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IEE Forecast (15). American economy will absorb the world capitals like a powerful pump in 2005

Informational results of the previous week: IEE forecasts come true, which proves reliability of the applied forecasting models and techniques. Readers may learn more about them, if they wish to.
Nevertheless, even within the previous forecasts, events are logical and natural. It causes aesthetic satisfaction according to professor A.P.Stahova, - and the economy submits to laws of universal numbers.

Even today we may predict the result of a FRS experiment on driving of the American economy from " a soft patch " at the beginning of 2000. In 2005 American economy as a powerful "pump" will absorb the world capitals. It will do that not by force, but with a powerful attractor  - the mechanism of capitals attraction. Investors of world macroeconomic regions will carry their capitals to the USA not under pressing, but quite voluntary. The USA became the most attractive region for investments (if only China and India do not interfere).

Alan Greenspan, the head of US Federal Reserve System in 2003, introduced the term "a soft patch" as a delay of economic growth.

The US economy in its hard 2000 did not experience a crisis. Its economic growth for the previous five years did not fall below 0 % a year. Still it was lower than two percent. During this period a grandiose experiment with downturn of a discount rate began. It served as a promoting monetary policy. FRS has lowered a discount rate to 1 %. Then it started to raise it smoothly. Goods flew from the USA to foreign markets, the dollar exchange rate reduced. Today foreign capitals flow to the USA too. So Alan Greenspan overcame "a soft patch".

The US balance of payments shows the amount of the streams. The sum for purchases and sales of long-term securities in February, 2005 were equal to annual gross national product of France. In February foreigners have got the US long-term securities for $1,3763 bln., and they  have sold for $1,2780 bln. The pure capitals have made $98,3 billion (About $92 billion in January). Despite of huge deficiency of trading balance ($61,0 billion), it has overcome it.

The data was published by the US exchequer on the last Friday on April 15. For 12 months ended on February, the volume of net - purchase of long-term securities by foreign investors has made $830,6 billion, against $759,3 billion for 12 months ended in February, 2004. The data impresses, for the USA have received the sum comparable to thirteen annual gross national products of Ukraine or, otherwise, to one annual gross national product of the Central European country. This is a good example of money search.

Economics has never experienced the analogy. It was the result of Greenspan's understanding of market processes harmonious game at the monetary market. It cannot be advertised, as any bank operations are not advertised, but in textbooks this case deserves the description in gold letters. There arises the following conclusion: not the government, but the central bank should work for the development of economy during the crisis periods.

However according to IMF forecasts, the economic growth will make only 4,3 % this year, in comparison with last year's 5,2 %. These data speak also about a negative vector. If the USA have received so powerful streams of capitals, some world regions must experience a recession. It can be in case that the streams supported the traditional US capital (we have already predicted, that it is traditional).

As a confirmation, the previous week IVF has changed its forecast for growth of gross national product in European zone from 2,2 % for 1,6 %. It has proved the IEE forecast that Germany would not fulfill the employment program this year. The IMF forecast on growth of gross national product in Japan has been lowered from 2,3 % to 0,8 % in 2005. And it makes obvious risks for economy. IVF is especially concerned with the fact, that the world growth is non-uniform. The USA and China outstrip Europe and Japan.

One more confirmation for IEE forecasts is that high prices for oil threaten the whole world. IVF also asserts this in the World Economic Outlook review. It recognizes, that it did not expect big demand for oil from India and China. It hopes, that volumes of an oil recovery will be increased.
However IVF economists believe, that sharp fluctuations of the prices for oil, can be negative for intermediate term prospects.

Institute of evolutionary economy wrote, that the prices for oil will be like the valve of return pressure for economic growth. 

As a confirmation for this, MEA in its report almost repeated the IEE forecast, - " Interest rates move on an ascending trajectory in the countries with good economic growth (especially in the USA) and, together with the high prices for oil, operate as a brake for economy ". And we (IEE) repeat, if not to start an innovative project of a world scale, the prices for traditional resources (including oil) will bring serious dangers to all countries of the world, and Ukraine among them.
At the same time MEA has lowered the forecast for growth of world demand for oil in 2005 for 50 thousand barrels a day up to 1,77 million barrels a day. In previous, March report МEА has raised the forecast on demand for oil in 2005 for 290 thousand barrels a day up to 1,81 million barrels a day. According to April forecast МEА, world demand for oil will make 84,27 million barrels a day in 2005. Though the forecast on demand for oil has remained very high, МEА has specified in the report, that " from the point of view of demand, risks are directed downwards, for the first time in two years ". In January - February demand for oil in China has grown by 5,4 % in comparison with the same period of 2004. IEE had predicted, that "the economy will rush a fever for some more time... "

Thus, the result can look as following: in the nearest future economic processes will be influenced by different vectors.

(с) IEE

(с) I.P. Makarenko 

Posted on the website: 2005-04-27

Comments on this article:

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Summing up 2006 it is already possible to speak, that for US dollar it was one of the best periods. We shall recollect even the end 2004 beginning of 2005 when its rate has sharply gone downwards in relation to practically all leading world currencies

The forecast of the IEE #8 (47).

In political relations between Yushchenko and Timoshenko eccentric events must happen to May 2006 (the Forecast on Hlebnikov Part 3)

Forecast IEE #7 (46). Europe: simultaneous growth of risks and sociopolitical pressure
The increase in the discount rate by the European central bank (ЕCB) in 2006 will cause a growth in the risks in the economies of incorporated Europe
The forecast of IEE #6 (45). Exchange risks of the world in 2006
afraid, that in the second half of 2006 the dollar exchange rate in the world exchange markets can fall to 30 % - 45 % in relation to ...
IEE Forecast [16]. Ukraine will not avoid crisis, if not to take precautions and not to start innovative processes
After year 2006, the economy of Ukraine will step in a phase of its first serious economic crisis
IEE Forecast (15). American economy will absorb the world capitals like a powerful pump in 2005
Even today we may predict the result of a FRS experiment on driving of the American economy from " a soft patch " at the beginning of 2000
IEE Forecast. If there are no innovative priorities, the habitation market will become a risky point of the fund for business and investors.

The real estate sector is a small drop, and but for economy it reflects the bitter history of Ukraine, and (without exaggeration) all the CIS history.

IEE Forecast (13). Investments outside of systemic innovations go "nowhere": on the lot of oil and dollar
World prices for oil and dollar exchange rate will be "the valve of constant pressure " for economic growth
IEE forecast and comment (II). If the discount rate will raise, dollar will strengthen
Though practically nobody doubts a possible FRS decision to raise a discount rate by 0,25 %, the world of analysts of the currency market has stopped waiting
IEE forecast and comments. On a sudden problem of " canceling of the obligatory sale of 50 % currency proceeds"
Political risks in management of economy do not weaken in Ukraine. That can provoke an economic crisis even in a short-term prospect (after 2006)
IEE Forecast. Dollar, oil, steel, and the global innovational system will influence the world dynamics
Factors, which will influence economic dynamics in the nearest future
IEE Forecast. Ukrainian economy is most likely to remain excessively dependant on tools of economic policy in 2005
Most likely, innovative processes, capable to bring Ukraine forward at any commodity or technological sphere will not start in
IEE Forecast. The World Economics Will Run a Fever For Some More Time
According to leading economist's opinion, continuous decrease of long-term rates in the world's most developed countries is one of the greatest puzzles in the financial world today. The problem is important for the USA, and other national economics
IEE Forecast. The World Economics Will Run a Fever For Some More Time
The world economics will run a fever for some period (5-10 years). It will suffer decreased production effectiveness, raised consumption of oil in China, price fluctuations for fuel. After that, we will experience an unprecedented and grand innovational project. The project will change the quality of all the world economics, absorb all the free capital, and increase long-term yield.
IEE Forecast: Growth of a dollar exchange rate can cause growth of the external economic risks for Ukraine
As to the internal factors, which compensate specified risks, it is necessary to carry significant potential of economic growth to them due to activization of internal consumption. It is a question of activization of the factors removing restrictions on ways of incomes growth of people, of fine and average business.
IEE Forecast. In economic there can be a slow economic growth with the crisis periods
The deficiency growth of the account of current operations in the USA is connected first of all with smooth and deep downturn of a discount rate.
IEE Forecast: on a dollar exchange rate, OPEC conference, and session of FRS board, Bush's speech and meeting of G7.
Events of this week will leave the trace in 2005 World discussions
IEE Forecast
The committee for Federal Reserve System (FRS) in the USA (FOMC) will raise a discount rate for 0,25 % having brought it up to the value of 2,50 % at the next session, which will take place on February 1-2, 2005.
IEE. In the coming year the price for gold will continue to grow
Gold already would seem ceased to carry out function of money, again in the price because of the monetary markets dynamics.