U.S. Having a Cyclical, Structural Recovery: Spence

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Dec. 11 (Bloomberg) -- Michael Spence of New York University discusses the economic recovery in the United States on Bloomberg Television’s “Bloomberg Surveillance.”

Or structural where things will get better?

We are having both.

We thought we had a cyclical recovery after we did not die of a heart attack but it is both a cyclical and structural.

The structural part is hard.

The cyclical recovery is a lot more modest than we have seen in the past -- and taking longer.

The reasons is the structural one takes longer.

Deleveraging, because it was a balance sheet recession, takes longer, and the government is under invested.

Are we taking longer because of competition from abroad?

A new globalization?

I know this is something you really thought about -- the lack of investment and jobs here because the investment is going to -- in a sense.

But the problem was, when we came into recession, we were running on a highly leveraged economy that generated excess aggregate demand.

And then domestic.

And then it dropped.

Like a stone.

So our main problem is we don't have enough aggregate demand.

What our economy is doing is restoring some of the domestic amanda slowly and accessing -- domestic demand slowly and accessing external demand because we are becoming more competitive.

The exchange rate, natural gas, and just resources.

Labor, capital, and stuff moving toward the tradable sector because at the margin -- are you willing to say 2014 is an american year?

No, i wouldn't go that far.

Compared with europe, yes, but i don't think we will get back until after 2014 and when the government decides that its portfolio has a bigger investment.

That is where i wanted to go.

Can washington assist or do they need to get out of the way?

Sometimes governments to get in the way.

So, both sides of this debate are sometimes right and sometimes wrong.

The government have a positive complementary role to play.

They generate human capital through education.

They generate the knowledge and technology.

They generate the infrastructure by investing.

And if you under invested for too long, you impair your potential growth.

Michael spence, noble laureate, joining us for the hour.

He talks about the government having a role to play.

Coming up, regulators taking a step to dim proprietary trading and prevent a crisis.

The volcker rule, we will discuss that next right here on "bloomberg surveillance." ?

This text has been automatically generated. It may not be 100% accurate.

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