The American Economy has faced one of the most destructive economic crises in 2008. The crisis started in the sub-mortgage markets has expanded to the financial markets, and the largest financial institutions have declared their bankruptcies. Subsequently, the collapse of the financial markets has spread to all the industries in the country.
What the American lost in the global financial crisis and what made the recovery from the crisis tough was the loss of trust for the American Economy among the agents in the economy. Until 2008, the economic development in the US was based on the consumption economy. The domestic demand was kept at a high-level to continue the economic growth. The crisis in 2008 indicated that the economic development based on the consumption economy in the US has collapsed (Papolo 1).
The American government and the Federal Reserve have implemented some recovery monetary and fiscal policies. The fiscal policies carried out in the US after 2008 until now included the bail-out strategy for the large companies which had the risk of bankruptcy. The government had to pay for the large corporations because the collapse of these companies could generate more trouble in the American Economy. In the following time, the bail-out strategy was transformed into entrepreneurship and new business support strategy. The American government has prepared necessary suitable conditions for the new entrepreneurs and the businesses. The tax exemptions, the financial and consulting supports for the entrepreneurs could create the tendency among the investors to start their businesses (The Department of the Treasury 1-24).
On the monetary side of the recovery strategies, the Federal Reserve was late for reacting to the crisis. The Federal Reserve could take responsibility to keep the local markets alive by implementing the expansionary monetary policies. The late response from the Federal Reserve to the fallen markets made it relatively harder to develop a recovery monetary policy for the bank. The Federal Reserve have started implementing the expansionary monetary policy; however, the agents did not believe that the monetary expansion could stimulate the domestic markets (Taylor, Kern and Crawford 2-10).
The fiscal policies and the strategies those restructured the financial institutions in the US have worked, and the recovery process have been accelerated. The Federal Reserve could control the expectations after the recovery has been achieved at a certain level. The Federal Reserve gave the message of increasing the interest rate, and the expectation of the increasing interest rate have managed to attract some capital from the other countries to the US. Therefore, the awaken markets in the US could have some liquidity (Taylor, Kern and Crawford 2-10).
Although, the American Economy could manage to increase its performance up to a point, it is still not possible to claim that the full recovery is achieved. The US Dollar has lost its value against the Euro and some other national currencies. The American Economy still cannot create enough jobs for everybody, and the demand for the highly skilled workers does not satisfy the skilled workers. The consumption is still not high enough compared to the time before the crisis.
For the full recovery, the economy management has to take responsibility to regulate the markets and develop some strategies to increase the control over the market structure. The last global financial crisis has proved us that the free market mechanism might create inevitable crises. What has happened in the mortgage market in the US has shown that the free market mechanism created bubbles in the economy, and the boom of the bubbles was ended with a global financial crisis. Therefore, the economy management has to develop a relatively better and more sophisticated monitoring and intervention system over the markets.
Works Cited
The Department of the Treasury, "The Financial Crisis Response In Charts." The Department of the Treasure. N.p., 2016. Web. 20 June 2016.
Papola, John. "Forbes Welcome." Forbes.com. N.p., 2016. Web. 20 June 2016.
Taylor, Richard W, David F Kern, and Jerry L Crawford. "Economic Policy And The Current U.S. Recovery". Arkansas Tech University. N.p., 2016. Web. 20 June 2016.
