[Skip to the end]
Euro Area Sector Analysis (Dec 17)
Euro-middle of historical range. But with government deficits nearing Maastricht limits (though those limits will be bent, it will be grudging), not much chance for large enough fiscal stimulus to make a difference to private demand.
Yes, deficits seem too small to support higher levels of output and employment.
US Sector Analysis (Dec 17)
U.S.-still far below peak of early 90s. Nearing levels of earlier this decade, but much private demand growth in recent years fueled by credit (unlikely to be repeated, certainly not to same extent).
Yes, we are still paying the price for allowing the budget to go into surplus. The deficit needs to be substantially higher to restore output and employment, to ‘make up’ for the surplus years that drained the financial equity needed to support the credit structure.
Japan Fiscal Balance as % of GDP (Dec 17)
Japan-well off recent peaks, in some part due to some fiscal tightening in recent years. Fiscal policy starting to be loosened, but private savings still have ways to go to get back to levels that were associated with the moderate period of domestic demand growth from 2003-2006.
Yes, and with their higher propensity to not spend income they require a higher deficit to sustain output and employment.