How to Fix America - Essay Example

Describe your best solution to improving the economy in the United States today. Consider the strengths and weaknesses of these strategies that are currently being proposed and their short-run and long-run strengths and weaknesses.
The economy of the United States has been a bit shaky in the last decade or so. This stuttering economy may need many different steps to get a boost and get to the same level that it was in the 1950-1960s era. There are many methods and approaches that can be adopted to improve the economy of the United States.
Lately, there has been a major financial crisis issue that has struck the United States and the world as well. This financial crisis and the recessionary time period have struck the United States and the rest of the world because of a reduction in the investors’ confidence level. This reduction in investors’ confidence is primarily because of the Federal Reserve’s supporting behavior toward large institutional banks and brokerage houses. The Federal Reserve has allowed such large institutional banks and brokerage houses to perform normally when these institutions carried liabilities worth an estimated 10% of the entire annual economic output (GDP) of the nation. The FED has kept a discriminatory approach towards the other private sector organization, which go into receivership if they are found to have such liquidity issues. This approach of the FED lets the large institutional banks and brokerage houses perform normally can lead the economy to shatter if any of these institutions are allowed to unwind. A major example is the Lehman Brothers bankruptcy issue. Such actions of the FED have led to a reduction in the confidence level of investors.
The approach that can be followed to address such an issue is to cut down and reduce the size of each bank. This reduction in the size of each individual bank would reduce the impact on the entire system if any of these banks fail. This way each and every institution would be accountable for the amount of risk that it takes up. This way the lending policies would become more risk-averse and cautious. Each and every bank would work upon their revenue and economic growth through a proper and reasonable interest rate.
The only issue with such a policy would be that it would lead to reduced lending by banks for any potential business, especially risky businesses.
The other issue arises with the transparency of the FED. The FED should be fair and just in all its decisions and the excess printing of the dollar bill as compared to the inadequate backing of gold needs to be fixed. This would increase and restore confidence in the value of each Dollar in circulation. This can be done by purchasing almost an equal amount of gold to keep a balance between the gold and the money that is to be printed. The issue that may need some consideration would be that gold may not be flexible enough to support economic growth through monetary expansion. (The Motley Fool, 2009)