Reach for the stretch pants, Barack

America’s economy, too, will shift, but in a different direction. Unlike Europe’s, America’s macroeconomic policy mix has just moved decisively away from austerity. The tax-cut agreement reached on December 7^th by Barack Obama and congressional Republicans was far bigger than expected. Not only did it extend George Bush’s expiring tax breaks for two years, but it also added more than 2% of GDP in new breaks for 2011, when this is coupled with the continued bond-buying of the Federal Reserve, America is injecting itself with another dose of stimulus steroids just when Europe is checking into rehab and enduring cold turkey.

The result of this could be that American output grows by as much as 4% next year. That is nicely above trend and enough to reduce unemployment, although not quickly. But America’s politicians are taking a risk, too. Even though their country’s long-term budget outlook is famously dire, Mr. Obama and the Republicans did not even try to find an agreement on medium-term fiscal consolidation this week. Various proposals to fix the deficit look set to gather dust. Bondholders, who have been very forgiving of the printer of the world’s chief reserve currency, greeted the tax deal by selling Treasuries. Some investors, no doubt, see faster growth on the way; but a growing number are worried about the size of America’s fiscal hole. If those worries take hold, the United States could even see a bond-market bust in 2011.

How does this parting of the ways matter? The divergence between the world’s big three will compound the risks in each one. America’s loose monetary policy and concerns about sovereign defaults in the euro zone will encourage capital to flow to emerging economies, making the latter’s central banks reluctant to raise interest rate and dampen down inflation. Over the next five years emerging economies are expected to account for over 50% of global growth but only 13% of the increase in the net global public debt. Rather than rebalancing, the world economy in the immediate future will skew even more between a debt-ridden West and thrifty East.

The West avoided depression in part because Europe and America worked together and shared a similar economic philosophy. Now both are obsessed with internal problems and have adopted wholly opposite strategies for dealing with them. That bodes ill for international co-operation. Policymakers in Brussels will hardly focus on another trade round when a euro member is about to go bust. And it bodes ill for financial markets, since neither Europe’s sticking-plaster approach to the euro nor America’s “jam today, God knows what tomorrow” tactic with the deficit are sustainable.

Of course, it does not have to be this way. Now they have splurged the cash, Mr. Obama and Congress could move on to a medium-term plan to reduce the deficit. Europe’s feuding leaders could hash out a deal to put the single currency and the zone’s banking system on a sustainable footing. And the big emerging economies could allow their currencies to rise. But don’t bet on it. A more divided world economy could make 2011 a year of damaging shocks.

1. Pick out from the text: a) expressions describing positive economic processes; b) expressions that describe negative processes in an economy.

1. Comment on the metaphors and metonymies from the text.

1. Use the vocabulary from ex. 1 to speak about the changes that the Russian economy experienced during the 20^th and 21^st centuries.

4. Talk about the following questions in pairs/groups. Remember to support your answers.

1) How prepared are you for a recession? How would your life change if there were a recession? Please explain.

2) Will people be richer or poorer in the future? Why do you think so?

3) How concerned are you about the economy and the future? Please explain.

4) Do you think that poor people suffer the most when there is an economic crisis? What happens to the middle class? What happens to the rich? Please explain.

5) Comment on the following statement: “It's a recession when your neighbour loses his job and a depression when you lose yours.”

5. Role-play. Imagine it's the future. The American dollar has crashed, and the country is in a depression. Government officials from all over the world are discussing which three countries might become the economic leaders in the new world order. Remember to provide reasons, too. Decide on the most likely country to take America's place as an economic leader.

Rendering

Render the following text in English and comment on it.

ЭКОНОМИКА США – ПАЦИЕНТ В СОСТОЯНИИ