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The collapse of France, British, Spanish markets are in the next year’s agenda. The aftermath of subprime mortgages allotted by U.S banks to every individual resulted in a drastic picture of U.S Economy. The…
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Current Macroeconomic Situation-U.S The real economy is infected not only in U.S but all over the world. The collapse of France, British, Spanish markets are in the next year’s agenda. The aftermath of subprime mortgages allotted by U.S banks to every individual resulted in a drastic picture of U.S Economy. The particular issue being faced by U.S economy is slowdown in consumer spending. From January 2004 to July 2004, consumer spending rose at an annual rate of 2.8%. Comparing it with 3.3% in 2003, it is a troublesome matter for U.S Economy.
Economic Indicators-U.S
U.S Inflation rate rose up to 3.8% in August 2011. Continuous increase in the prices of food, shelter and gasoline lead to an increase of 0.2% in August, 2011, same as the previous month. Apparel and shelter are the biggest contributors whereas the prices of health care, personal care, medical care, household operations and furnishing have also seen to be increased significantly.
Since April, the Unemployment rate has detained between narrow ranges of 9.0% to 9.2%. Currently, the unemployment rate is 9.1%. The number of long-term unemployed people is 6.2 million, as recorded in September, 2011. These individuals accounted for 44.6% of the total unemployed people in U.S.
GDP growth rate is an important indicator to measure the strength of an economy. GDP growth rate is said to be positive when the economy develops. Annualized Growth of real GDP has been recorded far below than 5.4% than the normal recoveries of previous business cycles. Credit rating of U.S is also at risk. Credit rating agencies have downgraded the credit rating of U.S from AAA to AA.
Monetary and Fiscal Policy-U.S
Many economists now believe that America’s economy has gone fragile. They recommend that it would not be to cut down the consumption and increase tax rates at this point of time. The dysfunctions in U.S have immense pressure from increasing population, globalization and technological advancements. The U.S requires smart and effective policies in every area. It needs to spend in areas like retirement funds and health care whereas it is encouraged to invest in the fields of research and development, education and infrastructure in order to grow. U.S is at that point of budgetary limits where money should to be used wisely and only on effective projects. But in every other area, government policies are suboptimal.
The world used to look at the U.S with awe as Americans had built highway systems for interstate, created best standard for education in the world, invested heavily in the frontiers of knowledge. But this is not now how the world perceives America nowadays. Americans have snatched something that the world has never doubted-the credibility of U.S. the U.S has gambled with the most precious resource-the trust of the world. Now, if the world raises a question to increase interest rate a little bit more to lend the U.S money, the budget deficit for America will rise over 1.3 trillion over 10 years. That’s the way American systems are working these days.
By the recommendation of Warren Buffett, recently President Obama has levied Buffett tax to the American millionaires In addition to $447 billion in tax revenue in order to jump start the economy. Warren Buffett wrote that millionaires like him often pay less taxes and most of their income comes from investment. The success or failure of the enormous fiscal and monetary spur over the past few years is one of the most contentious questions about the US economy. US policies seem most successful when sluggish economic growth in the Eurozone is used as a benchmark, as is the normal American practice. On the other hand, when last six postwar US business cycles are used as a gauge of achievement, the US economy seems to be struggling in the previous two to three years, despite having the significant amount of fiscal and monetary efforts.
The effects of U.S’s crisis are being felt all over the world. It is also increasing the amount of debt that the U.S government is taking on itself.
Zakaria, Fareed. (2011, August 15). The Debt Deal’s Failure. Time,19-21. Read More
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