The Economic Outlook and Macroeconomic Policy of the US - Assignment Example

a) How successful have the American Government and the US Federal Reserve been in running the American economy over the last two years? Answer: The Financial crisis that started in the year 2008 has had its effects on the world economies and most of the worldwide countries are still in the grip of recession. The United States of America has not been an exception, since it also has undergone the same kind of financial pressure that has been experienced by most of the countries. Indeed since the exit of the Bush Administration and the advent of the Obama administration had promised a very rosy picture for America. But with the passage of past two years, much is still to be done to revive the American economy, since the public also has shown their displeasure for many of the policies of the Obama regime. Though the Obama regime has promised jobs for the millions of the jobless Americans, much has to be seen the way in which the whole American economy is going to sway in the coming years. Two years ago with the change in the regime, everyone thought that the recession would be soon over and that the American economy will soon be resurrected back to its previous permanent superior position. But things have so much changed and it is seen that the whole set of optimistic predictions about an instant recovery were turned into rubble. Thus the whole thing of a temporary kind of resurgence only ended up in brewing more trouble for the US economy and the final result was that the start of a double dipping recession. Really it was a shock to the millions of the entrepreneurs as well as the American citizens in general, since this was the worst scenario that they had ever predicted or they ever wanted to happen. (www.bothsidesofthetable.com) The American government along with the Federal Reserve remained a mute spectator to the entire happenings, since they were also quite helpless and did the maximum that they could to save the entire US economy. But the US economy was sinking constantly and the Obama regime could do nothing to protect the consumer’s interests or the business investors. Indeed billions of dollars that were invested by the entrepreneurs and the investors went up for nothing which meant that it pushed the US economy deeper into financial trouble. The rising inflations during the past two years along with the loss of jobs nation wide, has made things very bitter and increasingly difficult for the American citizens, since they could not afford for even the essential utilities that they had previously enjoyed before the start of the recession. Life has turned from tough to the worst during the past two years. The foreign investors from the other countries totally shied away from the US stock markets, since things were becoming much worse and the whole US economy was bundled up in the past two years into increasing debts and poverty started to rule most of the US states. People had indeed opted for a regime change thinking that they would get a better government with the Obama regime but things have still not happened in the same way as they intended it to be. The Year 2010 has been a year that has been marked by the US government and the US Federal Reserve as a year, which was particularly meant for raising adequate funds for resurrecting the US economy as it was during the post recession era. But how far the fund raising has raised the capital for the various US industries and the American economy is still yet to be seen. Though the recession has started to recede and the US economy is showing a bounce back from the past years, still the investors as well as the general US public along with the business community is showing little optimism, regarding the various reforms and the policy packages that are being announced by the US government. (www.bothsidesofthetable.com) As per the US government’s statistical data, the unemployment rates are regarded to be much below the ten percent mark. But though this is the data that has been produced by the official agencies all across the US, the actual unemployment figures is considered to be much higher, than the rate that has been shown by the US government. This shows that the US government is not ready to disclose to the US public the actual figures of the unemployment rates, which would put further pressure and lead to an atmosphere of anxiety all across the US. The truth is that the real statistical figure as projected by some agencies indicates that about 45 percent of the US citizens have been on the lookout for the jobs, for the past six to eight months during the years 2010 and 2011 with not much success. . (www.federalreserve.gov ) Because of this the jobless majority of the US citizens are now not even opting for the part time jobs that are being developed by the US government. This shows that all the types of stimulus packages that are being offered by the American government, have not been successful enough to create the number of jobs that are required at the present state for the US citizens, which would have otherwise helped them to get back to their feet and maintain their normal lifestyle. If the satisfactory number of jobs had been created, then it would have resulted in the indirect revival of the US economy which would have given more spending power for the millions of Americans. The US government has been very unsuccessful in such attempts and the stimulus package that it had given to the US economy has not proved to be of any help to the ordinary American citizens. This shows the displeasure for the American citizens towards the job package and the steps taken by the American government to revitalize the US economy. (www.bothsidesofthetable.com) This is the ground reality that is ensuing all over the US presently and the whole US government is under pressure during the last two year, for bringing back the cheer and the healthiness of the US economy. The US Federal Reserve on its part is doing the best that it can to boost the US economy’s growth and pumping in more money to the stock markets and the commodity markets so as to bring back the lost confidence of the investors and also with an aim to bring back the foreign investors, who during the last two years have become very pessimistic about the state of affairs of the falling US economy and have moved themselves onto safer grounds. (www.federalreserve.gov ) As per the financial experts, if the US economy has to revive back to its previous power and become strong enough to sustain the type of growth that it had shown during the pre recession periods, then the US economy has to show a marvelous improvement in the GDP growth. In the case of the employment ratios and the revival of the US employment scenarios the GDP growth has to be at least 2.5 % which is something satisfactory for the US economy, taking into account the present economic scenarios and the condition that is prevailing in the US economy right now. But the most shocking fact is that, the US economy’s GDP growth during the past quarter has been only about 1.6 percent. (www.bothsidesofthetable.com) The housing market is yet another sector that is showing very grave results, which shows that this area is also in deep trouble. Statistical data shows shocking figures that the US selling rates for the existing houses have fallen to about 35%, which is also a figure that is very hard to digest. The rate of the foreclosures of the homes across the US have shown a very high increase, with increasing numbers of banks and the consumers putting pressure on the individuals. Thus the US government and the US Federal Reserve has not at all been successful during the past two years to stabilize the falling US economy, since the government statistics shows enough proof for this claim. b) Describe and evaluate the main macro economic policies used by the American Government and the US Federal Reserve over the last two years Answer: It is to be noted that the macro economic policies that are formulated by the US government and also the US Federal Reserve has long standing implications for the whole of the US economy and these will indeed get reflected in the lifestyle of the American citizens. The economic recovery of the US economy had begun right from the year 2009 but it has been seen that, there has been sluggish kind of growth that has been ever since been recorded. This has meant that there has been not much improvement in the US job market during the last two years of the present US government. As per the US statistical data the US financial experts are of the belief that the macro economic policies that have been formulated by the US government in combination with the US Federal reserve, has had a direct impact on these developments. Thus the following can be summarized as the main macro economic policies formulated by the American government and the US Federal Reserve, during the last two years. (www.kansascityfed.com) Stabilization of the Financial System: The US government and the US Federal Reserve in its unrelenting efforts have formulated policies during the years 2009 to 2011 to stabilize the whole of the US economy, which had been battered by the financial crisis of 2008. A stimulus package had been formulated and brought into action, which has partially helped in revitalizing the US economy. To an extent such policies have resulted in strengthening the financial system, which had been previously been in doldrums. (www.federalreserve.gov ) Monetary and Fiscal Policies of the US government: The US government in collusion with the US Federal Reserve, has been very successful in the creation of new set of monetary as well as fiscal policies, that has been able to plug the rise of the inflation and also helped in the revival of the US economy as a whole. (www.allbusiness.com) Rebuilding of Businesses to boost the rate of Production: The American government during the last two years has been concentrating in drafting policies to reshape the business sector, with a view to increase the production across the various parts of the country. This was done with an aim to improve the economy, since when the business units are strengthened and the production starts increasing, then the whole economy will get a major boost since the employment rates will increase and the number of jobs in the US job market will also increase. Thus the inventories of such business will be indirectly rebuilt leading to the economy becoming very robust. (www.federalreserve.gov ) But the statistical data of the US during the past two years has not shown any kind of significant change due to the above stated macro economic policies, which have been followed by the American government and also together US Federal Reserve, since the efforts have been spoiled due to the debt problems that have cropped up in Europe. Due to the European debt’s the situation of the global financial markets have become deeply affected, resulting in the inefficiency of the fiscal and building of inventory efforts of the US government. (www.pragoti.org) Thus during the past two years all these incidences clearly show that, the US government as well as the Federal Reserve has not been very much successful in their efforts to revive the US economy back to its previous power and bring back the lost gleam of the vibrant US economy. Hence the US government along with the US Federal Reserve has to develop strategies in such a way that, they totally concentrate on creating more jobs for the millions of the US citizens who are right now unemployed or have in other words lost their jobs due to the economic recession. Thus by doing so the US government will be able to change the course of the US economy which other words is looking to be in a very disturbing phase. The southward fall of the US stock markets have to be really plugged, which could make things better for the US economy, since it would revitalize the whole beaten economy and at the same time bring back the foreign investors who have been closely watching the state of affairs of the US stock markets and the US economy in general. References: Suster Mark “US Economic Risks (Sept 2010): Impact on Investors & Entrepreneurs” www.bothsidesofthetable.com August30. 2010. Web. March21. 2011 Chairman Bernanke S. Bernanke “The Economic Outlook and Macroeconomic Policy” Speech at the National Press Club, Washington, D.C. www.federalreserve.gov February03. 2011. Web. March21. 2011 De Long J. Bradford & Summers H. Lawrence “Macroeconomic Policy and Long – Run growth” www.kansascityfed.com Web. March21. 2011 Mukhopadhyay Abhijit “Financial Crisis and Recession – A Battleground of Economic Ideas and Philosophies” www.pragoti.org September09. 2010 Web. March21. 2011 Thredgold Jeff “The mysterious Federal Reserve and its high – stakes moves” Desert Morning News www.allbusiness.com January18. 2011 Web. March21. 2011 Read More