Issues Americans Cannot Understand: The Federal Reserve and the Economy

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Over the last 3 years the United States has seen an incredible flux in the economy from an all time high, to the lowest position since the Great Depression. Many Americans have no idea why or how these cycles affect their everyday lives, most importantly, they do not understand how the government intervenes to control these issues. Most people cannot comprehend the complexity of the United States banking system, how the Federal Reserve (FED) controls interest rates, the way our currency works, inflation, credit, etc… This is just a small list from a plethora of topics, that American’s are under-educated, and these are issues that we all need to face at some point in our lives. Rather than explaining each of these issues in detail, it is important to recognize that the US economy has a serious problem at hand, and the backbone of this problem is the Real Estate market. Correct the Real Estate industry, and the economy will prosper.

If we look back at the United States history, we can conclude that there have been several economic revolutions, starting with the agricultural revolution, then the industrial, and now the technological revolution. But, hidden under this urge for a greener, more eco-friendly technology, we lost touch with the driving force behind the American economy, Real Estate. For the past decade, the average home price in Florida has gone from an average of $181,000 in 1997 to $464,000 in 2007 according to the American Census Bureau. In fact, dating back to the Clinton era, it was decided by his administration, that everyone in America should be able to live the American Dream. That being, the ownership of their own home, the safest long-term asset in any investor’s portfolio. President Clinton’s administ...

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...a savings will eventually be used, and the economy will prosper.

Let’s think about the effect this extra saving will have on a massive scale. The banks will be disappointed to lose a small percentage of revenue today, however, they will still have a positive cash-flow with less risk of foreclosure. If more people are saving money on their monthly bills, they will be more likely to stay in their homes and pay bills on time. This will cause the value of homes to stop sliding, and less foreclosures to take place. With home prices stable, and more cash in the average American’s pocket, people will have more expendable income to buy goods, and services, thus boosting the economy, which has survived on Real Estate for so long. Solving this terrible crisis will not only help our economy, it will help the rest of the world financially through America’s leadership.

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