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BUSINESS CYCLES
Text 1.A
Business Cycles
Economic history shows that the economy never grows in a smooth and even pattern. A country may enjoy several years of exhilarating economic expansion and prosperity, as the United States did in the 1990s. This might be followed by a recession or even a fi nancial crisis or, on rare occasions, a prolonged depression. Then national output falls, profits and real income decline, and the unemployment rate jumps to uncomfortably high levels as legions of workers lose their jobs.
Eventually the bottom is reached, and recovery begins. The recovery may be slow or fast. It may be incomplete, or it may be strong as to lead to a new boom. Prosperity may mean a long, sustained period of brisk demand, plentiful jobs, and rising living standards. Or it may be marked by a quick, inflationary flaring up of prices and speculation, to be followed by another slump.
Upward and downward movements in output, inflation, interest rates, and employ ment form the business cycle that characterizes all market economies.
Features of the Business Cycle
What exactly do we mean by "business cycles"? A business cycle is a swing in total national output, income and employment, usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy.
Typically economists divide business cycles into two main phases, recession and ex pansion. Peaks and troughs mark the turning points of the cycles. The downturn of a business cycle is called a recession, which is often defined as a period in which real GDP declines for at least two consecutive quarters. The recessions begin at a peak and ends at trough. According to the organization which dates the beginning and end of business cy cles, The National Bureau of Economic Research, the last US recession began after the economy peaked in the summer of 1990. This was followed by a brief recession, which ended in March 1991, after which the United States enjoyed one of the longest expan sions in its history.
Note that the pattern of cycles is irregular. No two business cycles are quite the same. No exact formula, such as might apply to the revolutions of the planets or of a pendulum, can be used to predict the duration and timing of business cycles. Rather, in their irregu larities, business cycles more closely resemble the fluctuations of the weather.
While business cycles are no identical twins, they often have familiar similarities. If a reliable economic forecaster announces that a recession is about to arrive, are there any typical phenomena that you should expect to accompany the recession? The following are a few of the customary characteristics of a recession:
Often, consumer purchases decline sharply, while business inventories of auto mobiles and other durable goods increase unexpectedly. As businesses react by cut ting production, real GDP falls. Shortly afterwards, business investment in plant and equipment also falls sharply.
As output falls, inflation slows. As demand for crude materials declines, their prices tumble. Wages and prices of services are unlikely to decline, but they tend to rise less rapidly in economic downturns.
Business profits fall sharply in recessions. In anticipation of this, common-stock prices usually fall as investors sniff the scent of a business downturn. However, be cause the demand for credits falls, interest rates generally also fall in recession.
We have spoken in terms of recession. Expansions are the mirror images of re cessions, with each of the above factors operating in the opposite directions.
Forecasting Business Cycles
Economists have developed forecasting tools to help them foresee changes in the economy. Like-bright headlights of a car, a good forecast illuminates the economic terrain ahead and helps decision makers adapt their actions to economic conditions.
In an earlier era, economists tried to peer into the future by looking at easily available data on items like money, boxcar loading, and steel production. For example, a drop in steel production was a sign that businesses had reduced purchases and that the economy would soon slow down. Eventually, this process was formalized by combining several different statistics into an "index of leading indicators". While it is not infallible, the in dex does give an early and mechanical warning on whether the economy is heading up or down.
For a more detailed look into the future, economists turn to computerized economet ric forecasting models. An econometric model is a set of equations, representing the be havior of the economy, that has been estimated using historical data.
Clearly, forecasting is as much art as science in our uncertain world. Still, the strength of economic forecasting is that, year in and year out, professional forecasters provide more accurate forecasts than do those who use unsystematic or unscientific ap proaches.
Samuelson P.A., Nordhouse W.D.Economics (16th edition) , 1998.
NOTES
GDP - gross domestic product валовой внутренний продукт (ВВП): совокупная стоимость товаров и услуг, созданная внутри страны за определённый период
GNP - gross national product валовой национальный продукт: суммарная стоимость товаров и услуг, произведенных как внутри страны, так и за её преде лами за определённый период (обычно год); от ВВП отличается на величину, рав ную сальдо расчетов с зарубежными странами
plant - 1. завод, фабрика 2. оборудование: имущество/ активы, используемые компанией для осуществления производственной деятельности (часто употребля ется сочетание «машины и оборудование».
leading indicators - «опережающие» (ведущие) индикаторы (США) : показа тели экономической активности, предвосхищающие движение делового цикла; 12 показателей движения экономического цикла, включаемые в индекс, который еже месячно публикует министерство торговли (фондовые цены, денежная масса, заим ствования, разрешение на новое строительство, средняя продолжительность рабо чей недели, изменения в товарных запасах и т. д.)
VOCABULARY
to expand, expansion
to prosper, prosperity,
recession
to depress, depression
output
to profit, profit
incometo decline, decline
bottom
to recover, recovery
boom
sustained
to inflate, inflation
to slump, slump
interest rates
to contract, contraction
to peak, peak
trough
downturn, upturn
GDP, GNP
consecutive, (2 consecutive quarters)
to fluctuate, fluctuation
to consume, consumer,
consumption
inventories
business, a business
plant, plant and equipment
crude materials
wages, wages and salaries
to invest, investor, investment
an index of leading indicators
to estimate, estimate
А. Translate the following into Russian. Consult a dictionary if necessary.
pattern of demand; pattern of trade; output expansion; business cycle expansion; business recession; the Great depression; total output; world (global) output; profit before tax; gross profit; net profit; income on investments; annual income; rate of inflation; rate of growth; tax rate; exchange rate; expansion rate; interest rate; unemployment rate; bottom of cycle; to bottom out; economic recovery; recovery of prices; investment boom; boom and bust; booming sales; sustained growth; consumer demand; domestic demand; slack demand; to restrain inflation; price inflation; slump in demand; price fluctuations; domestic consumption; business decline; price decline; the economy is bottoming out;
В. Find in the text the English for:
экономический рост и процветание; затянувшаяся депрессия; объём производства и реальный доход; уровень безработицы; низшая точка экономического цикла; рост уровня жизни; спад; рост и падение процентных ставок; страны с рыночной экономикой; высшая точка экономического цикла; в течение 2-х кварталов подряд; экономика достигла крайней верхней точки; прогнозировать длительность цикла деловой активности; объем потребительских закупок; запасы товаров длительного пользования; инвестиции в машины и оборудование; спрос на кредиты;
Translate into Russian. № 1.1
Business Cycles
The United States and all other modern industrial economies experience significant swings in economic activity. In some years, most industries are booming and unemployment is low; in other years, most industries are operating well below capacity and unemployment is high. Periods of economic prosperity are typically called expansions or booms; periods of economic decline are called recessions or depressions. The combination of expansions and recessions, the ebb and flow of economic activity, is called the business cycle.
Business cycles as we know them today were codified and analyzed by Arthur Burns and Wesley Mitchell in their 1946 book Measuring Business Cycles. One of Burns and Mitchell’s key insights was that many economic indicators move together. During an expansion, not only does output rise, but also employment rises and unemployment falls. New construction also typically increases, and inflation may rise if the expansion is particularly brisk. Conversely, during a recession, the output of goods and services declines, employment falls, and unemployment rises; new construction also declines. In the era before World War II, prices also typically fell during a recession (i.e., inflation was negative); since the 1950s prices have continued to rise during downturns, though more slowly than during expansions (i.e., the rate of inflation falls). Burns and Mitchell defined a recession as a period when a broad range of economic indicators falls for a sustained period, roughly at least half a year.
Business cycles are dated according to when the direction of economic activity changes. The peak of the cycle refers to the last month before several key economic indicators—such as employment, output, and retail sales— begin to fall. The trough of the cycle refers to the last month before the same economic indicators begin to rise. Because key economic indicators often change direction at slightly different times, the dating of peaks and troughs is necessarily somewhat subjective. The National Bureau of Economic Research (NBER) is an independent research institution that dates the peaks and troughs of U.S. business cycles.
In many ways, the term “business cycle” is misleading. “Cycle” seems to imply that there is some regularity in the timing and duration of upswings and downswings in economic activity. Most economists, however, do not think there is. Expansions and recessions occur at irregular intervals and last for varying lengths of time. For example, there were three recessions between 1973 and 1982, but, then the 1982 trough was followed by eight years of uninterrupted expansion. The 1980 recession lasted just six months, while the 1981 recession lasted sixteen months. For describing the swings in economic activity, therefore, many modern economists prefer the term “short-run economic fluctuations” to “business cycle.”
Just as there is no regularity in the timing of business cycles, there is no reason why cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy could stay forever. Full employment refers to a level of production in which all the inputs to the production process are being used, but not so intensively that they wear out, break down, or insist on higher wages and more vacations. When the economy is at full employment, inflation tends to remain constant; only if output moves above or below normal does the rate of inflation systematically tend to rise or fall. If nothing disturbs the economy, the full-employment level of output, which naturally tends to grow as the population increases and new technologies are discovered, can be maintained forever. There is no reason why a time of full employment has to give way to either an inflationary boom or a recession.
Business cycles do occur, however, because disturbances to the economy of one sort or another push the economy above or below full employment. Inflationary booms can be generated by surges in private or public spending. For example, if the government spends a lot to fight a war but does not raise taxes, the increased demand will cause not only an increase in the output of war matériel, but also an increase in the take-home pay of defense workers. The output of all the goods and services that these workers want to buy with their wages will also increase, and total production may surge above its normal, comfortable level. Similarly, a wave of optimism that causes consumers to spend more than usual and firms to build new factories may cause the economy to expand more rapidly than normal. Recessions or depressions can be caused by these same forces working in reverse. A substantial cut in government spending or a wave of pessimism among consumers and firms may cause the output of all types of goods to fall.
Another possible cause of recessions and booms is monetary policy. The Federal Reserve System strongly influences the size and growth rate of the money stock, and thus the level of interest rates in the economy. Interest rates, in turn, are a crucial determinant of how much firms and consumers want to spend. A firm faced with high interest rates may decide to postpone building a new factory because the cost of borrowing is so high. Conversely, a consumer may be lured into buying a new home if interest rates are low and mortgage payments are therefore more affordable. Thus, by raising or lowering interest rates, the Federal Reserve is able to generate recessions or booms.
The Concise Encyclopedia of Economics
№ 1.2
Translate into Russian. Pay attention to the underlined words.
1. Consumption is driving growth, which will continue through to next year. The economy has gathered enough momentum to carry it through the next one to two years.
2. The U.S. economy shows signs of stabilizing but still faces significant risks before a substantial recovery can begin.
3. The economy expanded at a 0.2% pace in the fourth quarter, fueled by a 5.4% rise in consumer spending.
5. The global slowdown during the year led to drops in both exports and imports.
6. The government announced Wednesday that the country's economy shrank at 0.4% annual pace in the third quarter, the first decline in eight years and the biggest in a decade, likely heralding the start of a new recession.
7. For the first time in 20 years growth in the 30 industrialized member-countries of the OECD is contracting.
8. A growing number of economists believes Europe is in the early stages of a mild recession.
9. These data provide another signal that an economic recovery is under way.
10. The euro area's two largest economies (Germany and France), which together account for more than half of the region's output, are both slowing steadily as the global economy deteriorates.
11. Britain’s economy has taken a turn for worse, with manufacturing and services sectors contracting sharply over the last two months.
12. In Japan industrial production expanded by 0.3% in January, leaving
it 2.1% higher than a year before.
Translate into Russian. № 1.3
Economic and Financial Indicators
Hiring in America slowed, as companies, excluding farms, added just 51,000 workers to their payrolls in September. Nonetheless, unemployment edged down from 4.7% in August to 4.6% in September. And the Bureau of Labour Statistics is expecting a big upward revision in the payroll numbers. It estimates that an additional 810,000 non-farm jobs were created in the year to March.
Industrial production in Germany rose by 7.3% in the year to August, the largest annual increase since 1990. In France it went up by 1%. Germany’s merchandise-trade surplus, seasonally adjusted, grew to $15.5 billion in August.
A weaker yen bolstered Japanese exports, widening the country’s trade surplus to $8.5 billion in September, 6.9% more than a year earlier. Exports to America went up by 20.4% and those to China by 19.8%, thanks to rising demand for cars and electronics.
The Economist October – November 2006
Translate into Russian. № 1.4
Many Economists Doubt Heft of Europe Recovery
Don’t count on Europe to float the global economy yet.
Despite a lot of good news on the corporate front, cheap global competition has kept wages and job creation flat in most of the 12-nation euro currency zone. That is a problem, because in the past it was the shopping spree following hiring and wage rises that produced full-blooded economic recoveries.
“This economic cycle is different from others,” says Ken Wattren, chief euro zone economist at BNP Paribas in London. “It’s been great news for the corporate sector but not for the household sector.”
The U.S. managed to get round that problem, producing surging growth in its post-2001 recovery even as wage levels and initially employment stayed flat. But that was because American consumers, encouraged by rising property and stock prices, racked up huge credit-card bills and borrowed against their home equity to buy more cars and flat screen TVs. Continental Europeans, however, won’t or can’t do that.
The result: Many economists believe that euro-zone growth rates will top out at around 2%, widely considered the floor for growth in the United States – let alone the tiger economies of the emerging East.
There has been a lot to celebrate lately in the core euro-zone economies. Buoyant corporate profits, fueled by exports to the U.S.. Asia and oil-producing countries are pushing business-sentiment sky high. Companies are finally investing their higher profits at home, especially by buying new equipment. And the stock market has risen 28% in the past year, compared with 3% for the Dow.
But the bad news is that on its own, an export-led recovery probably can only go so far. Domestic consumption makes up 57% of gross domestic product in the euro zone. That makes it vital for sustained 3%-plus growth rates of the kind that Germany, France and Italy used to enjoy in the 1980s. So far though, consumers aren’t running out to shop, because they aren’t getting any more money in their pay packets.
Economists predict euro-zone GDP will grow by about 2% to 2.2% this year, up from an expected 1.5% in 2005. But many believe the growth rate will decline to below 2% again the year after, because of the risk that U.S. and Asian demand for European goods will slow down, while domestic consumption fails to compensate.
The Wall Street Journal January 2006
Translate into Russian. № 1.5
No matter where one goes in Argentina these days, evidence of the country’s remarkable economic recovery is hard to avoid. Since its collapse in 2001-02, Argentina’s economy has grown by a quarter. According to government estimates, it has finally surpassed its previous peak of May 1998. In another sign that the worst is over, on July 18th the government issued dollar bonds for the first time since its massive debt default of 2001.
But while the economy may have recovered its former size, it is different in many other ways. Some of the imbalances of the 1990s have been fixed: budget deficits have turned into surpluses; devaluation has ignited exports; and the public debt has been restructured. “It’s a less risky, less volatile country than it was,” says Miguel Braun of CIPPEC, a Buenos Aires think-tank. Yet many ordinary Argentines see a country that is more unequal, less prosperous and less economically secure than it was seven years ago.
Devaluation in 2002 prompted a temporary spike in inflation, and a lasting increase in food prices. As unemployment surged to 25%, real wages fell by an average of 30%. By June 2002, 56% of Argentines had fallen below the official poverty line. But as the economy recovered, so did employment. In the second quarter of 2004, each percentage point of output growth was matched by a full percentage point of new jobs. Unemployment has declined to 13% and poverty to 40%.
Many of the new jobs are in the informal sector: Argentina has the same number of formal-sector employees today as it did in 1980, while the number of informal workers has doubled. Such jobs pay less. Real wages in service jobs are still a quarter below their pre-crisis level. The overall share of wages in GDP has declined by 15%.
Wealthier Argentines have fared less badly: many of those who had withdrawn their dollar savings before a bank freeze poured them into property. That fueled a construction boom.
Devaluation has made travel abroad prohibitive for all but the wealthiest. Home ownership has become harder, too, since property is still priced in dollars. Since banks are weighed down with government debt, they lend little: mortgages and consumer credit are scarce.
Some of what workers lost has been gained by the state. The public sector now accounts for 27% of GDP, compared to 22% before the collapse. It has yet to turn that into better schools and infrastructure, partly because it must run a surplus to pay its debts.
Profits, too, take a larger share of the economy than in the past. But investment, though higher than it was, remains too low to sustain rapid growth once existing capacity is fully used.
Inevitably the pace of recovery is slowing. Now, for each percentage point of growth, jobs only increase by half as much. Unless companies are encouraged to invest more, and unless the government improves education and training, the social divide will continue to worsen. Inequality, job insecurity and low investment are hardly problems unique to Argentina. As it slowly becomes what the government likes to call “a serious country”, Argentines may find that their problems increasingly resemble those of their neighbors.
The Economist July 2005.
Translate the text into Russian. № 1.6
Odd Numbers
Why America’s advance GDP figures do not paint the whole picture
As the old joke goes, statistics are like a bikini – what they reveal is suggestive, but what they conceal is vital. America’s advance GDP figures tend to be more of a bathing suit than a bikini: they are a bit outdated and hide as much as they show. Nevertheless, on January 30th fourth-quarter numbers, showing an annualized growth rate of 0.6% (or less than 0.2% in quarterly terms), suggested that America’s economy was barely growing at the end of last year. It was lower than economist had expected.
Financial markets were initially thrown by the data. Toss in a revision or two and it is conceivable that they have marked the start of a recession – defined as two consecutive quarters of decline.
That could easily happen. Indicators for October and November were much stronger than for December. Many of the numbers for December were not available for the advance estimate, so statisticians had to make an informed guess, in some places using the stronger months as a guide.
That said, revisions could go the other way. A large fall in inventories subtracted 1.25 percentage points from fourth-quarter growth, making a far bigger dent than usual in the figures. Changes in inventories, however, are often subject to large revisions. They might well be adjusted upward later.
The first estimate of America’s GDP is notoriously imprecise, and is probably more so during times of wrenching economic change. According to the Bureau of Economic Analysis, which computes the GDP figures, around 25% of the required source data are not available for the first estimate and only partial information (for example two out of three months’ data) is on hand for a further 30% of sources.
The picture will become clearer on February 28th, when the second estimate of GDP is released. This iteration tends to include sharp revisions, because almost all of the final month’s numbers are available.
The Economist February 2008
Translate the text into Russian. № 1.7
Eurozone Grows at Fastest Rate in Three Years
The eurozone economy expanded at its fastest rate since early 2001 in the first three months of this year as robust growth in the US and Asia fueled heavy demand for European exports.
But economists said they doubted the recovery momentum was sustainable, given the continuing weakness of consumer demand in the 12-nation block and signs that global growth may be peaking.
Eurostat, the European Union’s statistical agency, said the region’s economy grew at a quarter-on-quarter rate of 0.6 per cent in the first three months, and by 1.3 per cent from a year earlier.
The figures mark a significant rebound for the eurozone after three years of dismal growth. But it still lags well behind other important economies such as the US, which grew almost 5 per cent year-on-year in the first quarter.
But economists said the provisional data, which did not include a detailed breakdown, suggested growth was largely the result of a strong net trade contribution, itself the result of weak import growth. Exports are robust because of strong global demand. But the data also reflect weak imports which were in turn a result of weak domestic demand.
Domestic demand might also weaken if oil prices drive up inflation.
With oil prices rising above $40 a barrel, the ECB has started to warn that energy costs could fuel inflation just as recovery takes firmer hold.
The Financial Times May 2004
Translate the text into Russian. № 1.8
Diagnosing Depression
What is the difference between a recession and a depression?
The word “depression” is popping up more often than at any time in the past 60 years, but what exactly does it mean? The popular rule of thumb for a recession is two consecutive quarters of falling GDP. America’s National Bureau of Economic Research has officially declared a recession based on a more rigorous analysis of a range of economic indicators. But there is no widely accepted definition of depression. So how severe does this current slump have to get before it warrants the “D” word?
A search on the internet suggests two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years. America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.
Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.
Emerging economies, however, have been much more depression-prone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.
Before the 1930s all economic downturns were commonly called depressions. The term “recession” was coined later to avoid stirring up nasty memories. Even before the Great Depression, downturns were typically much deeper and longer than they are today. One reason why recessions have become milder is higher government spending. In recessions governments, unlike firms, do not slash spending and jobs, so they help to stabilise the economy; and income taxes automatically fall and unemployment benefits rise, helping to support incomes. Another reason is that in the late 19th and early 20th centuries, when countries were on the gold standard, the money supply usually shrank during recessions, exacerbating the downturn. Waves of bank failures also often made things worse.
But a recent analysis by Saul Eslake, chief economist at ANZ bank, concludes that the difference between a recession and a depression is more than simply one of size or duration. The cause of the downturn also matters. A standard recession usually follows a period of tight monetary policy, but a depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level. In the Great Depression average prices in America fell by one-quarter, and nominal GDP ended up shrinking by almost half. America’s worst recessions before the second world war were all associated with financial panics and falling prices: in both 1893-94 and 1907-08 real GDP declined by almost 10%; in 1919-21, it fell by 13%.
The economic slumps that followed the collapse of the Soviet Union and those during the Asian crisis were not really depressions, argues Mr Eslake, because inflation increased sharply. On the other hand, Japan’s experience in the late 1990s, when nominal GDP shrank for several years, may qualify. A depression, suggests Mr Eslake, does not have to be “Great” in the 1930s sense. On his definition, depressions, like recessions, can be mild or severe.
Another important implication of this distinction between a recession and a depression is that they call for different policy responses. A recession triggered by tight monetary policy can be cured by lower interest rates, but fiscal policy tends to be less effective because of the lags involved. By contrast, in a depression caused by falling asset prices, a credit crunch and deflation, conventional monetary policy is much less potent than fiscal policy.
The Economist December 2008
Answer the questions.
Sum up the text in English.
C. Give the opposite.
downturn
slowdown
decline
recession
to contract
contraction
to decrease
unemployment
to cut (prices, interest rates)
to weaken the currency
sluggish
weak currency
bust
Translate the text into Russian. № 1.9
Is the US Heading for a Depression?
The sharp contraction of the US economy accelerated in the last three months of 2008, with official figures showing GDP shrinking at an annualised rate of 3.8%.
With forecasters already predicting the worst US recession since World War II, how big a danger is there that the US economy will slip into a depression similar to the 1930s?
The latest figures paint a gloomy picture of the US economy. Consumer spending, which makes up two-thirds of the economy, fell for the second quarter in a row, by 3.5%.
For all the talk of this being a consumer-led downturn, the credit crunch is hitting businesses even harder. This drop was led by a 22% drop in spending on durable goods like automobiles and washing machines. The decline in motor vehicle production was so great that it alone contributed 2% to the fall in GDP.
Businesses hit
Businesses as well as consumers have been hit hard by the slowdown. Exports, which had helped boost GDP earlier in the year, fell sharply, by 19.7%, as foreign markets for US products were hit by their own recessions.
Investment fared even worse. Residential investment fell 23.6% as the glut of foreclosed properties reduced new home sales. Business investment was down 19.1%, led by a 27.8% drop in purchases of equipment and software. Business inventories of unsold goods mounted. If the inventory build up - which is likely to be temporary - is excluded, GDP fell at an annualised rate of 5.1%.
Consumers save
The economic uncertainty does seem to be changing consumer behaviour. People are saving more in preparation for the coming downturn. The personal savings rate rose to 2.9%, more than double the 1.2% rate in the previous quarter. Consumers are being hit by a triple whammy: rising unemployment, which could rise from 7% to 10% of the workforce by the end of the year; restricted access to credit; and falling asset values. The fall in stock markets and house prices has reduced household wealth by 20%, from the middle of 2007. This alone has reduced consumption by around 1%, some economists estimate. It may make sense for consumers to save instead of spend, but in an economy as reliant on consumer spending as the US, this does add to recessionary pressures.
How long?
The key question in whether this will turn from a recession to a depression is how long the slowdown will last. In the 1930s, output declined for four years, with GDP cut by half while unemployment soared to one-quarter of the workforce. Despite the New Deal, output did not recover to its 1929 level until World War II when there was a massive boost in government spending.
At the moment, most economic forecasters are predicting that the US slowdown will last around two years, with the economy returning to weak growth by 2010. The National Bureau of Economic Research says the current economic slowdown actually began at the end of 2007 and is likely to be the longest post-war recession.
Government rescue?
The only thing currently boosting the US economy is Federal government spending, which rose 5.8% in the quarter.
But even if Mr Obama gets rapid approval for his $800bn stimulus plan - which has passed the House of Representatives and is currently being considered by the Senate - it will take some time for the money to be felt in the economy.
It is also unclear how many jobs will be created: President Obama aims to create 3.5 million new jobs, but others say the stimulus package could create between 1.2 and 3.6 million more jobs.
Financial squeeze
The other big uncertainty is whether the financial sector can be restored to health and at what cost. There is now $2.2 trillion of toxic bank debt worldwide, the IMF says, $500bn more than it estimated a few months ago. The collapse of financial markets in the autumn had a dramatic effect on consumer and business confidence.
There are plenty of reasons why growth might be even less than forecast, the IMF's Olivier Blanchard said, not least if banks have so many bad debts, they will further drag down the real economy.
The Obama administration still has $350bn left of the $700bn bailout for banks approved in October last year. It may need to ask for more. If it gets the money it needs and if the money is spent promptly and wisely, the US might just escape with a relatively mild recession. But given the extraordinary events of the past six months, most economists are still hedging their bets.
BBC NEWS January 2009
Translate the text into English. №1.10
Андрей Клепач изыскал экономический рост
Вчера, выступая на конференции консалтинговой компании Dun&Bradstreet в Москве, заместитель главы Минэкономики Андрей Клепач сделал несколько любопытных заявлений. Он признал, что дна российская экономика, вопреки мнению большинства экономистов, все еще не достигла. "Сейчас находимся около дна кризиса, и некоторое оживление ожидаем увидеть в июне-июле",— цитирует замминистра агентство "Интерфакс". Ощущение того, что разворот тенденции "не за горами", Андрею Клепачу придал "ряд позитивных сигналов из банковской системы", а также рост цен на нефть и металлы на мировом рынке. "Думаю, во второй половине 2009 года рост будет 4-5% по сравнению с первым полугодием. В результате в целом падение ВВП за 2009 год составит 7-8%, но, что важно, мы выйдем на позитивную динамику во втором полугодии",— заявил господин Клепач. Первое полугодие года для российской экономики является традиционно провальным в силу низкого роста в начале года. Таким образом, из года в год рост реального ВВП в первом полугодии является отрицательным, а во втором полугодии благодаря сезонности резко положительным. Оценка возможного роста ВВП на 4-5% во втором полугодии 2009 года по сравнению с первым полугодием, обнародованная Андреем Клепачом исходя из темпов падения ВВП в первом квартале 2009 года в 9,5%, по мнению экономистов ING Russia, очень даже пессимистична. Татьяна Орлова оценивает сезонный рост реального ВВП за второе полугодие в 20,5% в силу низкой базы. Господин Клепач, который заявляет о начале восстановления экономики в июне-июле, видимо, ожидает более низкого экономического роста в первом полугодии.
Вчера же замминистра заявил, что у российской экономики есть возможность избежать стагнации в 2010 году, когда рост может составить около 1%, хотя еще совсем недавно Андрей Клепач называл рост ВВП в 1% стагнацией, объясняя это тем, что он находится в пределах статистической погрешности. Россия "может вернуться на траекторию роста экономики и, если не в 2010 году, то через три года стать одной из наиболее динамично развивающихся стран". Впрочем, если цены на нефть будут держаться на уровне $50 за баррель, то позитивной статистики роста можно ожидать не раньше чем через "год-два", и, кроме металлургии, как надеется Андрей Клепач, его источником станут высокотехнологичные сектора.
Газета «Коммерсантъ» № 98 от 03.06.2009
Exercise 1
Translate the following into Russian.
А.
В.
To gather momentum; consumer spending; sustainable growth; to achieve target; to boost investment; soaring prices; to gain productivity; financial turmoil; to sustain losses; tumbling currency; real wages; economic recovery; buoyant profits; export-led recovery; provisional data; overall share of wages in GDP; to fuel a construction boom; robust growth; job insecurity; two successive quarters; upward revision; seasonally adjusted.
UNIT II
LEADING ECONOMIC INDICATORS
№ 2.0
Economic indicators are statistical data showing general trends in the economy. Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price Index, industrial production, bankruptcies, GDP, stock market prices, money supply changes.
Every week there are dozens of economic surveys and indicators released. In the past, experienced professionals and economists had an advantage in receiving these data in a timely fashion. Fortunately, the emergence of the internet has changed this situation by giving everyone access.
Economic indicators can have a huge impact on the market; therefore, knowing how to interpret and analyze them is important for all investors.
Economists typically group macroeconomic statistics under one of three headings: leading, lagging or coincident. Figuratively speaking, one views them through the windshield, the rearview mirror, or the side window. But how can an investor determine the direction of the economy in this blizzard of data?
Coincident and lagging indicators provide investors with some confirmation of where we are and where we've been, but here we'll take a look at the leading economic indicators. They're a good place to start, because they help us understand where the economy is heading.
Market Indexes
In order for an economic indicator to have predictive value for investors, it must be current, it must be forward-looking, and it must discount current values according to future expectations. Meaningful statistics about the direction of the economy start with the major market indexes and the information they provide about:
Although these measures are crucial to investors, they aren't generally regarded as economic indicators per se. This is because they don't look very far into the future - a few weeks or months at most. Charting the history of indexes over time puts them in context and gives them meaning. For instance, it is not terribly useful to know that it costs $2 to purchase one British pound, but it may be useful to know that the pound is trading at a five-year high against the dollar.
B. Index of Leading Economic Indicators
Ironically, the Conference Board's Index of Leading Economic Indicators (LEI) really isn't leading data. Upon release, the data is almost two months old, and most of the 10 component reports have been released prior to the LEI itself. It purports not to signal a change in market direction until the index has moved in the same direction, up or down, for three consecutive months, which it rarely does. It is widely viewed as a better harbinger of recession than expansion. However, it has predicted a number of recessions that did not occur, having once prompted American economist Paul Samuelson to suggest that "economists have correctly predicted nine of the last five recessions."
Weekly Data
Monthly Data
Several of the monthly data reports present data that is several months old, and can be characterized as leading from the rear, in something of an "I-told-you-so" fashion:
Conclusion
Leading economic indicators can give investors a sense of where the economy is headed in the future, paving the way for an investment strategy that will fit future market conditions. Leading indicators are designed to predict changes in the economy, but they are not always accurate so reports should be considered in aggregate, as each has its own flaws and shortcomings.
Wikipedia, the free encyclopedia
BASIC VOCABULARY
leading economic indicators опережающие экономические
показатели
coincident economic indicators совпадающие экономические
показатели
lagging economic indicators запаздывающие экономические
показатели
housing starts число новых строительств жилья
consumer price index (CPI) индекс потребительских цен
mortgage interest rate процент по ипотечному кредиту
foreign exchange rates валютный курс
jobless claims заявки на пособие по безработице
Purchasing Managers Index (PMI) индекс ожиданий менеджеров по закупкам
durable goods товары длительного пользования
factory orders производственные заказы
Consumer Confidence Index индекс потребительского доверия
Business Confidence Index индекс делового доверия, индекс предпринимательской уверенности
mutual fund взаимный фонд, фонд взаимных инвестиций
Translate the text into Russian. № 2.1
Consumer Malaise, Fiscal Fears
The French government has scaled back its forecast for 2005 economic growth. But even the lower version may prove too optimistic.
On June 21, Finance minister Thierry Breton said growth in real gross domestic product for 2005 will probably total less than 2%, instead of the 2% to 2.5% projected earlier. Unlike last year, when real GDP grew 2.1%, consumers are not fueling growth. In May, household spending on manufactured goods took an unexpectedly large drop, falling 0.9% from April. And while business confidence picked up in June, it remains well below the readings of 2004.
Consumers are struggling with higher energy costs and a weak job market. Big job losses in the factory sector led the 6,000 drop in first quarter payrolls. By April, the jobless rate had hit a five-year high of 10.2%, with more increases expected. Indeed, worries about protecting jobs and working conditions were a key reason given for the defeat in France of the European Union Constitution.
Because of the “no” vote, new Prime Minister Dominique de Villepin has unveiled a 4.5 billion euro plan to create jobs and loosen up hiring laws for small companies. Villepin hopes to have the plan in place by September when most French workers will return from their August holidays.
But any spending plan to boost employment will run up against France’s other major economic challenge: a growing fiscal deficit. With the economy slowing more than expected, the government is collecting less in taxes and paying more in social assistance than was budgeted. Unless the economy were to unexpectedly perk up, France will probably have a 2005 deficit equal to 3.1% of GDP. That would mark the fourth year in which France misses the EU limit on deficits, which is 3% of GDP.
A stronger economy this year does not seem likely. Private economists have cut their forecasts for growth, and even the government’s own statistical agency, INSEE, said on June 22 that real GDP expansion will probably be only 1.5%. Growth that slow will exacerbate France’s problems of weak job growth and a profligate government.
Business Week July 2005
Translate the text into Russian: № 2.2
July Index Data Signal
Pickup in U.S. Growth
The leading index of economic health rose for the fourth consecutive month, signaling a widespread pickup in the rate of U.S. growth.
The Conference Board, a business-research group in New York, said its composite index of leading indicators rose 0.4% in July to 112,5, an improvement from the revised 0.3% increase in June.
The index has been showing steady growth, increasing nearly 2% from March. The improvement in the index – a composite of 10 different economic measurements that are believed to be forward-looking – resembles a similar performance at the end of 2001 and in early 2002, which was followed by strong economic growth.
“The bottom line is that the leading economic indicators are more favorable than any time since the recession started more than two years ago,” said Ken Goldstein, an economist at the Conference Board.
“With export growth still months away, the burden now falls on consumer spending and business investment,” he added.
Since the economy sank into recession in 2001, U.S. employers have cut more than three million private-sector jobs. As a result, the unemployment rate has climbed to a nine-year high of 6.2%.
The Wall Street Journal, Europe August 2003
Translate the text into Russian: № 2.3
Вy the Numbers
The economy’s prospects look rather good.
U.S. President’s don’t
All presidents, whatever their confession or denomination, are closet numerologists. Numbers are how they read the mood and track the progress of the nation they govern. For George Bush, the numbers – rising casualty rates in Iraq, falling approval rating at home – have not been good of late. Hence he is turning with some enthusiasm to a happier set of figures: those tracking the American economy’s resilience and resurgence.
This week, he summoned his economic team to a meeting at his ranch in Crawford, Texas. Under a painting of a rodeo, they discussed an economy that is kicking strongly, but not bucking out of control. Output grew at an annual rate of 3.4% in the second quarter, a little slower than in the first. This was largely because firms chose to run down their inventories (subtracting 2.3 percentage points from growth) rather than making new stuff. With their shelves now depleted, companies are expecting to restock in the coming months and output is expected to rebound. Some analysts now forecast growth of 5% this quarter.
Momentum is gathering. Cars left the showrooms at a near-record rate in July (20.8m a year) and existing home sales reached all-time highs the month before (7.3m a year). Factories reported faster activity and fuller order books, especially for capital goods (up by 3.9% in June) that presage stronger investment. Even the federal government is doing well. So far this fiscal year, it has collected about $210 billion more in taxes than it had by this time last year.
Best of all, hiring is steady and sure. Employers added 207,000 workers to their payrolls in July, and 42,000 more than previously thought in May and June. They have hired about 200,000 workers a month on average since the end of January – not spectacular by the standards of the 1990s, but a marked improvement on Mr. Bush’s first term.
The Federal Reserve has digested the same numbers as Mr. Bush and reached a similar conclusion. There is much to welcome and little to fear in the economy’s current progress. This week, as widely expected, it raised interest rates by a quarter point.
Unlike central bankers and presidents, the public at large sets little store by numbers. Only a fifth of those polled recently by CBS News thought the country’s economic fortunes were improving, whatever the statisticians might tell them. More than half disapproved of Mr Bush’s handling of the economy.
What explains their skepticism? In Mr. Bush’s first term he was dogged by the question: Where are the jobs? Now the question is: Where are the pay rises? Workers’ total compensation grew strongly for the three quarters that began in July of last year – strongly enough to alarm some of inflation hawks at the Fed. But these gains were probably not very widespread, confined to those lucky employees who collected juicy bonuses or cashed in their stock options. Last quarter, according to figures released on August 9th, compensation actually fell, in real terms.
Indeed, the picture is worse for workers than these figures imply. Not all of an employee’s compensation ends up in his pay packet. Much of it goes in the form of benefits, such as employer contributions to health insurance or pensions. According to the Bureau of Labour Statistics, the cost of such benefits accounted for almost 60% of the gains in compensation enjoyed by private-sector workers in the first quarter of the year, and nearly 35% of the gains in the second. By the bureau‘s reckoning, wages and salaries proper grew by only 2.4% in the year to June, slower than the rate of inflation.
Despite these meager pay gains, households are eager to spend whatever they get. In June, they earned just over $9 trillion (at an annual rate) in disposable income. They duly disposed of all but $1.9 billion (0.02%) of it. Households save so little of what they earn because they gain so much from what they already own. In the 12 months to March the value of their houses rose by $2.3 trillion, according to the Fed. Home prices rose by almost 15% in the year to June, the fastest in decades.
Can these gains continue? One simply cannot know for sure. Even if a bubble in the housing market does exist, the Fed believes it should do little about it.
As for Mr. Bush, he still has more than three years to achieve his goal of reforming taxes. But before he can hope to transform the American economy, he must hope the economy’s good numbers transform his own flagging ones.
The Economist August 2005.
Translate the text into Russian. № 2.4
Improving on the Latin rate of growth
Three times in the past quarter-century, Latin America has played a leading role in global financial crises. So when investors around the world dumped risky assets in recent days, it made a refreshing change that Latin American shares, currencies and bonds were not singled out. That pointed to an economic transformation in the region. Taken as a whole, Latin America’s economies are doing better than they have for more than two decades.
In 2004, Latin America’s economies grew at an average rate of 5.9%, the fastest rate since 1981, as they finally pulled out of several years of stagnation (or worse in some countries). Though the pace has slowed a little, growth continues. Barclays Capital, an investment bank, reckons that in the first three months of this year the region grew at an annualized rate of 6%.
In some ways the growth looks more sustainable than in the past. Inflation, after a blip, averaged just 6.3% last year. Except for 2001, when it was 6.1%, that was the lowest rate since 1960s. The region has had a current-account surplus for the past three years. That is a sharp contrast with 1997, when growth of 5.55% saw a current-account deficit of 4.5% of GDP the following year – the unsustainable prelude to a wrenching round of devaluations and recessions.
Far from increasing its foreign debt, Latin America has used its growth to reduce it. Public debt is down too, from 72% of GDP in 2002 to 53% last year, according to the Inter-American Development Bank. That reflects stronger public finances. Bank calculates that the average fiscal deficit in the region has shrunk from 3.3% of GDP in 2002 to 1.7% last year.
All these changes have inspired a boom in Latin American assets. Stock markets have enjoyed three bumper years, and the risk premiums governments have to pay on their bonds have fallen to record lows. Unless commodity prices collapse and interest rates in the United States rise sharply, the region’s economies should sail safely through the current choppiness in financial markets, says Peter West, a Latin America specialist at Poalim Asset Management in London.
The Economist May 2006
to dump продавать по бросовым ценам, выбрасывать товар на рынок по низким ценам
Translate the text into Russian. № 2.5
Taking a Turn for the Better
Japanese companies are more confident about their prospects despite a big export slowdown and oil prices near $60 per barrel. The optimism is an indication that the sickly domestic economy is being nursed back to health.
The quarterly Tankan survey showed a broad-based improvement in business confidence. The June index of large manufacturers rebounded to 18, from 14 in March. The brighter outlook trickled down to medium and small businesses as well as nonmanufacturers. One of the biggest jumps came from companies that provide services for individuals, a sign that domestic demand is improving.
Businesses remain cautiously optimistic about the coming months even as exports remain a big question mark. Brighter prospects at home have companies lifting sales and profit expectations. As a result, businesses are ratcheting up capital investment plans and hiring workers. Through May, payrolls have grown by 750,000 persons, with the strongest gains coming in full-time hires.
The nascent turnaround in the labor market is already having positive effects. Despite cool weather conditions, May retail sales were up 2.7% from the previous year. June auto sales rose 8.6%. Even the housing market is showing early signs of improvement, with housing starts up 3% in May from previous-year levels.
Better times are paving the way to other vital changes in Japan’s economy. Brisk demand and rising wages and bonuses should help end the more than seven-year run of deflation. Analysts see a return to rising prices sometime next year. Brighter prospects are attracting foreign direct investment (FDI). In the fiscal year ended last March, FDI in Japan hit a record $36.7 billion. The influx of investment should help revive the ailing property market.
Japan’s economic fortunes will remain disproportionately linked to exports for the foreseeable future. Even with an upswing at home, economic growth in 2005 is unlikely to top 2%.. But more balanced growth will provide Japan the stability it needs to finally climb out of its long-running economic funk.
Business Week July 2005
to trickle down постепенно просачиваться
to ratchet up поднять, повысить
nascent рождающийся, в процессе становления
turnaround благоприятные изменения/поворот
influx приток, прилив, наплыв
funk уныние, паника, страх
Translate the text into Russian. № 2.6
It’s Time for Rates to Catch up
with Rising Euro-zone Growth
Germany is old and tired, and its economy is doomed to decline – that conventional wisdom has been rock-solid for so long. But not any more. The latest Ifo survey of business climate in Germany was a knockout. It was the highest since the boom time of May 2000. Even the long-suffering construction sector is looking up.
Estimates of German growth for 2006 are following the Ifo upward. The German government yesterday revised its own forecast up to 1.4% from 1.2%, but that still looks low. If the current optimism does not prove in vain, growth could easily reach 2%. That would be the highest since 2001. What’s more, this improved momentum can last for several years.
Germany has never really lost its economic advantages – an educated work force and world-class technological expertise. But for a decade or so, it has lost the plot on wages and unemployment benefits. That’s changed, thanks to a steady trickle of labor-market reforms and some tough tactics by corporate bosses. The only weak point in the recovery is household spending, but lower unemployment should fix it before long.
Germany may be ahead of Europe in its turnaround, but the latest indicators for the whole euro zone are also pretty encouraging. Even Italy, which really does have fundamental weaknesses, is looking a little better. If the healthier economic environment persists, government deficits should start to decline.
The Wall Street Journal January 2006
Translate the text into Russian. № 2.7
U.S. Factories Hit by Sharp Decline in Orders
Factory orders in the U.S. fell off sharply in August as demand declined at the fastest rate since the start of the year – a sign that the recovery in manufacturing could be running out of steam.
The decline in orders was led by a 40 per cent drop in demand for commercial aircraft, which helped distort the volatile monthly figures. But there was also weakness across a range of industries, including industrial machinery and home appliances.
Policy makers and investors are generally optimistic that business investment and industrial activity will be supported by overseas appetite for U.S. goods despite a slowdown in domestic demand aggravated by the credit squeeze and falling U.S. house prices.
But yesterday’s sharp decline in factory orders combined with other recent indicators of manufacturing activity underline the risk that industrial momentum may not be sustained in the face of economic headwinds at home and abroad.
The commerce department said orders fell 3.3 per cent last month in the biggest setback for manufacturers since January.
Orders for durable goods expected to last at least three years fell by 4.9 per cent, while demand for products with a shorter lifespan, such as food and petrol, fell by 1.6 per cent.
There were also tentative signs of weakness in the jobs market as the Department of Labor said the number of newly filed claims for unemployment benefits rose last week by 16,000 to a total of 317,000, the largest weekly increase in four months.
Today’s closely watched report on job creation is a critical gauge of the health of the economy and will provide the Federal Reserve with an important indication of how much support consumer spending may get from a tight labour market.
Figures showed a shock fall in jobs last month and triggered a wave of stock market declines, setting the stage for the Fed to cut interest rates by 50 basis points on September 18.
The Financial Times October 2007
Translate the text into Russian. № 2.8
Euro-zone Growth Forecasts Increase
Economists are raising their forecasts for 2007 growth and, in some cases, interest rates in the euro zone, after growth in the region accelerated unexpectedly in the three months ended in December.
Gross domestic product in the countries that use the euro currency grew 0.9% in the fourth quarter, fueled by strong showings across the region’s four largest economies – Germany, France, Italy and Spain – according to figures from Eurostat, the European Union’s statistics arm. That was well above expectations and the previous quarter’s 0.5% growth rate.
Economists said strong exports fueled by robust global growth were likely a prime factor behind the euro zone’s fourth-quarter sprint, though a detailed breakdown of the numbers wasn’t yet available.
“It’s very good news indeed, and very reassuring thing is that we now have shared momentum in the biggest countries of the euro zone,” said Gilles Moec, senior economist with Bank of America in London.
Still, the impact of domestic tax increases, the U.S.’s moderate slowdown and the European Central Bank’s six interest-rate increases since December 2005 are likely to combine to slow growth in the first quarter of this year. Economists say growth in 2007 is unlikely to match last year’s pace.
The Paris-based Organization for Economic Cooperation and Development, in a report also released yesterday, credited part of the recovery to continuing labor- and product-market overhauls across the euro zone. But it warned governments against complacency in the face of a cyclical upswing and said further changes are needed to boost the region’s long-term growth rate.
The Wall Street Journal February 2007
Translate the text into Russian. № 2.9
U.S. Economic Data Signal
a Broad Slowing of Growth
Data indicated a broad slowing in the U.S. economy, as factory orders were flat in August and service-sector growth cooled in September as price pressures eased.
Factory-goods orders were flat in August, after two months of declines, as demand for autos and parts offset weakness in most other areas, the Commerce Department said. July orders were revised to a 1% fall after an original estimate of a 0.6% decline. The August figures were slightly stronger than the 0.2% decline Wall Street forecasters had predicted.
The government revised its estimates for August durable-goods orders to unchanged, from the 0.5% decline reported last week. A barometer of business-investment spending – nondefence capital-goods orders excluding aircraft – rose 0.4%, after a 0.6% rise in July.
Over the past three months, overall activity in the manufacturing sector appears to be slowing. This week the Institute for Supply Management indicated manufacturing cooled further in September. Measures of inflation and employment also fell.
The ISM said its nonmanufacturing index, based mostly on service-related companies, fell to 52.9 in September from 57 in August and 54.8 in July. It had been expected to come in at 56. Readings higher than 50 represent expanding activity.
In the report, the ISM said the inflationary forces faced by the service sector eased markedly, with the September price index falling to 56.7 from 72.4 in August. September has the lowest reading since the 51.8 recorded for August 2003.
The Wall Street Journal October 2006
Translate the text into English. № 2.10
Как мы можем понять, что происходит в экономике? Экономисты
пользуются специальными экономическими данными, чтобы отслеживать, прогнозировать и анализировать изменения в экономике вообще и в ее отдельных отраслях.
Из различных экономических данных, публикуемых государственными и другими учреждениями, экономисты интересуются теми, которые отражают текущее или будущее состояние экономики. Эти сводки называются экономическими показателями, потому что они отображают состояние экономики. Они могут помочь менеджеру управлять своей компанией в изменяющихся условиях.
Где можно получить экономические данные? Кроме специализированных источников, вы можете найти их и их анализ в деловой прессе, особенно в национальных ежедневных деловых газетах («Ведомости», «Коммерсантъ»). Вот ключевые экономические показатели:
Уровень экономического роста
Цены и инфляция
Процентные ставки
Безработица
Строительство и продажа жилья
Розничная торговля и продажа новых автомобилей
Рынок ценных бумаг
Крупнейший показатель: уровень экономического роста
Этот основной показатель отражает процент роста всей экономики, рассчитываемый по ВВП. Сам ВВП определяется как общий размер экономики. Данный показатель состоит из следующих слагаемых: потребительские расходы, инвестиции, государственные расходы и чистый экспорт (экспорт минус импорт).
Он публикуется ежемесячно. Но, к сожалению, его позднее пересматривают. Разница между первоначальными и конечными значениями может достигать одного-двух процентов для показателя, среднее значение которого составляет примерно три процента.
Рассмотрите отклонения от этого трехпроцентного уровня и найдите тренд. Тренд — это самый важный элемент. Если происходит сокращение экономического роста в течение нескольких месяцев или кварталов, то, возможно, условия существования многих видов бизнеса станут более трудными. В периоды снижения роста покупатели тратят меньше, следовательно, компании делают то же самое. Компании не желают производить и накапливать у себя продукцию, которая не находит сбыта, и сокращают производство. Если вы заметили, что ваш бизнес снижает обороты, было бы отличной идеей отследить поведение ваших покупателей и графики продаж, и, возможно, вам придется сократить производство, закупки сырья и количество принимаемых на работу. Не впадайте в панику, но будьте особенно внимательны во время такого замедления.
Если экономический рост ускоряется, потребители начинают тратить много денег. Люди чувствуют себя уверенно на своих рабочих местах и хотят совершать больше покупок и пользоваться кредитом. В такие времена большинство фирм пытаются «ковать железо, пока горячо», извлекая преимущества из создавшихся условий. Как и во время замедления темпов роста экономики, вы должны наблюдать за поведением ваших клиентов и отслеживать продажи. Избегайте чрезмерного развертывания деятельности, привлечения слишком большого количества работников и т.д. Для экономики как плохие времена, так и хорошие не продолжаются вечно.
Translate the text into Russian. № 2.11
Chile’s Economy
Stimulating
Cashing in the fruits of rigour
Long held up as a model of policymaking that others in Latin America and beyond should follow, Chile’s economy has recently seemed oddly lacklustre, with growth below the regional average and inflation stubbornly high. As a small, open economy it is uncomfortably exposed to the world recession—the price of copper, its main export, has fallen by almost two-thirds since mid-2008. But virtue sometimes has its reward. More than any other government in the region, Chile’s is able to take action to stimulate the economy. Now it has done so.
Last month Andrés Velasco, the finance minister, unveiled fiscal measures worth $4 billion. Government spending will rise this year by 10.7%. On February 12th the independent Central Bank joined in, slashing its benchmark interest rate by a massive two-and-a-half percentage points, to 4.75%. These measures mean the economy may suffer only a mild downturn.
Mr Velasco’s package includes an extra $1 billion for Codelco, the state-owned copper company, to finance investment; $700m for infrastructure projects; extra benefits for poorer Chileans; and temporary tax cuts for small businesses. The measures are better designed than similar efforts in rich countries, says Eduardo Engel, a Chilean economist at Yale University. “There’s almost no pork.”
Mr Velasco himself says that the challenge is to get the bulldozers moving: “We looked for projects we can do quickly.” Much of the money will go on houses for the poor and road maintenance. He reckons these public works will create 70,000 new jobs directly. They follow an earlier, smaller fiscal stimulus last year.
The government forecasts this year’s fiscal deficit at 2.9% of GDP, but it can easily afford this. That is because it has stuck to a rigorous fiscal rule drawn up by its predecessor requiring it to save much of the revenue gained when the copper price rises. Not only is public debt minimal (4% of GDP in December), but the government has also piled up $20.3 billion (about 12% of GDP) in a sovereign wealth fund which it can now spend. That marks a contrast with neighbouring Argentina, whose government has financed an increase in spending by nationalising private pension funds, shredding investor confidence.
The fall in commodity prices has at least helped to cut Chile’s inflation rate, from 9.9% for the year to October to 7.1% in December. By the end of this year it should have fallen back within the Central Bank’s target range of 2-4%, reckons Rodrigo Valdés, the bank’s former chief economist who now works for Barclays Capital. He expects further substantial interest rate cuts in the course of the year.
Lower rates will not necessarily encourage Chile’s banks, some of which are foreign-owned, to lend. So officials are also trying to inject cash and confidence into the banking system. They have done this in two ways. The Central Bank, which has ample reserves, has auctioned dollars. And the government has given a $500m capital boost to BancoEstado, a state-owned entity which is the third-biggest commercial bank, to allow it to expand lending, especially for mortgages and small businesses.
The government’s decision to save so much of the copper windfall was not popular at the time. But “being a Keynesian means being one in both parts of the cycle,” Mr. Velasco says. His approval ratings in opinion polls have leapt over the past few months, as have those of his boss, Michelle Bachelet, Chile’s president. The ruling centre-left Concertación coalition, which has been in power since 1990 and had been looking tired, now has a chance in a presidential election next December it had seemed certain to lose. Good policy can sometimes be good politics.
The Economist February 2009
Translate the text into Russian. № 2.12
Economists See Slump Ending in September
Economists in the latest Wall Street Journal forecasting survey expect the recession to end in September, though most say it won’t be until the second half of 2010 that the economy recovers enough to bring down unemployment.
Gross domestic product was predicted to contract in the first and second quarters of this year by 5.0% and 1.8%, respectively, on a seasonally annualized rate. A return to growth – a modest 0.4% - isn’t expected until the third quarter. In the fourth quarter of 2008, the most recent period for which data are available, the economy contracted 6.3%.
“The end of the decline isn’t the beginning of the recovery,” said David Resler of Nomura Securities Inc. “It’s like a boxing match. Even if you win the fight, it’s not going to feel as good when you get out of the ring as when you went in.”
Indeed, economists’ prospects for the labor market remain bleak. Just 12% of the economists expect the unemployment rate to fall some time this year. More than a third of respondents expect the jobless rate to peak in the first half of 2010, while about half don’t see unemployment declining until the second half of 2010. By December of this year, the economists on average expect the unemployment rate to reach 9.5%, up from the 8.5% reported for March. They do see the rate of declining slowing, forecasting 2.6 million job losses in the next 12 months, compared with the 4.8 million jobs lost in the previous period.
Even when the economy stops shedding jobs, the unemployment rate is likely to remain elevated for some time. “The unemployment rate isn’t going to recover, because you have to get back everything you lost and then some,” said Joseph Lavorgna of Deutsche Bank Securities Inc. He estimated that the economy would have to grow an average of about 4% for six years to get back to the sub-5% unemployment rates seen in 2007.
Despite the grim news for jobs, economists are seeing more signs of a recovery in the broader economy this year. On average, the 53 economists surveyed expect the recession to end in September, compared with the October forecast last month. It marked the first time since the recession began that the economists didn’t push the date of recovery further into the future. The survey was conducted April 3-6, before the release of trade data this week that led some forecasters to revise upward their outlook for the first quarter.
Several factors are raising hopes, chief among them businesses’ sharp cuts in production and inventory late last year. The economy may be reaching a point where even meeting subsistence demand requires an increase in output. Empty shelves need to be restocked, even if at lower levels than before.
Meanwhile, asked to name the biggest risk to their forecasts, economists singled out problems in the credit markets. “Once the virtuous cycle starts, the chief headwind will be credit availability,” said Kurt Karl of Swiss Re. The possibilities of a failure of a major financial institution and persistent reluctance of consumers to spend, both related to the credit markets, were tied for second place in the list of concerns.
The Wall Street Journal April 2009
Exercise 2 Translate the following into Russian:
Household spending; business confidence; manufactured goods; factory sector; fiscal deficit; index of leading indicators; economic performance; order books; interest rates; in real terms; wages and salary; a decade; public debt; commodity prices; domestic demand; deflation; foreign direct investment; turnaround.
UNIT III
GOVERNMENT DEFICIT
AND BALANCE OF PAYMENTS
№ 3.0
A. A budget deficit occurs when an entity spends more money than it takes in. The opposite of a budget deficit is a budget surplus. Debt is essentially an accumulated flow of deficits. In other words, a deficit is a flow, and debt is a stock.
An accumulated deficit over several years (or centuries) is referred to as the government debt. Government debt is usually financed by borrowing, although if a government's debt is denominated in its own currency it can print new currency to pay debts. Monetizing debts, however, can cause rapid inflation if done on a large scale. Governments can also sell assets to pay off debt. Most governments finance their debts by issuing long-term government bonds or shorter term notes and bills. Many governments use auctions to sell government bonds.
Governments usually must pay interest on what they have borrowed. Governments reduce debt when their revenues exceed their current expenditures and interest costs. Otherwise, government debt increases, requiring the issue of new government bonds or other means of financing debt, such as asset sales.
According to Keynesian economic theories, running a fiscal deficit and increasing government debt can stimulate economic activity when a country's output (GDP) is below its potential output. When an economy is running near or at its potential level of output, fiscal deficits can cause inflation.
In economics, the balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country's status in international trade, with net capital outflow.
The balance, like other accounting statements, is prepared in a single currency, usually the domestic. Foreign assets and flows are valued at the exchange rate of the time of transaction.
C. Current account
The balance of trade is the difference between a nation's exports of goods and services and its imports of goods and services, if all financial transfers and investments and the like are ignored. A nation is said to have a trade deficit if it is importing more than it exports.
In economics, the current account is one of the two primary components of the balance of payments, the other being the capital account. It is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid).
The current account balance is one of two major metrics of the nature of a country's foreign trade (the other being the net capital outflow). A current account surplus increases a country's net foreign assets by the corresponding amount, and a current account deficit does the reverse. Both government and private payments are included in the calculation. It is called the current account because goods and services are generally consumed in the current period.
Positive net sales abroad generally contributes to a current account surplus; negative net sales abroad generally contributes to a current account deficit. Because exports generate positive net sales, and because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports.
The net factor income or income account, a sub-account of the current account, is usually presented under the headings income payments as outflows, and income receipts as inflows. Income refers not only to the money received from investments made abroad (note: investments are recorded in the capital account but income from investments is recorded in the current account) but also to the money sent by individuals working abroad, known as remittances, to their families back home. If the income account is negative, the country is paying more than it is taking in interest, dividends, etc. For example, the United States' net income has been declining exponentially since it has allowed the dollar's price relative to other currencies to be determined by the market to a point where income payments and receipts are roughly equal. The difference between Canada's income payments and receipts have been declining exponentially as well since its central bank in 1998 began its strict policy not to intervene in the Canadian Dollar's foreign exchange. The various subcategories in the income account are linked to specific respective subcategories in the capital account, as income is often composed of factor payments from the ownership of capital (assets) or the negative capital (debts) abroad. From the capital account, economists and central banks determine implied rates of return on the different types of capital. The United States, for example, gleans a substantially larger rate of return from foreign capital than foreigners do from owning United States capital.
In the traditional accounting of balance of payments, the current account equals the change in net foreign assets. A current account deficit implies a paralleled reduction of the net foreign assets.
From Wikipedia, the free encyclopedia
BASIC VOCABULARY
|
budget deficit |
дефицит бюджета |
|
budget surplus |
профицит бюджета |
|
government debt |
государственный долг |
|
balance of payments |
платежный баланс |
|
balance of trade |
торговый баланс |
|
current account |
платежный баланс по текущим операциям |
|
capital account |
баланс движения капитала |
|
assets |
активы |
|
liabilities (debits) |
обязательства, пассивы, задолженность |
|
obligations (credits) |
обязательства (кредиты) |
Translate the text into Russian. № 3.1
U.S. Trade Deficit Widens as Oil-imports Costs Jump
The U.S. trade deficit widened in March, as higher imports of more-expensive crude-oil offset gains in U.S. exports.
The deficit, the largest in six months indicated that trade was likely an even larger drag on economic growth than previously thought, analysts said.
“The trade deficit was a disappointment, and we could see GDP growth for the first quarter revised below 1% and that would indicate a harder landing than anticipated,” said Marc Pado, a U.S. market strategist at Cantor Fitzgerald.
The U.S. deficit in international trade of goods and services rose 10.4% to $63.89 billion from February’s revised $57.89 billion, the Commerce Department said.
The U.S. deficit with China, America’s largest two-way trade deficit, was $17.25 billion.
Washington has taken a tougher stand with Beijing on trade issues recently. Top Chinese economic officials are scheduled to visit Washington later this month for bilateral economic talks.
During March, imports and exports both rebounded, but the 1.8% rise in exports wasn’t enough to offset a 4.5% rise in imports.
The U.S. exported record amounts in March to Canada, the European Union, Germany, China and Japan, with sales buoyed by stronger exports of industrial supplies such as gold and other metals, chemicals and coal. Energy imports surged, both in price and quantity. Imports of consumer goods also rose, while imports of capital goods decreased.
While the report confirmed that the trade deficit subtracted from growth of the U.S. economy during the first quarter of 2007, many economists hope that trade will contribute to faster growth later in the year, as a weaker dollar and healthier economies around the world boost exports.
The Wall Street Journal May 2007
Translate the text into Russian. № 3.2
Why Americans Should Root for the Dollar to Weaken More
Last year, the U.S. dollar did what economists had long predicted it would have to do: It fell in value against other currencies. And many believe that if Americans know what is good for them, they should be hoping for more of the same this year.
A weaker dollar creates plenty of hardships. Not only do European vacations get more expensive for Americans, so do Chinese-made television sets and other imported goods. For foreigners, a weaker dollar means their investments in the U.S. lose value. But in the eyes of economists, the more the dollar weakens, the more it helps alleviate one of the great worries of our time: the gaping U.S. current-account deficit.
The current account, which includes trade flows and other international payments, measures exactly how much Americans’ spending is outpacing their income – and how much they are borrowing from abroad to fill the gap. The U.S. is estimated to have rung up a deficit of about $900 billion in its current account last year. That is equivalent to nearly 7% of the U.S. economy – a level that, if sustained, would cause the nation’s foreign debts to pile up to dangerous levels.
A weaker dollar would help narrow the deficit by making U.S. exports more attractive to foreign buyers while making it costlier for Americans to buy products from abroad.
A tougher question is how far and how fast the dollar needs to fall. Some economists fear a sudden plunge will roil international markets and trigger a U.S. recession. Others believe a slower and more manageable adjustment is under way. They guess it could take a decline of 8% to 25% over as long as 10 years to get the U.S. current–account deficit down to a more sustainable level of 3% of gross domestic product.
During the past several years, the dollar’s movements have played into the hands of those who believe the currency’s adjustment will be slow and not too painful. After gradually weakening from its 2002 peak, the dollar strengthened in 2005, even as the U.S. current-account deficit set records. In 2006, the U.S. currency weakened again, as evidence of improving economic growth in Europe prompted investors to put more money into euros. By the end of last week, the dollar’s value against a basket of U.S. trading partners’ currencies was down 2% from a year earlier and 17% from its February 2002 high.
A weaker dollar by itself won’t be enough to resolve global imbalances. Many economists agree that Americans also need to save more, either by spending less or by cutting the federal budget deficit. As of November, U.S. consumers’ spending exceeded their disposable income by 1%.
Stronger growth abroad could play a role in shrinking the current-account deficit by increasing U.S. exports, though some believe the benefits would be limited.
Beyond that, much depends on which currencies the dollar weakens against. Economists view Asian currencies as most crucial because trade deficits with Asian countries account for more than half of the U.S. current-account gap.
With all the caveats taken into account, economists’ estimates vary widely on how much the dollar would have to weaken to bring the current-account deficit into line.
The Wall Street Journal January 2007
Translate the text into Russian. № 3.3
Revenues Narrow U.S. Budget Deficit
U.S. revenue collections hit a high in April, contributing to a further improvement in the budget deficit for the year.
Releasing its monthly budget report, the Treasury Department said Thursday that through the first seven months of this budget year, the deficit totals $80.8 billion, significantly below the $184.1 billion imbalance run-up during the first seven months of the 2006 budget year.
So far this year, tax revenues total $1.505 trillion, an increase of 11.2% over the same period last year. Tax collections swell in April every year as individuals file their tax returns by the deadline.
For the first seven months of this budget year, which began Oct. 1, revenue collections and government spending are at highs.
The Congressional Budget Office said that it now expects the deficit for all of 2007 to total between $150 billion and $200 billion. That would be a significant improvement from last year’s deficit of $248.2 billion, which had been the lowest imbalance in four years.
The federal budget was in surplus for four years from 1998 through 2001 as the long economic expansion helped push revenues higher. But the 2001 recession, the cost of fighting a global war on terror and the loss of revenue from President George W. Bush’s tax cuts sent the budget back into the red starting in 2002.
The administration’s budget sent to Congress in February projects that the deficit will be eliminated by 2012 even if the president achieves his goal of getting his tax cuts permanent. They are now slated to expire in 2010.
However, the critics say the improvement in the deficits will be only temporary with deficits expected to balloon again with the higher Social Security and Medicare payments needed as 78 million baby boomers retire.
The Wall Street Journal May 2007.
Translate the text into Russian. № 3.4
Japan Has First Surplus With China For a Decade
Japan earned more from exports to China than it spent on imports last month – the first time in almost a decade that it has run a trade surplus with its fast-expanding neighbour.
Figures released yesterday show the overall Japanese trade surplus rose for the eighth consecutive month in February to Y1,407bn – a 52 per cent rise on a year earlier and the highest level since 1998.
The trade surplus highlights the role the rest of Asia is playing as a source of growth for Japan, a feature of the country’s recovery.
Japan’s economy expanded by an annualised 6.4 per cent in the past quarter, thanks to export growth and related business investment at home with household consumption - another potential source of growth – registering a minor gain.
Peter Morgan, chief economist at HSBC in Tokyo, said: “We’re still seeing strong growth in exports and that suggests the economic expansion will continue for some time. As long as global growth holds up, Japanese growth tags along.”
Exports to China hit Y590bn, topping imports – of Y577bn – for the first time since 1994, as a demand for machinery, semiconductors and electronic consumer goods accelerated.
The export growth, however, also stems from growing number of Japanese companies that send parts to Chinese factories for assembly and then ship products elsewhere.
Japan’s expanding trade surplus is likely to add to upward pressure on the yen, which was steady at about Y106 against the dollar in Tokyo yesterday.
The Financial Times March 2004.
Translate the text into Russian. № 3.5
Japan’s Current Account Reaches a Record Surplus
Japan’s current-account surplus surged to a record in March as exports remained strong and imports fell for the first time in more than three years, the Finance Ministry said.
The surplus in the current account, the broadest measure of trade in goods, services and investment earnings, widened 36.9% to 3.317 trillion yen before seasonal adjustment, the Ministry said.
The increase was mainly because of a slowdown in imports, which fell for the first time in 37 months, a ministry official said. Imports were affected by a decrease in business in Asia, especially China, because of the Lunar New Year holidays, the official said.
Economists said yen weakness will continue to support growth in the current-account surplus. ”As long as the trend of the weak yen continues, the Japanese current account will remain strong, underpinned by companies’ healthy overseas business,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute.
The current-account surplus for the fiscal year ended in March rose 11.1% to 21.253 trillion yen, topping 20 trillion yen for the first time.
Separately, the Japanese central bank said corporate-goods prices rose 2.2% in April from a year earlier, marking the biggest year-to-year increase since December, when the index gained 2.5%. April’s growth marks the 38th straight month of increase.
The Wall Street Journal May 2007
Translate the text into Russian. № 3.6
Korea Posts Record Nine-month Trade Surplus,
Despite Declines
South Korea had a larger-than-expected $3.79 billion trade surplus in October, helped by brisk exports of information-technology products and rising demand from emerging markets including China, the Ministry of Knowledge Economy said Sunday.
The government says it now expects that monthly exports and imports will begin to grow in November, partly helped by the low base from the year-earlier periods.
This projection is a come-down from its previous one, as it had said a month earlier that the exports and imports would grow at the beginning of the fourth quarter, in October. But the government still points to a faster-than-expected recovery of domestic and global demand.
South Korea is one of the first economies in the region to report trade data, and thus provides a gauge to market watchers in assessing global demand.
According to the preliminary data, exports in October fell 8.3% from a year earlier at $34.03 billion, less than the 12% decline projected by market watchers, while imports were down 16.3% at $30.23 billion, versus a forecast for a 15.7% decline.
The trade balance was in the black for a ninth straight month, with the surplus for the January-October period totaling $34.58 billion, the biggest on record, followed by a $31.9 billion surplus in the first 10 months of 1998.
In September, Korean exports and imports fell 7.8% and 24.6% respectively, for a $4.7 billion surplus.
The latest data are expected to fuel growing optimism that South Korea will be one of the countries that weathers the severe global economic downturn better than expected this year.
Such optimism was recently backed up by the government, which now sees possibilities for gross domestic product to expand this year, since South Korea’s production and exports are doing far better than when it had expected GDP to contract 1.5% this year.
According to recent production data, industrial output jumped 11% in September from a year earlier, the fastest pace in 20 months.
A majority of analysts still believe the Bank of Korea won’t start to raise rates from an all-time low of 2% before early next year, due partly to the opposition from the government, which is warning that a hasty rate increase will hurt the nascent recovery. Still, experts say the firm economic indicators announced recently are more than enough to sway the central bank to adjust its policy rate.
Exports to China, South Korea’s biggest export destination, rose 3.4% from a year earlier in the first 20 days of the month, while those to the Association to Southeast Asian Nations jumped 9.0% in the same period, marking the first rise this year.
Compared with the first 20 days of October 2008, shipments to developed nations were weaker, with exports to the U.S. down 37.4%. Shipments to the European Union were off 19% and those to Japan were down 22.5%.
The Wall Street Journal November 2009
Translate the text into Russian. № 3.7
The White House on Monday raised its forecast for this year's U.S. budget deficit by $89 billion due to the recession, millions of new unemployment claims and corporate bailouts. The new estimate predicted a deficit of $1.84 trillion, or 12.9 percent of gross domestic product, for the fiscal year ending September 30. It updated the White House's February forecast of a $1.75 trillion deficit, or 12.3 percent of GDP.
White House officials said the gloomier picture reflected weaker tax receipts as the economy declined and higher costs for social safety-net programs such as unemployment insurance. Spending on government rescues for the financial and automobile industries also played a part.
While the Democratic-led Congress has approved the broad outline of Obama's proposed FY 2010 budget that includes initiatives on healthcare, education and other items, many lawmakers are wary about the deficit outlook. "It's clear that there is much more that we can do to protect our children and grandchildren from the unprecedented trillions in additional debt proposed by the administration," Senate Republican leader Mitch McConnell said in a statement.
The White House countered that Obama inherited huge deficits from his Republican predecessor President George W. Bush. The higher deficits "are driven in large part by the economic crisis inherited by this administration," White House budget director Peter Orszag said on his blog.
After taking office in January, Obama released a bare-bones version of his budget in February with a spending plan for 2010 carrying a price tag of $3.55 trillion. The White House has now revised up the size of the spending plan to $3.59 trillion.
The U.S. economy shrank at a steep 6.1 percent rate in the first three months of this year.
The new White House figures bring the deficit estimates closer in line with the non-partisan Congressional Budget Office, which has forecast a $1.85 trillion deficit this year and $1.38 trillion in fiscal 2010. To allay worries about the deficit and fend off Republican attempts to paint him as a big spender, Obama in the past week has rolled out a series of announcements aimed at showing he is working to stem the red ink. Last week, he said he could wring $17 billion in savings from his budget by cutting waste in areas from weapons systems and education to the cleanup of abandoned mines.
But the cuts in 121 programs amounted to less than one-half of 1 percent of the total budget for 2010 and even the slim list of reductions is likely to face resistance in Congress.
Obama also unveiled a plan to toughen tax policies for multinational companies that invest abroad and to close loopholes on overseas tax shelters. Many businesses strongly oppose the proposed changes for multinational firms.
Obama on Monday highlighted more savings at a White House forum on making the U.S. healthcare system more efficient.
Reuters May 2009
Translate the text into Russian. № 3.8
Geithner Tells China U.S. Will Tackle Budget Deficit
Treasury Secretary Timothy Geithner told China that the U.S. wants to shrink its budget gap as soon as an economic recovery takes hold, reassuring the nation that is the biggest holder of U.S. government debt.
The U.S. goal is a deficit of “roughly 3 percent” of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today in a speech in Beijing.
Geithner’s maiden visit to China as treasury secretary aims to deepen cooperation in dealing with the global financial crisis in meetings with Premier Wen Jiabao, President Hu Jintao and Vice Premier Wang Qishan. U.S. government debt has this year handed investors the worst loss since at least 1977 on forecasts for ballooning deficits and Wen has expressed concern about the “safety” of China’s dollar assets.
“The Chinese public is worried about the safety of its foreign-exchange reserves,” said Yu yongding, a senior researcher at the government-backed Chinese Academy of Social Sciences and a former central bank adviser. “If America fails to adjust its economy by increasing its saving rate and reducing its current account deficit another financial crisis triggered by a dollar crisis could be inevitable,” Yu said in an e-mail.
China held about $768 billion of Treasuries as of March. For the fiscal year that ends Sept. 30, the U.S. deficit is projected to reach a record $1.75 trillion from last year’s $455 billion shortfall, according to the Congressional Budget Office.
‘Sustainable’ Deficit
Geithner said that China’s investments in U.S. financial assets are very safe, and that the U.S. is committed to a strong dollar.
“We are going to have to bring our fiscal deficit down to a level that is sustainable over the medium term,” Geithner said. “This will mean bringing the imbalance between our fiscal resources and our expenditures down to the point -- roughly 3 percent of GDP -- where the overall level of public debt to GDP is definitely on a downward path.”
The U.S. will need to phase out the tax cuts and bank rescue programs set up to help the economy recover from a deep recession, Geithner said. Spending cuts also will be needed, along with health care reform and new budget constraints like pay-as-you-go rules.
The global economic recession “seems to be losing force” although recovery will be a long and slow process, he said, acknowledging General Motors Corp. factory closures and its corporate reorganization being announced today in Washington.
China’s manufacturing expanded in May, two reports showed today, in response to the country’s 4 trillion yuan ($585 billion) stimulus package announced last year.
Bloomberg June 2009
President Barack Obama, hoping to enhance his reputation for fiscal discipline at a time of increasing worry over runaway government spending, challenged lawmakers Tuesday to codify "pay as you go" budget rules in law.
Mr. Obama on Tuesday outlined a proposal that would require any new tax cut or entitlement program be paid for. "The pay-as-you-go rule is very simple," he said. "Congress can only spend a dollar if it saves a dollar elsewhere. … Entitlement increases and tax cuts need to be paid for. They are not free, and borrowing to finance them is not a sustainable long-term policy."
The federal budget deficit is projected to approach $2 trillion in the current fiscal year, blowing through all records and triggering fears that the massive borrowing required to finance the government could damage the U.S.'s creditworthiness, push interest rates higher and stifle an economic recovery.
Republicans say Mr. Obama's push for so-called pay-go rules amounts to little more than a public-relations campaign, complaining that the rules won't bring down the deficit, but will allow Democrats to fund more government spending with tax increases. The rules would apply to mandatory spending only, not discretionary spending.
Mr. Obama's attention to pay-go rules came a day after he touted plans to speed up the implementation of the $787 billion economic-stimulus package and as he pushes for an expensive overhaul of the nation's health-care system.
It also follows a new Gallup poll that suggests Americans are less enthusiastic about Mr. Obama's stewardship of the budget. The percentage of people who approve of the president's handling of the deficit has fallen three percentage points since March to 46%, according to the poll released Monday.
In his speech Tuesday, Mr. Obama acknowledged public skepticism over the government's ability to restore its finances, but he said pay-go rules would help lawmakers cut through politics.
"The debate of the day drowns out those who speak of what we may face tomorrow. That is why 'pay as you go' is essential," Mr. Obama said. "It requires Congress to navigate the ebb and flow of politics while remaining fixed on that fiscal horizon. "The rules would include automatic cuts in mandatory programs as penalties for violations.
The Wall Street Journal June 2009
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(Kazan, May 26, Tatar-inform). Russia will have a federal budget deficit of 9% of GDP in 2009, a government source told reporters, says Interfax. The previous deficit forecast was 7.4% of GDP, not including National Welfare Fund assets.
"We're taking a more pessimistic scenario [than the one set down in the budget], just in case, but the general economic situation could turn out better," the source said.
The source said the forecast was for GDP to shrink between 6% and 8% this year. Economic Development Minister Elvira Nabiullina herself has aired these figures.
Deputy Finance Minister Oksana Sergiyenko said in a speech at the Financial Academy on Tuesday that the budget deficit could exceed 9% in 2009.
"If the macroeconomic situation is less favorable, the deficit could exceed 9% of GDP, and that's quite a figure," she said, adding that this included expenditure by the National Welfare Fund.
Interfax May 2009
Translate the text into Russian. № 3.11
The European Commission said Monday that it will formally warn eight euro zone nations — including Germany, a champion of fiscal prudence— about ballooning budget gaps that will break EU rules.
Germany's budget deficit is expected to reach 3.9 percent of the country's gross domestic product in 2009. The EU expects it to go to 5.9 percent in 2010 — almost double the 3 percent ceiling of the EU's sound budget rules that underpin the stability of the euro.
Finance ministers of the 16 EU nations that share the euro reviewed national spending plans showing 13 of them will have budget gaps of more than 3 percent of GDP this year: Belgium, Germany, Italy, the Netherlands, Austria, Portugal, Slovenia, Slovakia, Greece, Ireland, Spain, France and Malta.
Concerned that governments may try to spend their way out of the current recession, EU Monetary Affairs Commissioner Joaquin Almunia said he hoped that when he issues formal spending warnings later this year the violators will recommit to the euro's sound budget rules. "I hope that ... I will receive unanimous support from the ministers for the stability and growth pact" that contains the sound financing rules, said Almunia.
He told the euro zone finance ministers he does not expect their economies to show growth again until at least the middle of next year. "In the second and third quarters of 2010 our economies — as an average — will start having positive figures in growth," he told reporters."
He said there was no point in executing an "exit strategy" from the recession — by requiring governments to clear debts racked up during the economic slump — until then. "We cannot start an exit strategy before we have overcome the deep recession we are suffering now," Almunia said.
In the current recession, the EU is cutting governments that are opening their wallets wide in social and other spending to let costly economic revival packages soften the impact of the recession. Stalling growth and surging unemployment have hit government revenues, just as they pay out billions more in social welfare and health care to the rising number of unemployed.
EU governments have agreed on stimulus packages more than euro225 billion in 2009 and 2010 in tax breaks and infrastructure projects. They have also set aside many billions to cover capital injections and guarantees for banks that may not ever be called in.
Los Angeles Times June 2009
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К нынешнему экономическому кризису Россия была готова едва ли не лучше всех стран мира. Среднегодовой рост ВВП в первой половине 2008 года достиг 8%. Из стран БРИК быстрее росли лишь экономики Китая и Индии. Тогда в моде была теория, что рост развивающихся экономик не связан с США и вполне может продолжиться независимо от американских проблем. В предкризисном году страна обладала мощным бюджетным профицитом и положительным текущим сальдо, и была неуязвимой с точки зрения величины внешнего долга - всего 18% ВВП. Не слишком сильной была и зависимость российских банков от внешнего финансирования. Еще одним аргументом в пользу России был относительно малый размер ее финансового сектора - отношение банковских активов к ВВП было минимальным. О том, что же все-таки случилось, рассказывает президент АРБ Гарегин Тосунян.
"Да, предкризисный запас прочности у России был достаточно велик. Устойчивый двойной профицит - бюджета и текущего счета операций, рост золотовалютных резервов до 37% ВВП - все это позволяло иностранцам говорить о нашей стране как об "островке стабильности" в условиях будущего кризиса. Но, как оказалось, ни миллиарды долларов международных резервов, ни бюджетный профицит в 6-8% ВВП вовсе не защитили российскую экономику, а лишь амортизировали кризисный шок. Почему же так получилось?
Мы недооценили превышение стоимости мирового роста сырьевых ресурсов и в связи с этим, недостаточность внутренних кредитных ресурсов в экономике. Банки давали деньги реальному сектору под более чем 20% годовых. Чтобы понять это, нужно посмотреть, как устроена российская денежная система. Доля кредита по отношению к ВВП и до кризиса была в три-четыре раза ниже нормы. А это значит, что российские предприятия не получали кредитных ресурсов и были вынуждены использовать разные "суррогатные" способы вроде вексельных кредитов, бартера или крайне дорогих займов отдельных банков, которые еще давали деньги реальному сектору экономики.
Но потом цены на сырье упали, и этот источник иностранных денег иссяк. При этом еще и Центробанк стал зажимать наличную денежную массу, чтобы она не вырвалась на валютный рынок и не привела к девальвации рубля. Поскольку дешевого кредита нет, доходы падают и потребитель резко ужимает свою активность, то растут издержки. А они, в свою очередь, вынуждают производителя повышать отпускные цены, то есть происходит инфляция издержек.
И я утверждал ещё тогда, что нужно срочно снижать ставку рефинансирования ЦБ, а они уверяли, что я не прав. В первую очередь нужно было стимулировать реальное производство, и при этом выдержать "золотую середину" - не разгонять волну инфляции. Но в первую очередь нужно было стимулировать производство. Потому что у нас, в отличие от остального мира, случился вовсе не кризис перепроизводства, а прямо противоположное. А с инфляцией нужно было бороться в первую очередь за счет сдерживания тарифов госмонополий. Но ставку рефинансирования и сейчас можно снижать, и это не вызовет роста инфляции в реальной экономике и в финансовой системе".
В экономике, как правило, существует определенный уровень денежной массы и кредита. И если он выше - возникает монетарная инфляция, если ниже - инфляция издержек. Именно последняя сегодня, по мнению некоторых экспертов, "косит" российскую экономику, а финансовые власти борются с ней чисто монетарными методами - сжимая денежную массу. Это по разным оценкам лишь усугубляет ситуацию в экономике. Задолженность по зарплате в стране продолжает расти. А на горизонте уже маячит еще одна волна кризиса - просроченных банковских долгов.
ИД «Регламент»
Render the text in English. № 3.13
Михаил Москвин-Тарханов, Депутат Московской Городской Думы
Президент Медведев в своем недавнем интервью сказал, что Россия 'пробила дно кризиса', что ее экономика 'просела' значительно сильнее, чем большинства ведущих стран, и что это стало для всех неожиданностью.
Да, подобное быстрое и глубокое падение экономических показателей с сентября 2008 года по март 2009 года оказалось неожиданным. Кризис продемонстрировал особые национальные черты ряда экономик и, главное, новую глобальную структуру. До марта 2009 года не было ясно, как развиваются процессы, и, если почитать прогнозы с сентября по март, то виден широкий разброс мнений экспертов, сквозь который тогда проглядывала общая растерянность. С марта стало ясно - с кризисом на глобальном уровне удалось справиться благодаря огромным вливаниям средств в банковскую систему и национальные экономики правительствами Большой двадцатки. Причем главным лидером выхода из кризиса стал Китай, а неожиданно большую глубину падения продемонстрировала Россия, та самая, которую наше правительство даже ранее рекламировало как потенциальную 'тихую гавань' в период кризиса.
Но что происходит с кризисными явлениями сейчас? Дно кризиса пройдено еще весной этого года. Довольно быстро восстанавливается экономика Китая, испытывая уже некоторые явления перегрева. Хорошо идет восстановление экономик стран Европы, хотя некоторые новые члены ЕС и тянут этот процесс назад. С некоторым трудом, но отчетливо восстанавливается Япония. Экономика США, которую все еще тянут назад отраслевой ипотечный кризис, фондовый рынок и банковский сектор, тем не менее, тоже быстро восстанавливается. Наблюдается постепенное восстановление реального сектора и хорошо видны 'точки роста'. Устойчивым и довольно высоким становится спрос на нефть, природный газ, металлы, удобрения, лес, при этом наблюдается тенденции к росту этого спроса. Все это стимулирует к активному восстановлению нашу, уже плотно интегрированную с мировой, российскую экономику.
Так, российские биржи по сравнению с показателями годичной давности с ноября 2008 удвоили свои индексы. Кто купил акции 'голубых фишек' в ноябре 2008 года - феврале 2009 года стал, по общему портфелю, в среднем, богаче вдвое.
Российская экономика, сократившись за последний год на десятую часть, тем не менее, продемонстрировала хорошую устойчивость. Накопленные за период роста внутренние предкризисные явления, в частности, в виде завышенной стоимости активов 'рассосались', теперь основные активы недооценены. Даже российский бич - инфляция - на время приостановилась, несмотря на положительный внешнеторговый баланс, валютное скопидомство Центробанка и работающий станок. Государственные резервы велики, дефицит бюджета они полностью покрывают, внешняя торговля весьма эффективна, рубль укрепляется, наблюдается восстановительный рост промышленного производства, есть хорошие показатели аграрного сектора, идет восстановление кредита, растет покупательная способность населения. Все это происходит на фоне социальной стабильности внутри страны и улучшения политической конъюнктуры в мировом окружении. Реально страновые риски России невелики, какие бы оценки ни давали ангажированные аналитики, а опыт работы иностранных инвесторов на российском рынке и российских компаний на фондовых рынках зарубежных стран, накопленный за последние годы, весьма велик. Создана вся необходимая инфраструктура для привлечения западных капиталов на российский рынок.
Полагаю, что масштабное возвращение иностранных инвесторов и иностранных кредитов на российский рынок начнется еще в этом году, и к концу 2010 года наша экономика наполнится деньгами и импортными товарами. Снова начнется кредитование российской экономики под залоги пакетов растущих акций 'голубых фишек' и компаний второго уровня, снова будет чрезмерное накопление государственных резервов, снова проявит себя во всей красе 'голландская болезнь' или 'нефтяное проклятие'. К модернизации такая экономика будет практически нечувствительна. Зачем трудиться, когда все дается без труда? И будем проедать наше будущее.
Что же мы должны в этой ситуации сделать, если хотим развития, а не прозябания в 'сырьевой периферии'?
Первое, не суетиться. Пока экономика восстанавливается, ее можно бросить в еще один виток кризиса любым неосторожным решением. Пока необходимо продолжать проводить актикризисные меры, улучшать политическое положение страны, всячески привлекать инвестиции во всевозможные отрасли экономики вплоть до восстановления устойчивого роста. Восстановление устойчивого экономического роста - это и есть окончание кризиса. А вовсе не достижение докризисных показателей.
Второе, по достижении устойчивого роста на стадии 'разогрева' и 'перегрева' взять под государственный контроль три фактора: общий объем экспорта, в первую очередь, нефтепродуктов, объем внешних заимствований всех компаний-экспортеров и целевое использование госкомпаниями этих заимствований. Необходимо снижать до разумных пределов объемы экспорта нефти и газа, перестать соревноваться в расточительстве с Саудовской Аравией и начать экономить ресурсы по всем направлениям, во-первых, сначала, продаваемые вне страны, и уже во вторую очередь, реализуемые на внутреннем рынке, а не наоборот, как хотелось бы некоторым.
Третье, открыть широкое бюджетное кредитование из федеральных бюджетных фондов стратегических компаний-экспортеров и других крупнейших предприятий и организаций по низким ставкам, ниже банковских, и в отдельных случаях, даже ниже учетной ставки (ставки рефинансирования) с тем, чтобы заместить иностранные кредиты.
Четвертое, и может быть самое важное - разрешить выделять из бюджетов Российской Федерации, субъектов федерации и крупнейших городов беспроцентные или льготные бюджетные кредиты промышленным предприятиям, в первую очередь, энергетике, тяжелому, химическому машиностроению, металлургии, производству горного оборудования, транспорту, строительному машиностроению, судостроению, авиастроению и некоторым другим важнейшим отраслям производства. Такие кредиты должны носить исключительно целевой характер и быть направлены исключительно на внешнеторговые закупочные операции, на приобретение машин, оборудования, целых производственных линий, ноу-хау, патентов и иных видов преимущественно основных средств производства.
Что это даст нашей экономике:
- производительность труда в тяжелой и иной индустрии, на транспорте будет расти высокими темпами: если в развитых странах рост производительности труда не превышает 4% в год, то развивающиеся страны, применяя импортные технологии нового поколения, могут достигнуть роста производительности труда до 15% - 20% в год (при условии высокого образовательного уровня населения);
- за счет роста производительности труда высвободится много рабочих рук, которые можно будет использовать в расширенном воспроизводстве, что есть наилучшее решение демографических и миграционных проблем;
- появятся в большом количестве товары высокого качества, способные заменять импортные поставки, разовьется конкуренция на товарных рынках, тем самым будет сдерживаться инфляция, а также появятся новые российские продукты с высокой добавленной стоимостью на экспорт;
- для проведения внешнеторговых закупок компаниями-заемщиками будет приобретаться валюта на внутреннем рынке, и Центральном банку не придется ее покупать и санировать в большом количестве в иностранных активах, поступление рублевой массы 'от станка' может быть уменьшено до разумных пределов;
- начнется активное перемещение мировых производств в Россию, вслед за технологиями придут и частные инвестиции, за ними снова технологии, в том числе смежные, что даст мощный и качественный рост ВВП.
Теперь пятое, необходимо разрешить рублевое кредитование по умеренным ставкам из бюджетов всех уровней градообразующих предприятий, перспективных проектов развития и создание инфраструктуры. Это позволит не только поддержать и модернизировать производства, создать рабочие места и обеспечить транспортную доступность, но и окажет положительное влияние на банковскую систему, заставив ее активно снижать ставки, искать новые возможности, конкурировать за заемщика. Такая конкуренция среди кредиторов также позволит увеличить производство и подавить инфляцию.
Шестое. За период выхода из кризиса, за счет бюджетных и внебюджетных финансовых ресурсов, на основе отечественных разработок и международного сотрудничества выделить направления инновационного развития, создать и аккумулировать научно-практические разработки, часть из которых довести до практических моделей и опытных образцов, подготовить их к промышленному выпуску.
И, наконец, седьмое, очень, и очень трудное для нас. Это наладить массовый выпуск инновационного продукта. И вот здесь становится очевидным, что без новой индустриализации страны, без закупки самых современных технологических линий, без обучения персонала, нам инновационный продукт самим не произвести, придется только торговать патентами, если хоть это сможем. Миновать индустриальное возрождение страны и сразу прыгнуть в инновационную постиндустриальную эпоху не получится. 'Большой скачок' не удавался никогда особенно никому.
Таким образом, в предлагаемой к рассмотрению модели посткризисного развития можно выделить три этапа:
- инерционный этап (подготовительный) - выход из кризиса, подготовка законодательства и организационных мер для второго этапа;
- «большой перелом» - изменение экспортной политики, контроль над внешними корпоративными заимствованиями, массированные бюджетные инвестиции в новые импортные индустриальные технологии, закупка импортного научного оборудования, развитие частно-государственного партнерства, подавление инфляции, стабилизация рубля, качественный рост ВВП, новых научных исследований, создание опытно-конструкторских разработок, накопление защищенного интеллектуального продукта;
- инновационное развитие на основе оригинальных технологий.
Таким видится мне наш посткризисный период в том случае, если мы захотим обновления страны. Правда, можно и не делать ничего, на наш век хватит, а там 'хоть трава не расти'.
15 октября 2009
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U.S. Deficit Dilemma: This Time It’s Worse
Gap of $1.4 trillion will likely get bigger, even if economy revives
Conveying the enormity of the U.S. budget deficit is tough. As humor columnist Dave Barry once observed, millions, billions and trillions sound too much alike. Think golf balls, watermelons and hot-air balloons, and you get a better idea. If today’s tax rates prevail, federal benefits are paid as promised and other spending grows at the same pace as the economy, the deficit will be bigger in 2019 than at any time in Barack Obama’s lifetime – and that’s even if the economy revives.
For the fiscal year that ended Sept. 30, the final deficit tally will be about $1.4 trillion. Measured against the size of the economy, that’s 9.9% of gross domestic product, bigger than any year since 1945. As a share of GDP, tax and other revenues are lower (15%) and spending higher (25%) than anytime in the past 50 years.
President Obama says this isn’t his fault. Of the $9 trillion in deficits projected over the next decade, the White House blames $5 trillion on the past – the Bush tax cuts, the wars in Iraq and Afghanistan and the Medicare prescription-drug bill that a Republican Congress passed and George W. Bush signed without any visible means of support.
The White House pins the other $4 trillion on the consequences of the recession and financial crisis. The real problem isn’t how we got here, it’s where we are: Another day older, and deeper in debt.
The U.S. has confronted big deficits before. “Numbers like this will eventually prompt corrective measures, just as a stark but less worrisome budget outlook did in 1990,” Goldman Sachs economists assured clients last week. This time will be tougher. We are starting from a much deeper hole. When the economy began climbing out of the deep recession of the early 1980s, federal debt – the sum of every annual budget deficit – amounted to less than 30% of the U.S.’s GDP, the value of all the goods and services produced in a year. At the beginning of the 1990s, it was less than 40%. Today, it exceeds 50% of GDP and is rising towards 80%, perhaps 100% of GDP over the next 10 years. Even at today’s low interest rates, the federal government spent about $195 billion on interest in fiscal 2009, more than 10 times the entire NASA budget. A rising debt-to-GDP ratio means interest takes an evergreater slice of the budget, much of that going to the foreigners.
But the president has yet to offer a business plan to demonstrate how he will prevent the U.S. from becoming the world’s largest subprime borrower. “We will be showing more about what we intend to do about the deficit when the president’s budget comes out in February,” promised Peter Orszag, the president’s budget director.
Inside the administration, the policy wonks are divided. Those most pessimistic about the economy talk of more deficit-widening stimulus, arguing that reviving economic growth is the imperative. Deal with deficits later. Those who see an improving, if sluggish, economy say the deficit must be addressed before it causes a crisis of confidence among U.S. creditors and provokes a dollar crash or a sharp increase in bond-market interest rates.
The president’s political advisers are hardly deficit phobes by nature, but see rising public angst about the deficit and Republicans scoring points by talking about it. The latest Wall Street Journal/NBC News poll posed a choice: Should Washington “worry about keeping the budget deficit down even though it may mean it will take longer for the economy to recover” or should it “worry more about boosting the economy even though it may mean larger budget deficits now and in the future?” Some 62% chose deficit-fighting; only 30% picked economic revival.
The rub is that the deficit-fearing public doesn’t want tax increases or spending cuts. “Everyone dislikes the deficit, and everyone dislikes the specific steps you have to take to get out of it,” Mr. Orszag says. Any realistic attack on deficits will both restrain spending on benefits and raise taxes on Americans earning less than $250,000 a year, despite the president’s vow not to do that.
The if-I-were-king answer is to give the economy a little more carefully crafted stimulus now and enact spending restrains and tax increases that take effect in three or four years when the economy is healthier. But even if Mr. Obama could talk Congress into that, the fiscal credibility of the U.S. political system is so weak that few would believe that the promised belt-tightening actually would take effect.
The Wall Street Journal October 2009
Translate into Russian. № 3.15
Exercise 3
Translate the following into Russian:
Current account surplus; trade deficit; to offset gains in exports; to rebound; to surge; to fill the gap; to narrow deficit; to trigger recession; to shrink the current account deficit; tax return; tax revenues; to be in surplus; to be in the red; to be in the black; fiscal year; fiscal deficit; fiscal policy.