I recently had a discussion with a company in Holland, Michigan, that felt they needed to be more established in Europe but were hesitant given all the negative media reporting a turbulent economy. Moreover, now that the European Central Bank, UK Monetary Policy Committee and the Bank of Japan have all picked up the monetary policy baton from the Federal Reserve, many see the exchange as reinforcing the perception that opportunities in Europe and Japan aren’t as strong as in the U.S., but this isn’t the whole story.
Through the evolution of real GDP relative to 1997 (see below), the U.S. economy has fared better in this recovery, despite more severe housing excesses. This is in large part due to the U.S. financial system forcing banks to deal with bad loans and fix the problem faster than in Europe and Japan.
Evolution of Real GDP in Selected Developed Economies
Ratio to real GDP (U.S. chained 2011 dollars on a PPP basis) in Q4 1997: