Economic Developments in the United States as of 2012 - Book Report/Review Example

Task “The magnitude of economical mess facing Americans” Essentially The wall Street Journal is an international daily-published newspaper with concentration in business news. The journal is the largely distributed paper in the United States of America. This paper is influential on key issues touching on the economic status of America and international business and financial issues. It develops a sense of thinking for the American people on the Economic trends. Its internet expansion enables it to teach around 2.5 million people. This study intends to analyze the economical trend in America and much focus is on the capital and recurrent expenditure that has left the country with hefty national debts. The analysis revolves in the article “The Magnitude of the mess we are in” The American federal government is currently experiencing an extra annual spending of $1 trillion compared to 2007 level. The economy trend has been perturbing from 2007 through 2008, 2009, 2010, and 2011.it is imperative to note that, the country is struggling with a string of unprecedented federal budgets, which are serviced by increase borrowing. It is believed that an American household has increased its borrowing amount up to $55,000 annually. This is a risky situation, which has prompted uproar from diverse stakeholders. The hefty debts have resulted to unprecedented burden f interest payment (Shultz, Boskin, Cogan, Meltzer & Taylor, 13). The status of economy of the United States of America is agonizing, and it has compelled government agencies to design ways of stabilizing the economic market. For instance, the treasury has tried to capitalize on the low, short-term interest rates levied on its short-term loans offered over short-term durations. The study reveals that, the government should face the real turn of events on the economic status and overhaul the monetary policy to allow integration of the emerging trends with the American economic policy. This ensures positive trend of the American economy (Shultz et al, 15). It is noteworthy that, the catastrophe is attributable to the large percentage of unemployment. Essentially, the two issues decline of economy and a high rate of unemployment were the campaign instruments against the sitting president’s leadership and policy, and this ensured a tough pressure on the democrat wing of the government. This article reveals that, the Federal Reserve financed the last fiscal year’s budget deficits. Fundamentally, most of the foreign governments accounted for nearly all of it. On the other hand, the American citizens and institutions’ purchase and sales netted to about zero. The current state indicates that, the Federal Reserve owns 30% dollars of the national debt (Shultz et al, 17). This is the largest percentage of GDP in the account of America since the finish of the Second World War. It is vivid that, the decentralization of the large markets with the centralized control by a few government officials has predominantly affected by the Federal Reserve on the majority of banks and individuals, has put America in the worst ever, economic trends in its history. For instance, the budget deficit index from 2007 up to 2011 appears to be perturbing. It is illustrated as follows Year Deficit ($ trillion) 2007 1 2008 1.1 2009 1.4 2010 1.3 2011 1.2 It is noteworthy that, the Federal Reserve has managed to replace completely, the interbank money and large segments of other markets with itself. This situation has resulted to the determination of interest charge by declaring what it will recompense without much consideration of supply and demand of money (Shultz et al, 17). It is predicted that, if the Federal Reserve continues with the application of the distorting incentives and interfering with price discovery and implementing strategies, which are supply-demand noncompliant, unintended economic consequences are highly predicted to slap the country’s financial systems and economic policies. It should be understood that demand and supply form critical instruments in any market. The laws dictating these instruments are inevitable. Critical analysis establishes that, the government should seek ways of getting money to finance its spending by taxing or borrowing (Shultz et al, 21). Additionally, the government’s plan to tax the upper-income people only, should put on hold for the time being due to its non-flexibility and non-compliance to the progressive nature of the United Sates of America’s tax system. Despite, the serious economic challenges, This study has established that the Federal government has sort to revert these negative trends through financing of Consumer Financial Protection Bureau compared to the earlier appropriations extended to it (Shultz et al, 18). This incentive is seen as a move to severe the checks and balances needed for legitimate government. More over, the traditional Federal debt management has been replaced by purchasing of long term and selling short-term debt. However, this strategy is likely to reflect a two-sided risk. For instance, incase, the Federal Reserve is not wound, it will pour almost every coin into the economy consequently causing inflation. In the event Federal Reserve effectively turns the government, debt and mortgage- backed bonds, bought into money; it will have an explosive turn of events in towards a positive economic trend (Shultz et al, 23). Similarly, if the federal remains unwound and keeps the reserves, it is obvious that, the banks will not be able to access and pull back on the loans (Shultz et al, 26). This study finds out that, the financial stability does not only depend on how much individuals spend but how wisely and effectively consequently unwinding becomes difficulty prompting the balance sheet to rise. In conclusion, strategies such as trade liberalization, sound monetary policy and economic theory based on empirical studies should be deployed to scale down the rate of economic decline and overseeing the training programs that have been structured to enhance the economic fabric (Shultz et al, 25). However, the unfunded long-term liabilities and social fund and Medicare add trillions of dollars to the already overstretched strings of economy. It is imperative to note that, the qualitative easing policy instrument is hard to manage. It is evident that, the Americans face a regulatory uncertainty obstacle. This implies spiky increase in taxes and a sharp cutoff in spending, which are bound to affect the economy (Shultz et al, 13). Traders speculate that, the Federal Reserve might intervene in the credit market without limit consequently; businesses and households confront large-scale uncertainty, which calls for the government to integrate its monetary policies with the ever-changing economical trends. Shultz, Boskin, Cogan, Meltzer and Taylor: The Magnitude of themes we are in." Wall Street Journal. (2012): 1. Print. Read More