The article is one of the latest reports on the improving international business at both the Wall Street and the European Union, owing to a number of fiscal policies expected within the next few months. The article reports that the Wall Street is gaining from increased equities and bonds trade that is being driven by an improving business environment and economies of the European Union.
According to the report, the Wall Street markets are achieving massive improvement because there are expectations that the number of merger events in the EU region will increase while the European Central Bank is expected to cut the rates on stoked bids for equities. The article provides examples of the increasing rate and value of trading at the Wall Street. For instance, the Dow Jones and the Nasdaq indices rose by about 0.49% and 0.40% receptively (Reuters, 2014).
The ECB’s wants to counter low inflation as well as weak lending in the region. Due to these expectations, orders for some manufactured goods have been rising; capital spending is dropping while home prices have been on the rise since March 2014. In addition, it reports that consumer confidence has achieved the highest peak since 2008 (Reuters, 2014).
However, the article also notes that some problems might arise and interfere with the trend because the rise is due to mere expectations while the recent political conflicts between the US and China have made the Chinese authorities undermine trade between corporations in the two nations.
Fiscal and monetary policies are the main economic issues that emerge within the context of the article above. For instance, it is evident that the main issue driving the observations reported in the article is the role of ECB in developing and enforcing money and fiscal policies in the EU region, which directly affects the trade at the Wall Street, USA. Theoretically, the purpose of a fiscal policy is to aid growth and check on the level of market growth and development of the economy (Langdana, 2013).
The authorities involved have the role of fixing fiscal policies to help the economy run towards its full capacity (Langdana, 2013). It seeks to promote growth in real GDP, increase employment rates and assume the monetary supply. In doing this, the authorities attempt to have a relatively constant monetary policy to influence growth. In this article, it is clear that the ECB is the authority involved in controlling fiscal and monetary policies in the EU.
To promote growth, the EU has applied a fiscal policy of cutting on stoke bids for equities while holding inflation at a constant level (Reuters, 2014). In addition, the policy seeks to ensure that lending rates are held constant in order to influence growth (Reuters, 2014).
Apart from the fiscal policies observed above, some other issues are evident in the report. For instance, the problems associated with the Paradox of Thrift seem to have been addressed in the case of the EU. When the population and companies think that there is a looming financial crisis, consumption is reduced and business face low income, layoffs are expected and more people seek to save (Langdana, 2013).
However, this is not the case. In fact, the report in the article shows a reverse of this paradox in the EU and the US. For instance, more people are spending on equities and bonds while unemployment in the EU is on the rise. In addition, corporate profits are rising, thanks to ECB’s policies that seek to revive the economy after the recent European crisis.
Another important issue is the impact of politics on the economies. As the article reports, the political conflicts between the US and China, the largest economies in the world, is likely to affect markets in the US and the EU. At the international level, the USD is the most used currencies, while China is the largest lender. Thus, any political conflict between the two nations is likely to hurt the world economy.
References
Langdana, F. (2013). Macroeconomic Policy: Demystifying Monetary and Fiscal Policy. New York, NY: Springer.
Reuters. (2014). Wall Street Markets Rise on E.C.B. Rate Cut Hopes. New York Times, p. A17.