to the economy. Others relate to the debate on the effectiveness of such plans and disputes whether they are needed, writes Market Watch. The specialist believes that, some signals to improve the economy of the country. However, labor markets remain under pressure and unemployment will likely continue to grow in the short term, Greenspan believes.
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