Spending Too Much

War is always a costly option. The government is responsible for paying for all war costs, which includes transportation and all appliances for combat and safety. As a result, the nation at war will suffer.

            The war in Iraq has had a drastic effect on the United States’ economy. As if the situation were not bad enough, US military is unable to withdraw troops from Iraq therefore continuing the costs that the United States government has to pay. The graph shown above comes from the USA Today website. Every millisecond the number of billions of dollars spent on the war in Iraq increases. Costs like this have proven to be very damaging on an already broken economy.

            The gas situation last year was extremely trying on US citizens. For multiple reasons, the prices of gas continued to rise and Americans were in panic. People were selling their cars left and right to try and buy more fuel-efficient vehicles. Even then, however, gas was too expensive to purchase.

            Now, the economic problems that have begun to arise are far more serious. Deficit financing of the war makes the United States more dependent on foreign investors to finance its debt and, ultimately, lowers standards of living. It leaves the nation in worse shape to face coming economic challenges as the baby boomers retire and health care costs rise, straining Medicare and Social Security

China Drama

I guarantee that if most American's go through the things that they own, this includes books, appliances, clothes, etc, they will find that a large amount of those products will have a label on them  (or had at one point) saying "Made in China". The point that I am trying to make is that America and China are directly related to one another, particularly when it comes to the economy of each nation.

A three part series made up of three articles describes the pros and cons of Chinas wide-spread production and consumption. For the United States, the trade process we have with China has been extremely beneficial. The US ran a $900 billion deficit with the world in 2006, equivalent to 7 percent of its economy and a quarter of that was with China alone. Interestingly enough, however, the United States has been borrowing money from China for quite some time now.

Also, the emergence of China as both producer and consumer now means that China, not the US, has become the largest trading partner for a number of other nations. As a result, Washington has relatively less influence over these governments on a range of issues. Now, the majority of US citizens are worried that the United States will not be able to maintain a successful business agreement with China. 

This is extremely important considering that now that the United States economy is in such a drastic situation, China's support basically controls a number of companies that are at risk of going bankrupt. Even though this issue is not as big of a concern as it was back in 2006, it still has the potential to have a huge effect on America's economy. This is important to remember, as well as the options American's have to do whatever they can to help. Everything is not entirely in our control, so we must be careful with the international decisions that we make from here on out.

Stock Block

After beginning to write about the economy in this blog, I suddenly realized that I had a lot more questions about the economy than I realized. I have also wondered what the stock market is exactly and what direct effect it has on the economy. The economy and the stock market are directly related. 

 

Generally speaking, the stock market will reflect the economic conditions of an economy. If an economy is growing, then output will be increasing and most firms should be experiencing increased profitability. This higher profit makes the company shares more attractive and they can give bigger dividends to shareholders. If the economy is expected to go into a recession, then stock markets will fall. This is because a recession means lower profits, less dividends and even the prospect of firms going bankrupt, which would be disastrous for shareholders. However, in a recession, the stock markets can sometimes increase. Often this is because stock markets are forward looking. The market has probably already priced in the effect of the recession and now the stock market is anticipating a recovery. For example, the stock markets in 2007 and 2008 performed badly in anticipation of a US recession.

 

In order to gather this information, I basically researched the stock market and the different aspects of the economy. After reading numerous articles I finally began to understand how it all works. Now, I'm extremely glad that I took the time to focus on learning the details because now I am more aware of what it all takes and why things happen the way they do.

A Glimmer of Light

The United States economy has been in a discouraging state for quite some time now. The stock market has fluctuated at frightening levels, the the housing market has lost a great deal of its value along with the value of a dollar, and the optimism and hope of American citizens have fallen dramatically. 

As a college student, I have been keeping a close eye on the job market. More and more companies are shutting down and more and more people have been losing their jobs. The rate at which this was happening was occurring at a ridiculously fast pace. Recently, on the BBV , however, an article was posted stating that the rate at which job loss was occurring was slowing. Perhaps this proves to be a glimmer of hope. 

For quite some time now, US citizens have heard former President Bush and newly elected President Obama about their plans to begin economic restoration in the United States. Unfortunately, there is not one single plan that will satisfy every citizen of the United States. Whatever decisions are made will somehow effect at least one group of people negatively and others positively. 

Another economic issue is of health care. Obama is currently working with health companies to cut costs in order to make health care more affordable. As a result, industry groups hope to save up to 2 trillion dollars on health care. This is essentially the route that we all need to take at this point. Companies as well as individual citizens need to do what they can to conserve energy and save money in order to stabilize the economy. 

I personally am so happy that businesses and the American people as a whole are becoming more optimistic. In a third article, the current signs of the economy beginning to improve and expand have made many people very optimistic. 

The truth of the matter is, however, that the damage that has been done so far cannot possibly be restored over night. It is a relief though, to know that people used to have no faith in the possibility of restoration, and that attitude is beginning to change. 

Effect of the Swine Flu

The United States is not the only nation that is having economic crisis. Just recently, a case of the newly discovered Swine flu was discovered in Mexico. This influenza is common in swine and rare in humans. People who work with swine, especially people with intense exposures, are at risk of catching swine influenza if the swine carry a strain able to infect humans. However, these strains rarely are able to pass from human to human.

            Unfortunately, the strain that is able to survive in humans is spreading at epidemic levels throughout Mexico City. An article by Jens Erik Gould describes the outbreak. So far, the flu is suspected of killing around one hundred and fifty people. The flu has caused officials to order the shutdown of all 35,000 restaurants in Mexico City. Because of the business problems and the percentage of people that have died, economic activity in Mexico City has fallen by about sixty percent.

            The NY Times also writes about this epidemic. It compares this epidemic to the SARS epidemic and the effects that that virus had on different places throughout the world. This spread is not nearly as worse as the SARS epidemic, 800 people, for example have died in 7 different countries due to Swine flu, which is not necessarily catastrophic, but it will still have its effects. 

    The Swine Flu is slowly creeping its way throughout the United States. This is something to be mildly, or perhaps even severely concerned about. Because the Swine flu has had such a drastic effect on Mexico's economy, it is quite possible that it will begin to have it's effects on the United States' already weakened economic situation. As for now, however, the situation is not as drastic as it is in Mexico City and many measures are being taken to contain the flu.

Hope for the Future?

Most people are struggling through the current economic recession with hopes that thins will return to normal once it all ends. Unfortunately, specialists who have been studying the economy's habits are predicting that the economy may stay in a rut for a long time even after the recession is over. The problems that have arisen seem to be too severe to bounce back from within the next three to five years. Research predicts that it may take up to a decade for the economy to show any signs of recovery. Many people have been saying that American's are going to have to adapt to a new way of living that they are not accustomed to. This means less consumption and selfishness throughout America as a whole. 

The housing market, for example, is still declining even after more than two years of slumping prices. It is said that the falling housing market is the center of America's economic crisis, and house prices are expected to descend as more people lose their jobs and the country falls deeper into recession. The problem with the housing market is a combination of many things. Builders continue to throw up more homes that are not selling. At the same time, those houses are competing with the ones that are coming on the market due to foreclosures and are not selling either. 

President Obama has recently addressed this subject with a plan to keep American citizens in their homes. Basically the plan is to create more manageable mortgage plans and lower interest rates on loans. Obama believes that this plan will prevent up to seven million homeowners from losing their phones. 

Our Crumbling Economy

America's current recession is of great concern to everyone. Over the past couple of years, gas prices have peaked at more than four dollars per gallon and a number of large companies have claimed bankruptcy. The largest recent concern is the amount of job loss occurring. Real estate agents, construction workers, and furniture manufacturers have all lost their jobs due to plummeting housing prices. Experts predict that June will mark the sixth month of decline in job loss with a number of 60,000 jobs lost. The question is: how long is this going to continue?

This recession is unlike most. In most recessions, everything seems to collapse with nowhere to go but up. In a slow recession, like this one, job loss along with everything else is deteriorating at a very slow rate and is predicted to take a good bit of time to rebuild. This will make America's suffrage time a lot greater and a lot more painful.

Not to put a damper on the upcoming holiday, but the recession has prevented many people from splurging on flowers and chocolates for Valentine's Day. People simply do not have the money to spend on commercial products such as this. Consumers are beginning to do what they should have always done. Instead of hoarding their money, they are saving. 

Now, the final and most important question. Who do we trust to fix our crumbling economy? Newly elected President Obama has manufactured a plan to create jobs that will re-employ up to ninety percent of those who have lost their jobs. The plan is to spur jobs that will rebuild roads, schools, and bridges as long as jobs for teachers, officers, and health care professionals. 

Restoring the current job loss situation appears to be the first step to rebuilding the economy as a whole. With occupations in place, credit will improve, people will begin to buy again, and everything else will just fall into place. The process, however, will take a while. With the economy recessing as slowly as it is, it will take just as long to restore it.