The United States Economy: The Slow Recovery Of A Nation

817 words - 4 pages

The United States Economy: The Slow Recovery of a Nation

Introduction…………………………………………………………………………... page 2

Monetary Policy……………. ……………….……………………………………… page 2

Recovery…...……….…………………………………………………………….….. page 3

Conclusion……………………………………………………..…………………...... page 3

References……………………………………………….……………….……….….. page 5

The United States Economy: The Slow Recovery of a Nation
Consumer concern over a declining housing market, political gridlock in Washington, high energy and healthcare costs, and budget worries collectively have resulted in an economic meltdown in need of a recovery. After 9/11, central banks around the world cut interest rates so low that investors borrowed disproportionate amounts of money leading to reduced liquidity and a buildup of foreign exchange outside the United States. While at the same time, Americans overindulged in consumption without saving any money. Homeowners extracted value from their homes to subsidize mortgagees with government support coming to late. According to United States Department of Commerce (2013) with the national unemployment rate at 7.4 percent, not counting those that have stopped even looking for work, wages paid to workers were the smallest share of Gross Domestic Product (GDP) since the 1950s. In December of 2008, a full recession hit our country and the Federal Open Market Committee answered the call resulting in consumers today feeling more a little more comfortable about spending their money once again.
Policy Tools
The Federal Reserve has their tools, such as quantitative easing, to influence the cost and availability of the money supply and influence short term interest rates in an effort to promote economic growth. After the recession hit, the Fed was charged with getting creative and finding ways to stimulate the economy. They bought vast amounts of long-term bonds issued by the U.S. government and mortgage companies which increased the demand for these securities thus lowering yields. This applied pressure on interest rates making it more affordable for consumers and businesses to borrow money for purchasing goods such as homes and automobiles. We have made good strides in monetary policy driven by the Federal Reserve, with the lowering of interest rates and quantitative easing. The Federal Reserve has held a firm stance in part, due to the lack of fiscal policy support from the legislative and executive branches of the government. Payroll tax rates are high, income tax rates have risen and the taxes associated with the Affordable Care Act have impacted the slog in the GDP.

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