THE AMERICAN ECONOMY IN 2014
Introduction 2
The Fiscal Policy 3
The Monetary Policy 4
Conclusion 4
References 5
The American Economy in 2014
Introduction
This essay will argue whether the American Economy is live enough for a complete recovery from the global financial crisis started in 2008. The GDP growth rate after 2010 has started rising again; however, we observe that the economic growth is not following a stable path. The annual the highest level of the growth rate is around 3%, and it fluctuates over time down and up – in some quarters it becomes negative. In the first quarter of 2014, the economic growth rate was -2. For a complete recovery, the American Economy should stabilize its growth path.
The new job openings have started increasing after 2010 when the recovery has begun, and we observe that the new hires are increasing steadily. The unemployment rate in 2013 and 2014 has decreased down to 5.9. The decrease in the unemployment is following a negative-sloped trend. Thus, the government policies implemented has started giving good signs about the economy. The inflation rate is stable over time and around 2%. Thus, the agents in the economy do not face any inflation problem from the customers' point of view; however, this is not a desired situation for the suppliers. A relatively little higher level of inflation might stimulate the production in the country. There is also an important statistic for the American Economy: youth unemployment. The youth unemployment is still higher than 12%. Considering that the new job openings are increasing around 3% a year, in the following years, the American Economy might face a crisis in the labor market.
There are two main policies to intervene the markets for a more stable and growing economy: monetary policy and fiscal policy. The American government was forced to bail out the large companies in trouble just after the crisis started. For a long time, the American community discussed if the bail-out policy was the right recipe for a quick recovery in the American markets. The American Economy looks like getting recovered slowly from the negative influences of the financial crisis; however, it is hard to claim that the economy is completely recovered. At this point, many agents in the American Economy expect the Federal Reserve’s stimulating interventions to the markets. This essay will discuss the fiscal policy and the monetary policy implemented after the financial crisis.
The Fiscal Policy
The American government has made very urgent decisions in 2008 and started a bail-out policy. The main issue was to save some large companies to prevent the spread of the crisis to the other companies and the society through increasing the unemployment rate. Even though, it has been criticized by the public, it truly prevented the worse results from the crisis. However, bail-out policy was not a sustainable policy for the American government because the government debts have increased relatively more than the desired level. The high level of government debt might cause preeminent problems like inflation and crowd out private investments. Consequently, the American government is required to stop the bailout policies.
The only task assigned to the government is not increasing the government spending to stimulate the economy. Also, the government is responsible for providing security in the markets in many varying aspects. In the past, providing security was meant to have stable markets, and many thought that the government needed to be passive if there was nothing going wrong in the economy. However, the last global financial crisis has proven us that the dynamics in the markets might accumulate some problems, and cause large economic and financial crisis. In accordance with the idea of that the markets always have the potential to create crises; the government needs to develop a continuous policy to control the markets in case of potential troubles. The government needs to be more active in monitoring and controlling the markets further than only implementing some fiscal policies.
The Monetary Policy
The Federal Reserve kept its silence during the hot days of the global financial crisis. After the government's bail-out policy soothed the economy, the Federal Reserve, to increase the financial resources inside the country, increased the indicator interest rates. This policy helped the American Economy receive some of the American capital outside the country. However, a high level of interest rate would not increase the investments and the production inside the country. Especially, the agents would like to see a relatively better environment after 2008 for starting their businesses; in terms of promoting the entrepreneurship in the economy, the interest rate was comparatively higher. Subsequently, the Federal Reserve has started decreasing the interest rates to stimulate the investments and the entrepreneurship in the economy.
Conclusion
The American Economy has still not recovered from the global financial crisis. The economies are facing a new era after the most recent financial crisis. Many economists believe that the market failures might a common thing in the near future; therefore, the continuous intervention to protect the security in the markets is inevitable. The American Economy in 2014 still needs more time to recover, and the latest statistics indicate us that it is still fragile.
References
Arestis, P., & Fontana, G. (2009). Special symposium of discretionary fiscal policy: Fiscal policy
is back! Journal of Post Keynesian Economics, 31(4), 547-548.
Dionne, E. (2014, September 23). Economic Insecurity, Rising Inequality, and Doubts about the
Future: Findings from the American Values Survey 2014. Events. Retrieved October 9, 2014, from http://www.brookings.edu/events/2014/09/23-american-values-survey-economic-inequality-insecurity
Hayes, M. (2008). Special Forum on Recent Interpretations of Keynes and the General Theory:
The Post-Keynesian Economics Study Group – After 20 Years. European Journal of Economics and Economic Policies: Intervention, 5(2), 297-300.
