There are many who believe that the power and influence of the US are declining because its economy has stagnated. However, John Plender in his Markets Insight report on the Financial Times said economic events in 2014 will most likely give evidence to prove this belief wrong. The US investment case is still compelling, first of all, because its economic fundamentals this year are in far better shape compared to those of other advanced countries.
The report said that the US is ahead of Europe and Japan in heading towards normalization after the financial crisis as the central bank starts moving away from unconventional banking measures. Two of fiscal austerity has also placed the budget deficit at less than half of its figure in 2010. The report said this was a key point as far as potential decline is concerned since robust public finances are vital to the projection of power globally. In addition, the housing market is also on the road towards recovery, with signs of business confidence increasing.
The report said 2014 may not be supercharged for the US economy but it will be far better compared to that of other leading industrial countries. It was interesting to note that the global markets appreciated this relative strength as the dollar ended 2013 on a high note compared to other currencies around the world. This was not an easy task after the fiscal irresponsibility shown on Capitol Hill, the report said. It was also an achievement considering the success of the European Central Bank last year in stabilizing the sovereign debt crisis in the Eurozone, with effect that the euro posted a 4.3% gain over the year against the dollar. One of vital results of the financial crisis is the reinforcement it gave on the dollar's role as the world's preferred store of value in times economic difficulties, the report said.
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