Whither the US economy? This is the biggest conundrum for the year 2009. Last Friday’s announcement of 3.5% GDP growth for the third quarter is viewed by some economists and analysts as the Obama administration ‘treat’ for the US people to savour as they prepared for the Halloween celebration.

While to others, including the Nobel Prize-winning economist Joseph E. Stiglitz, that impressive number is more like a ‘trick’ that cannot be sustained in the coming year. So that leaves the not- so-passive bystanders like us to wonder whether it is really a ‘trick or treat’.

It is an undeniable fact, the US economy, as the world’s biggest economy, has immense influence on any of the economies that are playing the catch-up game in which Malaysia is an active participant. Indeed, the US is one of the largest trading partners for Malaysia; which underlines that hundreds of thousands, if not millions of Malaysians are earning their living from such bilateral activities.

Furthermore, lots of capital market studies have shown that the two markets are cointegrated in the long-run with the US market dictating the Malaysian market movements. Hence, to ignore the biggest puzzle in this year would imply that we pay little concern for the lives of these Malaysians and their dependants despite the call for a ‘1Malaysia’ by the prime minister.

So what can we gather from the latest set of information about the US economy? The US stock market indicators did not respond positively to the news about the very good GDP figure. This implies that market players do not have enough belief that the past information relating to the third quarter would be the catalyst for better performance of listed companies in the next quarter and beyond.

At the same time, the reported stubbornness in the unemployment figure of 9.8% in the month of September adds salt to injury as projection of it being greater than 10% is gaining more and more support. Actually, to the discerning few, this bizarre situation whereby income is growing while unemployment is rising simply leads to one inevitable reading on the whole situation; that is, the increasing income gap with potentially worsening socio-economic impact among residents of the US.

Thus, there seems to be no silver lining from the GDP figure amidst a stable price condition.

Consequently, what can we expect from the next episode? The world is quite at a standstill eagerly waiting for this week’s Federal Reserve monthly policy statement that would give a hint to the reaction of the US policymakers on the soft withdrawal by Japan, Australia and Norway from their easy monetary policy stance.

The Bank of Japan has made it clear that it will stop their liquidity enhancement activities in the open market by the end of the year, while the other two countries have raised their interest rate with the same adverse effect on liquidity; despite the strong sentiment worldwide that the worse is yet to come.

The dilemma that the US faces is that if the Fed gave the slightest kind of indication that money- pumping activity is to be halted soon, the stock market will tumble as a result. And with New York still maintaining its status as the most preferred financial centre, based on the Bloomberg poll released last Saturday, the expected repercussion on such a policy stance would surely be massive.

On the other hand, if the Fed is afraid to face this outcome, then the hyper-inflation rumour is fast becoming a reality which would then put tremendous downward pressure on the value of the US dollar; which would in turn raise serious reactions from those who hold US dollar- denominated assets, especially the Central Bank of China that have in its vault more than one trillion worth of the US ‘I-owe-you’ papers.

Hitherto, the US has been the superhero of the world’s politics and economy; and undeniably, as a nation, it does have a lot to offer to the rest of the world. Tim Geithner has correctly asserted that investment is the key to US recovery as domestic consumption cannot be relied upon given that the credit society is now focusing more on how to pay back their mountain of debt.

Unfortunately, given the credit-crunch factor coupled with the liquidity-trap situation that is besetting the economy, one really wonders if there is any internal source of confidence for domestic private investment to take off.

So the sensible way out seems to be for the US to change its role from the global world’s capital provider to capital recipient and from the world’s consumer to producer.

The recently concluded 15 ^th Asean Summit gave a credible voice to this new growth model agenda when 10 Asean countries plus China, Japan, South Korea, Australia, New Zealand and India; acting as a bloc of emerging economies, showed their seriousness to do away with this ‘old growth model’; hence, implying their readiness to take up this new role with the noble aim of ensuring a positive outlook for the global world we live in.

Nevertheless, before that can happen, protectionist policies that might emerge from beg-thy- neighbour mentality must be avoided at all cost.

Simultaneously, the offer price on US goods and services must be right first. In the final analysis, until the day the US dollar reflects the true state of its inherent macroeconomic fundamentals, it is highly unlikely for us, who are showing sincere willingness to play the new collective role of capital providers and consumers, to be able to help the US people to help themselves out of what has been coined as the ‘super bubble’ by the creative destruction protagonist, George Soros himself.

Ironically, this time around, we need currency speculators like Soros to straighten out things for the sake of Americans and their future generations.

The writer is attached to the Deparment of Economics, Kulliyyah of Economics and Management Sciences, International Islamic University.