Worry about the passing of US sub-prime crisis burden to outside of US

The recent announcements of each country's economic figures were quite surprising.

Although US financial market is still in the sub-prime credit crisis mess with no signs of recovery, but the housing market, consumer market's economic figures are showing some pleasant surprises. US July existing home sales increased 3.1% from that in June, personal consumption in the second quarter increased by 1.7%, the largest increment since last year 3Q. 2Q GDP grew 3.3% comparatively, much higher than 1Q 0.9% growth.

At the same time, Europe, Japan and other economic bodies economic growth is taking a serious downturn. Japan's 2Q showed a 0.6% negative growth, the worst performance in 7 years. Euro regions showed a 0.2% decline comparatively.

US may be the source of the sub-prime credit crisis, but its economy is showing signs of recovery. Morgan Stanley says that the other regions in the world may get into recession earlier than US. US has once again shown its economy flexibility. This flexibility comes from not only the enterprises own vitality, but also from the swift reactions of the FED and Finance department. When oil price was shooting up, the FED took a big rate cut. The interest rate drop from 5.25% to 2% within 8 months. At the same time, the US currency also took a dive, making new lows. And to encourage consumer spending, the Bush administration in Jan this year announced a 145 billion USD tax rebate program.

At the same time, Euro central bank and other countries central banks are still focusing on controlling inflation with the Euro central bank raising its interest rates by 25 basis points recently. While the crisis in England is comparable to that in US, the England central bank still dare not lower the interest rates.

With the flexibility in the US economy, the sub-prime credit crisis is still unable to be resolved by the slow and self adjustments in the US economy. The other bigger possibility of releasing the crisis pressure is by transferring some of the burden to other areas. At the beginning of the century at the time of the IT tech bubble crisis, Allen Greenspan lowered interest rates to increase liquidity to boost the housing market growth. So the IT tech bubble crisis problem was resolved by the housing market boom quite quickly but at the same time the underlying crisis was transferred to the housing market which caused the current sub-prime credit crisis problems.

Now what we are seeing is that with the swift reactions of the US government and the slow counter actions by the other countries, the US sub-prime credit crisis is slowly transferring its burden to outside of US. US 2Q economic growth, although in it has the effect from the economic stimulus package, but the more important reason was the increase in exports. The U.S. Department of Commerce figures showed that in 2Q, US products and service export grew 13.2%, much higher then the expected 0.2% and 1Q's 5.1%. Import went down to 7.6%, higher than 1Q's 0.8% decline. This makes export becoming the main reason for the strong economic growth in 2Q in US.