Fareed Zakaria GPS – CNN 06-02-13

Fareed Zakaria said:

  • The great American housing market is back as the Case-Shiller housing index showed its largest annual increase in prices in seven years, showing its core character: flexibility and resilience.
  • The US is the only rich country whose population is growing, increasing by 3 million people every year, thanks largely to legal immigration – meaning we will need new housing.
  • Americans have been paying off their debts at a steady clip since the financial crisis.
  • The US economy is susceptible to bubbles and manias, but has the flexibility to adjust. American people and companies change past practices, take pain and prepare for the future.
  • American companies are ruthless in restoring productivity even at the cost of firing people, and often come through a crisis stronger and faster. Companies are posting strong sales and profits.
  • American banks are far better capitalized than their principal competitors in Europe, more secure with stronger balance sheets. Recovering home prices will create a virtuous cycle between credit and housing that will enhance both stability and growth.
  • Washington handled the 2008 financial crisis extremely well, acting quickly and with massive firepower rescuing overextended banks, enacting a large stimulus, saving, but restructuring two automobile giants.
  • The Fed is to be congratulated for its bold strategy of flooding the markets with liquidity and  lower rates while the economy was depressed, unlike Europe’s response and Japan’s after its crash.
  • China controls and manipulates almost every major industry. China is ranked as the 80th most corrupt country in the world. State controls, nepotism and a culture of bribery made it difficult to do business – the World Bank ranked China 91st in the world behind Azerbaijan and the Kyrgyz Republic. The buildup of these conditions is beginning to show – foreign investment is declining, trade with Europe and the United States is slowing.
  • China needs serious reforms but economic reforms everywhere are politically difficult. China wants growth, modernity but does not want to become a Western-style, liberal democracy. But its growing middle class will seek greater individual autonomy and freedom.
  • The OECD says the best developed country to live in for the third year in a row is Australia, but only if you measure all the factors in the study equally. Japan ranks highest for safety; Switzerland is first for overall life satisfaction; Finland is best for education, Sweden is best for environment; the US far outranks the rest for income.

Paul Krugman at Princeton said

  • During Clinton’s term the US economy added 236,000 jobs in an average month and we’ve had hardly any months that look as good as an average month during the ’90s.
  • Many state and local governments have stabilized their finances but we are still too deep in a hole to call this anything like prosperity.
  • Rogoff-Reinhart’s claim that growth falls off a cliff when debt exceeds 90 percent of GDP is clearly not true – there is a mild, negative correlation between debt and growth, but that cliff doesn’t exist.
  • The US has handled the global economic crisis abysmally. It is not over: we have massive long-term unemployment in the US, massive youth unemployment in Southern Europe.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1306/02/fzgps.01.html