Fidelity- "Five years into the worst financial crisis in generations we are starting to see how effective various policies have been. Spain, the UK and the US offer three interesting test cases, each dealing with the after effects of a real estate bust in different ways:
· Spain = austerity with tight money (austerity, no devaluation, no quantitative easing, market interest rates too high)
· UK = austerity but with loose money (austerity, currency devaluation, quantitative easing)
· US = no austerity with loose money (no austerity, stable currency, quantitative easing)
“The chart of real GDP levels below suggests that the US is following the best policy path, at least on the metric of economic performance. (...) The so-called ‘fiscal cliff’ is the first serious test of the US desire to maintain what I see as a winning policy. Most likely the political parties will see sense and spread tax rises and spending cuts over a period of years."
Trevor Greetham, Director of Asset Allocation at Fidelity Worldwide Investment