Looming Economic Crisis in United States

On January 21st and 22nd 2008, universe of discourse pecuniary trades crashed amidst the fears of the Statesn parsimony slowly are gradually moving toward recession. The emerging markets world oer corrected almost 20 to 30 percent art object the developed financial markets of Europe and American corrected over 10-15 percent. At present the DOW is 20 percent below its July top a steer that financial markets are entering a bear phase. (Landler & Timmons 2008)The paper impart try to shed light on what is looming large on American frugality, what are the policy or market failures which are taking the saving into recession, How the present Bush device of stimulus will impact the scenario in future and will it be good enough to bring the miserliness back on track.Main contributors to the slow plenty of the thriftAmerican economy is hit by numerous factors at the same cadence reaping slow mint, increasing unemployment numbers, falling retail gross sales, increasing trade s hortage, weakness of dollars, issuance of Euro, housing crisis and failure of financial markets. (Landler & Timmons 2008)Housing rack upet The housing market has been slowing down for an year now and most presidential candidates are suggesting ways on how American economy can come turn up this mess. The slowdown in the housing market is due to high evasion rate on mortgages especially sub-prime mortgages. During the credit expansion time agency first Bush measure cuts banks and financial institutions lowered their vigilance on credit rating and in quest to expand market give the sack up giving housing mortgages to shady borrowers.Another reason why this happened was m unrivaledy was easy to come and housing market was on uptrend so in case of failure of installment and foreclosure the banks and financial institutes were capable to concentrate the money back through increased price of the houses. But after the slowing down of housing markets real estate rates stomach falle n 5-10 percent in last year only and check to UBS it is expected go down by 15-20 percent more in coming year.increase National Debt the present earthal debt is around 9 trillion dollars which accounts for almost 65 percent of the Gross Domestic Product. much(prenominal) high level of national debt increases the interests on payments significantly and reduces the elbow quadrangle of the government in tinkering with the fiscal policy.In the past America able to finance its debt by weakening the dollar but now with emergence of Euro it has become increasing difficult to export the national debt to foreign institutions and countries which in past are happy to maintain huge dollar reserves. (Kjeldsen, 2002)Increasing Trade Deficit The profitability of American companies have grown over the past half a decade but the trade deficit hasnt come down. The main reason for it is off-shoring and outsourcing. American companies are reservation the most of low cost manufacturing and serv ices in countries alike(p) china and India to boost their bottomline.Low level of saving rates In answer to the main reason for credit card default rate one women respondent on CNBC summed up the saving rate of Americans we all like to buy things, we all love to travel and we dont unavoidableness to wait for it. This culture of plastic money spending today salaried later has brought down saving rates to alarming levels and it can significantly hamper the investment in the economy.Increasing inequality among Americans the last evaluate cuts provided immense benefits to the rich Americans and increased the income gap between the rich nation and poor nation. Hurricane Katrina exposed the underbelly of this growing inequality in the artless and it will take years of corrective actions.Financial Markets crash America is financial market sensitive country by that it means that the riches effect among American can be reflected by the state of the financial markets as more than 80 percent of the population invest in the financial markets. This has let the consumer sentiments down which is resulting in lowering retail sales and subsequently lowering employment generation. (Landler & Timmons 2008)President Bush Stimulus objectPresident Bush has passed the stimulus contrive of 168 billion into law, the stimulus plan will ensure money in the hand of real consumers in short time which will help in keeping the economy afloat by not letting the demand go drastically down. In the long run along with the revenue enhancement cuts and stimulus plan the economy will able to get refreshful investments which can fill out production and employment opportunities.The stimulus computer software will start providing tax cuts after May and before that it provide a one time rebate of 600 dollars for the individual and 1200 for couple and an additional 300 dollar apiece for a child in the family. (MSNBC, 2008)The stimulus plan may be a step in right direction but the cha llenges the economy is facing are fundamental one. With high oil prices and fears of inflation the tax cuts may end up fuelling the inflation in the economy resulting in more import of cheap products from countries like China which is maintaining fixed transposition rates.ConclusionAt present the economy is looking down the cask and there is a very slim chance that it will trajectory recession and more importantly a growth slowing down in next 2-3 years. America is fast graying and productivity going down with increasing health costs, the times seems to be certainly tough in future. The one ray of hope is creating of jobs by investing in new technologies which America is historically good at.ReferencesKjeldsen-Kragh, Soeren. (2002) International Economics. Copenhagen, , DNK Copenhagen Business School Press, 2002.Mark Landler and Heather Timmons (2008) Stocks Plunge Worldwide on Fears of a U.S. Recession. Retrieved on seventeenth Feb from http//www.nytimes.com/2008/01/21/business/2 2stox-web.html?_r=1&hp&oref=sloginMSNBC (2008) Bush signs stimulus package into law. Retrieved on 17th Feb from http//www.msnbc.msn.com/id/23143814http//www.trb.org/publications/millennium/00138.pdf