The article that I have chosen to analyze is entitled “Political Pressure Wouldn’t Halt More Fed Easing” written by Scott Lanman and published last October 5, 2011 in Bloomberg. Federal Reserve Chairman indicated that he would continue to use monetary policies to stimulate economic activity, which is primarily reflected upon interest rates. This is amidst the probable recession for the US due to its debt debacle and credit downgrading which triggered a panic-stricken market.
As many economists have already noted, the leading indicator for a recession, or a downturn of the US economy is the growth of Gross Domestic Product (GDP). GDP is the increase in the amount of goods and services produced by an economy over time. According to the Economic Cycle Research Institute (ECRI), more than three years ago, the 2008 financial crisis already triggered studies on longstanding pattern of slowing growth, characterized by higher cyclical volatility and lower trend growth. In layman’s terms, in the short run, we may be having higher upswings of economic growth but at the cost of having equally strong downswings which are hard to anticipate. However, when you try to see patterns as far as from 1970, the long-run trend is down. A part of this trend is shown on the graph below:
As one can notice, there was a steep upward change in GDP growth by the end of the 3rd quarter in 2009. The GDP growth figures for 2011 is 2.2% and 1.6% for eth 1st quarter and the 2nd quarter respectively. The graph above may be misleading insofar as it suggests an upward sloping imaginary trend line, but as far as the ECRI is concerned, two implications are possible: First, the fall of GDP will even be steeper than perhaps the -5% in the 2nd quarter of 2009. Th...
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Works Cited
Lanman, Scott. (2011). Bernanake Signal Political Pressure Wouldn’t halt More Easing. Bloomberg News. Retrieved from http://www.bloomberg.com/news/2011-10-05/bernanke-signals-pressure-from-congress-wouldn-t-halt-additional-easing.html
Economic Cycle Research Institute. (2011). Retrieved from http://www.businesscycle.com/reports_indexes/reportsummarydetails/1091
Bureau of Labor and Statistics. Unemployment Data. Retrieved from http://data.bls.gov/timeseries/LNS14000000
Inflationdata.com. Inflation data. Retrieved from http://inflationdata.com/inflation/inflation_rate/currentinflation.asp
Federal Reserve. Interest Rates Data. Retrieved from http://www.federalreserve.gov/Releases/h15/data.htm
Tradingeconomics.com. GDP data. Retrieved from http://www.tradingeconomics.com/gdp-growth-rates-list-by-country
This paper aims to discuss the Short-Term and Long-Term Impacts of the Great Recession and
In conclusion, the current macroeconomic situation in the United States is characterized by moderate growth because of better economic conditions that were brought by the events of 2013. The country has experienced moderate economic growth since the 2008 global recession but has shown real signs of momentum. While the country is not concerned about recession or inflation, the rate of unemployment is still a major challenge despite improved consumer and business confidence. As a result, the Federal Open Market Committee or Federal Reserve System needs to adopt fiscal and monetary policy initiatives that help address the unemployment issue and promote high economic growth.
Gustman, A. L., Steinmeier, T. L., & Tabatabai, N. (2012). How Did The Recession Of
The United States has been through many recessions in its history, but I have chosen to focus on the recession of 2001. This recession only lasted from the months of March through November of 2001, but many things happened to our economy during these eight months of hardships, including one of the most traumatizing events in the United States of America’s history. “A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.” (NBER) Not only did the United States experience a recession, but it was also the year our country went under an attack brought onto the World Trade Center, and this shook our nation up even more than an average event might. March 2001 ended a ten year expansion, and led to an eight month downfall of our economy, also known as the 2001 recession.
Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession.
Looking back to the Carter and Reagan Administration’s, you can begin to see where the Recession originated from. Prior to the Reagan administration, the United States economy experienced a decade of rising unemployment and inflation. Political pressure favored stimulus resulting in an expansion of the money supply. Reagan wanted to increase defense spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors. Reagan enacted lower marginal tax rates in combination with simplified income tax codes and continued deregulation. During Reagan's presidency the annual deficits averaged 4.2% of GDP after inheriting an annual deficit of 2.7% of GDP in 1980 under President Carter. The real
The Wall Street Journal (Mon. April 11, 1994) - "Fed Moved Too Slow On Increasing Rates"
The Bureau of Labor Statistics characterizes a recession as a general slowdown in economic activity, a downturn in the business cycle, and a reduction in the amount of goods and services produced and sold. But what usually causes this slowdown to begin with? Each recession has its own specific causes, but all of them are usually preceded by a period of irrational exuberance which is part of the expansion phase of the business cycle. The most recent one, which officially lasted from December 2007 to June 2009, produced the greatest US labor-market meltdown since the Great Depression. This Great Recession began with the bursting of an 8 trillion dollar housing bubble. Irrational exuberance in the housing market led many people to buy houses they couldn’t afford because the thought was that housing prices could only go up. The bubble burst in 2006 as housing prices started to decline, threw many homeowners off guard, who had taken loans with little money down. When the realization set in that they would lose money by selling the house for less than their mortgage, they foreclosed. This triggered an enormous foreclosure rate which caused many banks and hedge funds to panic after realizing the looming huge losses due to the buying of mortgage-backed securities on the secondary market. By August 2007, banks were afraid to lend to one another because they did not want these toxic loans as collateral. This led to the $700 billion bailout, and bankruptcies or government nationalization of Bear Stearns, AIG, Fannie Mae, Freddie Mac, IndyMac Bank, and Washington Mutual. Consumer spending experienced sharp cutbacks due to the resulting loss of wealth. The combination of this along with the financial market chaos elicited by the bursting of th...
The steady growth of inflation in 2007 and 2008 suggest that the Federal Reserve applied discretionary powers to avoid tightening. Tightening is inflation growing too fast. In 2009 the feds needed to be concerned about the deflation because the average inflation rate dropped to -.4%. Inflation tends to follow movements and they are closely related to the business cyc...
In the early 2000s, there was a decline in economic activity in developing countries. Moreover, its repercussions were also felt by developed countries, one of which is the the United States of America experienced an economic state, which showed recessionary qualities. However, in early 2002,
In conclusion, regardless of Macropoland’s current economic condition, it is fair to say that it is all part of the business cycle. The business cycle has three parts: peak, trough, and peak. The peak is the date that the recession starts. In Macropoland’s case, the peak would be at the beginning of 1973, its trough somewhere between 1973 and 1974, and then its peak again at 1974. In the second scenario, Macropoland is either at its trough, where it is about to head up again because of its low inflation rate, or it is at its expansion, on its way to heading to its next peak.
According to The Balance, a financial website brand owned by About.com, the causes of the 2008 recession have been blamed on certain factors such as the decline of manufacturing orders that began in 2006, and the housing market crash in 2007 which created a domino effect that lead to recession. According to Investopedia, in the short time before the 2008 recession, stocks were at an all time high in October of 2007. Less than a year later in September of 2008, stocks were down over 20%. This is eerily similar to today’s massive growth in the economy which could eventually fall like 2008’s. One of the largest indicators of where the economy is heading stems from the current politics of the United States. Economic plans of the Trump Administration such as an investment in infrastructure, promises to lower taxes, and bringing jobs and production back to America, have arguably been some of the reasons for such a large amount of speculative growth in the economy. Unless Washington does in fact follow through on their end of the bargain, the growth that our economy is seeing today can turn in the opposite direction in the blink of an eye. Some signs of a future recession of the economy have come just recently from the unexpected unemployment increase. According to CNBC, in March of 2017, 98,000 jobs were created although it was estimated that 180,000 were
Labonte, M. (January 7, 2014). Monetary Policy and the Federal Reserve; Current Policy and Conditions. Congressional Research Service.
The Great Recession started in late 2007 when an 8 trillion dollar housing bubble bursted.(stateofworkingamerica.org)/great-recession/) 8.4 million jobs were lost which was about 6 percent of the American work force. The recession lasted about 2 years and effected America harshly. American households lost around 16 trillion dollors in net worth in the 2 year span. At the end of the recession America recovered about 14.6 trillion dollors of the lost money. Stated by the article near the end of the recession the economy still had 5.4 percent fewer jobs than it did at the beginning of the recession, this reason along with the extraordinarily slow recover grants this time period as
The current state of the economy in the United States has been slow in recent months. While the economy is not currently in a recession, we may eventually fall victim to the first recession we’ve had in nearly ten years. The economy in general is showing growth, just not much. It will be difficult to predict what exactly will happen to the US economy in the future. Many economists do not agree on what will become of the economy. Some feel that we will begin a recession over the next year, and some feel that there is significant policy implementation that will allow us to dodge a recession and regain our economic strength. There are many factors that make up the US economy. The means in which I will discuss the overall growth and current status of the economy is by analyzing the Gross Domestic Product, and discuss the factors that cause it to rise and fall.