Economy can be defined as the wealth and resources of a community,especially in terms of production and consumption of goods and services. Currently, the United States is the leading super power in the world and it acts as a role model to other states. The economic trend in the United States influences the economic status of the whole world.
This is to say, the economic status in the United States reflects the economic situation in the whole world. At the moment, there is a slight improvement in the United States’ economy. Even with these improvements, it is still not where it had been anticipated before the whole world went through a great depression (Economic outlook, 2012).
Over 100,000 jobs have been created in the past seven months by the U.S. economy. However, it still remains halfway below the set bar of 200,000. Jobs stipulated to bring down the rate of unemployment remained at 8.2 percent in the month of March. This has been a major obstacle in re-electing president Barrack Obama among other fiscal matters.
There has been a slight growth in consumption levels, Gross Domestic Product and income levels in the U.S., but this slight growth is not what was expected. The housing mortgage market is still dead, one of the major contributors of the bad American economy. The Federal Reserve has continued to stimulate oil prices by reducing the interest rates to almost zero and quantitative ease but to no avail.
In the fiscal year 2012/2013, even though weak, the U.S. economy has recorded a positive growth rate of 2 percent in its Gross Domestic Product (World Financial Watch, 2013).
Consumption in households has continued to be a major point to be pondered. Consumption households in the U.S. indicated an increase in the year 2012 and the beginning of 2013 because of the additional jobs created and the stimuli of fiscal policies which put it at an additional gain of +2.2 percent in the fiscal year 2011. In this period of 2011 and early 2012, a lower spending rate was recorded of +1.4 percent because people could not afford luxuries.
They could not afford to go for vacations and host extra visitors. This is low as compared to the previous 3.3 percent on average that was recorded in the earlier years. This can be blamed on the high unemployment rates, but mostly on the low personal income which is disposable because of the increase in taxes at 0.6 percent year after year.
This has also been contributed largely by the acute and steady increase in gasoline prices. To cover up for this consumption, many consumers have continued to borrow through automatic loans, credit cards, consumer loans, corporate junk boards and the commercial real estates. The credits being taken by the consumers have gone up by fifteen, in the past sixteen, months making it just three points before it reaches eighteen as recorded in August 2008 (Economic Outlook, 2012).
There have been small forms of development in investment areas in the U.S., insolvencies are on the other hand falling. Businesses that are investing in software and other equipment are rising up and have recovered from their losses and this has continued for the greater portion of the year 2012 and is continuing in the year 2013.
This is possible because they are being sustained by the restoration of good health shown by the businesses which have had considerable cash liquidities, thereby presenting them with an opportunity to borrow at affordable interest rates, for example, the commercial banks.
On the other hand, businesses involved in construction have continued to suffer greatly from the housing state markets like the subprime mortgages with starts of housing permits to be at seventy percent, a rate that is lower compared to the 2006 rate, which was higher even though this rose slightly for some few months. In the light of this, bankruptcy in businesses declined for the fourth round in the year 2011, seventh straight quarter and is still feared to fall by 10 percent in the fiscal year 2012 (Moseley, 2009).
The fiscal policy is currently facing turmoil. President Barrack Obama recently presented his budget for the 2013 fiscal year, and would most likely raise the deficit instead of increasing the value of the economy. Republicans also presented a budget that countered Obama’s budget, indicating that it would reform entitlements and cut on government spending.
Unfortunately, none of the two budgets presented by the two parties passed the test of solving the poor economy. Serious matters regarding the economy were expected to come up, because one,- the tax that was reduced during President George W. Bush regime and the reduced payroll were meant to be phased out as in the case of benefits in joblessness reduction as well as the cut in budget sequences that must increase.
Secondly, the goal that was set might have been too low and would have had to bet set higher. Thirdly, the presidential elections are more likely to focus on the U.S. nation’s finances and the U.S. economy. Meanwhile, since World War II, no president has ever been put back on the presidential sit with a high rate of unemployment as it has been seen recently (World Financial Watch, 2013)
The monetary policy in America is facing up but the third round of easing quantitatively is quiet an unreachable ambition. Benarke, a chairman at the Federal Reserve, has been increasingly thorough in his assessment of the of the U.S. economy currently resulting in the increase of the treasury yields. He however continues to work hard and to do whatever it takes to lower the interest rates to zero. He plans to go on with his strategies till the end of the fiscal year 2014.
This is a situation that seems so impossible that the rest of the people in the federal sector wonder if it is achievable and workable for a better future. Reduction in the interest rates has led to the weakening of the dollar. Benarke still believes in the QE3 (a third round of quantitative easing).
According to him, risking another round of recession is too dangerous. It is a sharp rise in the oil prices that would most likely lead to the third round of quantitative easing without which there could be no QE3. Reduction in unemployment and the growth of the economy would make a third round of quantitative easing not necessary because there would be no exaggerated inflation rates in the future (Economic Outlook, 2012).
External trade in the USA still remains at a big loss. The growth impulse obtained fromexternal or foreign trade was only for a shorter period of time recorded to be positive. This was only seen in 2011. From 2012 onwards, it has been seen to be negative. Meanwhile, thecurrent account balances and trade balance are at a risk of being strongly being deficit. This is likely so because of one, America mainly demands for its imports from Japan, Europe and china.
Secondly, it is the weaknesses experienced in these economies, Japan, China and Europe, that are widening the economic gap in America. Thirdly, the constant increasing oil prices have contributed largely to the shortage with the oil producing nations (OPEC). America imports comprises of food products like fish from Japan as well as some makes of vehicles from Japan, china and Europe. It tends to overlook other states.
Any problem experienced by any of these states will also be experienced by America. It is wise that America has a wide variety in terms of where to source for its products. It should instead focus on expanding its scope and import from other states that might be more convenient in terms of prices and continued production. The continuous changing oil prices also have contributed to the poor economy not just in America but worldwide. A solution should be put in place to be able to stabilize prices (Economic Outlook, 2012).
America has experienced a decline in the profit rates. This has also been a major reason to the fall of the U.S. economy. This happened in the 1950s all through to the 1970 where the profit declined almost to 50 percent which was at 22 percent and went down to 12 percent.
Even though there has been a slight improvement, it is still the case in the year 2013. This is mostly reflected in the capitalist states because they are all dependent in America. According to Marxist theory, it has resulted in the high rate of unemployment, high rate of inflation and consequently, low wages resulting in low investments. People can no longer invest because they have no money for investments.
This is the reason for the slow growth rate. The U.S. government is putting in much effort to reduce the unemployment rate by implementing monetary policies like the reduction in government spending, controlled interestrates and controlled taxes. Organizations have put in insolvency approaches to cut wagesfor them to continue working, negotiating their arrears and consider union agreements invalid (Economic Outlook, 2012).
Even though America has been seen to grow in its economy, a lot still needs to be done to see it achieve the best economy. This is important because its economy is a mirror to the rest of the capitalist’s states in the whole world. A bad economy has a bad impact on its people.
This can be seen in the expensive health care that the common citizen cannot afford, the poor living standards seen by the poor housing and lack of basic needs like food, shelter and proper clothing. A poor economy has its people exhausted and stressed up at the work place because they are not motivated. America has to come up with various approaches that will see the continent grow as a whole and not just individually. This can also be achieved if fair and proper policies are put in place (William, 2011).
References
Economic Outlook. (2012). Economic outlook as of May 2012. Retrieved from www.eulerhemes.us/eu/economic-research.html.
Moseley, F. (2009).Us economic crisis: Causes and solutions. ISR. 64. Retrieved from www.isreview.org/issues/64/feat-moseley-shmtl.
William, M. A. (2011). Economics: A Contemporary introduction (9th Ed.). New York: South Western College.
World Financial Watch. (2013, April 13). World financial watch. Retrieved from www.worldfinanacialwatch.com/us-economy/the -current-state-of-us-economy.