Currency is valueless, and it is all about the confidence of the people in it. Since the start of the economic crisis in 2007, the Federal Reserve has juxtapositionaly employed conventional and non-conventional monetary policies to caution the effects of such crisis on economic activities and stabilize the financial market. Price stability and maximum employment were necessary for the nation and the world that uses the US dollar as the standard. To achieve this, the Federal Reserve turned to Large Scale Asset Purchases. Although the ends of all the policies formulated are the same, ambiguity shrouds the means to achieving such ends. The state has to spend, but as Trump and Hilary Clinton differ in the source of funds. The best options will be assessed with both the log and short term implications on the economy. To see whose option would better work for America’s situation, I will explore economic consequences of each suggestion.
Trump's thoughts are perhaps the best approach. If a country acquires funds from external sources, the public’s purchasing power remain uninterrupted, and the Nation can inject more money into the economy to stimulate growth. This method, however, does not regard the dollar. The value of the dollar may depreciate as some funds in circulation increase while taxes remain constant. Donald Trump has repeatedly shown that he wants significant cuts on taxes a case which Clinton do not agree with. Taxation, after all, is a classic method of controlling inflation (Presidential Primaries, 2016).
Hilary Clinton: 4 billion dollars to improve roads and breaches.
Clinton's opinion will put consideration to the strength of the dollar. The spending of 4bln dollars will increase the number of funds in circulation; improve efficiency which may, in the end, reduce the cost of production. The funds to be spent by government should come majorly from taxation. This proposal will work well for the US and in my opinion best when the country is not in financial crisis. The good thing about this approach is that it is job oriented. When people are employed, their purchasing power increases they can spend more on consumer goods and pay taxes. (Presidential Primaries, 2016)
The US dollar Policy and global dollar credit
As construed by McCauley, et al, US unconventional monetary policies play a fundamental role in shifting of dollar Credit transition to Global bond investors from Global banks (McCauley, et al. 2015. 8). Global liquidity is highly dependent on the dollar. A study of unprecedented rise outstanding Dollar credit to other borrowers apart from banks by Rey, Hélène explains how a cash shift can happen. Economic entities do not operate in isolation and investors can leverage on high return bond across the world if those offered by the Federal Reserve are not encouraging. The presumption of US as a stable economy has brought far-reaching implications on other nations in the world. When the confidence of the dollar falls (dollar depreciates), all economies that use it as reference are negatively affected, and the confidence in the dollar should be kept by every means possible (Rey, Hélène, 2015. 19).
Capital mobility has worked well for developing countries and those countries with lower capital intensity than the US. Decisions, whether capital mobility should be restricted, will touch both of America foreign policies and financial objectives. As there is no evidence that the US is losing when capital is moving out of the US. Trump argues that the exportation to business and capital to Mexico and Overseas have robbed Americans of Jobs. It is, however, important to note that Labour is expensive in The US, and such firms cannot sustainable operate in the US. We need to strike a balance and formulate regulations in which capital should be move rather than restricting.
Personal opinion
While different policies can work for a single problem, demagogic action should not be mixed with complex fiscal matters. When a country is on the downside, it makes more sense to borrow from external sources to keep the financial market stable. As much as taxation does much for the value of the dollar, it may intern lower the purchasing of individuals and the disposable income. The economy will stagnate as there will be no investments. The presumption of a stable economy should also reflect in the way the crisis is handled. The economy should be allowed to grow while in and out of recession. America’s domestic policies have become political standpoints. Sometimes they have disagreed for the sake of it even when there is no good reason. Both Hilary and Trump had a consensus that minimum wage was too low, but each had to find a way in which he/she can be different from the other.
The minimum wage sounds good for the employee but unfavorable for both the state and the employers. With the levels of minimum wage we have now, companies are willing to employ more or keep the current number of the employee. When the minimum wage rises, firms will have to cut down their staff and would rather keep only the experienced and the most productive employees. Young people who would work for whatever amount of experience will never get a chance, in the end, taking the country back to unemployment.
Work cited
McCauley, Robert N., Patrick McGuire, and Vladyslav Sushko. "Global dollar credit: links to US monetary policy and leverage." Economic Policy 30.82 (2015): 187-229.
Rey, Hélène. Dilemma not trilemma: the global financial cycle and monetary policy independence. No. w21162. National Bureau of Economic Research, 2015.
Presidential Primaries.” Issues & Controversies. Infobase Learning, 6 May 2016. Web. 21 July 2016. <http://icof.infobaselearning.com.libproxy.howardcc.edu/recordurl.aspx?ID=2717
Rey, Hélène. Dilemma not trilemma: the global financial cycle and monetary policy independence. No. w21162. National Bureau of Economic Research, 2015.
