How unsustainable the American economy is - Essay Example

Unemployment is a major issue in America and the current rate of unemployment is over 9% in the country, when Barack Obama took over as the President of America it was about 7%. This also goes to show that the promises he made were not fulfilled, employment will be generated when the economy recovers but it is showing no signs of recovery and this is certainly bad news for America and all its citizens. This is also bad news for the whole world because the recent events have left European countries in complete disarray.

The Euro zone crisis have escalated ever since recession started taking its toll, Greece and Spain stand on the verge of defaulting. “In my view what is happening in Greece is just the tip of an iceberg.  With private debt in many parts of the world, we socialize these private losses.  Now with large budget deficits in Europe, in Japan, in the United States.  The bond market vigilantes have woken up in Greece, in Portugal, in Spain. At some point they're going to wake up in the U.K., in Japan, in the United States.

  We're running a 3.5 budget deficit.  It is obviously over time not sustainable.” (The US Economy is Unsustainable) The FED has certainly failed to do its job; recession was a classic example of the same. There is absolutely zero discipline. Excessive borrowing was encouraged by the FED and the same resulted in damage beyond repair and now also the same thing continues. Deflation still exists; interest rates are still really low. There is no market discipline which directly suggests that the economy is unsustainable.

There are far too many fiscal problems in the US, a country like US does not even have the option of defaulting available at its disposal but if the same thing continues we might witness high inflation in the near future which will be really bad for America and all its citizens. Riots may even occur when the unemployment rate in the country goes further up but this is highly unlikely because the unemployed have something called a safety net with the help of which they receive some compensation.

Things are looking really bad for the economy of the US and all its citizens, it is not doom and gloom yet but something concrete needs to be done about it and it needs to be done sooner rather than later. “The recent deep recession and the subsequent slow recovery have created severe budgetary pressures not only for many households and businesses, but for governments as well. Indeed, in the United States, governments at all levels are grappling not only with the near-term effects of economic weakness, but also with the longer-run pressures that will be generated by the need to provide health care and retirement security to an aging population.

There is no way around it–meeting these challenges will require policymakers and the public to make some very difficult decisions and to accept some sacrifices.” (FED Chief Ben Bernanke Calls US Economy Unsustainable) Ben Bernanke the Chief of the Federal Reserve has little faith in the economy of the US and the same speaks volumes about the mismanagement of the Federal Reserve. There are a lot of unidentified liabilities which add to the already mounting debt, liabilities like social