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Alfonso Peccatiello: The Fed Put Is Back, Bull Steepener Base Case
Forward Guidance
Comparative Analysis of Government Borrowing and GDP Growth in America and Europe
The US has significantly leveraged up since the financial crisis with the government borrowing extensively, while the private sector has decreased its leverage. In contrast, European countries, including those in the eurozone like Greece, face limitations as they cannot print their own money but rely on the European Central Bank. The European Central Bank's regulations restrict fiscal deficits, requiring countries to maintain deficit spending below a certain threshold and make structural adjustments, such as cutting primary spending. These stringent rules have hindered growth in Europe from 2012 to 2019, leading to a significant growth differential between the US and Europe. The US has achieved higher GDP growth primarily due to more aggressive deficit spending, which is limited in Europe, thereby restraining growth potential and productivity in the region.
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