The Success of US Economy in 2004-2007 Essay

Published: 2019-10-10 12:34:59
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Economics and professionals economists have felt the heed of a series of books economic subjects which is not filled by usual textbooks or by the highly technical treatise.  This present series are published under the general title The Economics handbook series with the interest of informing any reader in general. They are short volumes that give essentials of the subject matter within the hundreds of few pages within a short span of period.

The American Economy has undergone a considerable remodeling during the recent past. First the most important issue is the single factor, which is the new factor that has never been experienced in the History of America. America has never had a major depression far nearly two decades. WE have had virtually full employment and booming prospect. Although past experience has been quite different throughout out history every eight or nine years we have experience serious depression and widespread unemployment. Indeed over a century our economy was the most violently fluctuating economy in the world.

The recent election history, particularly 2000 presidential contest and 2002 congressional elections, suggests a decisive victory for the incumbent republican president.  Since then the American economy had enjoyed unprecedented economic growth. The budget was balance and with the cold war over and America as the only hegemony left standing, the world was mere peaceful than ever (Acemoglu, 2004)

Operating under pressure the American Economy had performed a miracle. The output response to adequate aggregate demand has surprised everyone, and what is many still more surprising, it has not led to any such destructive inflation as was feared. Clearly we are not out of words in this matter, but the experience of recent years is reassuring.

One thing is certain; our economy is equipped with three powerful safeguards against peace time inflation:

1. Our prodigious capacity to increase production when under pressure.

2. Our capacity both corporate and individual, to save at high income levels;

3. Our demonstrated capacity at responsible fiscal and monetary management.

However the problem of wages and collective bargaining still remain. There can be no doubt that this requires statesman like action. In all events it is therefore fair to say that experience thus far indicates that the alarmists may well have beaten the drums a little too loudly and it will be happy to note recently a little softer note in the discussion of this very important problem.

A high degree of stability in the value of money must be an important consideration of public policy. Yet there is in considerable danger of making a fetish of rigid price stability. This fetish could easily become a serious obstacle to optimize. (Karol & Panis, 2004)

The record of post man central Bank history in the United States points to the conclusion that monetary policy has become only one of many instruments controlling the rate of aggregate spending. And fiscal policy has played the dominant role, with monetary policy and selective controls serving as important supporting measures. The long term interest rates still need to be coming down, especially since they climbed back recently short term rates could go down another percentage point to help. In addition the Federal Reserve should conduct some of its open market purchases in the long-term markets, and the Treasury should stop selling new bonds in the long term markets. Both measures would lighten the supply of bonds in the long maturities, give an upward push on their prices and bring down long tern interest rates.

In 1960, on the Kennedy Council, the council was trying to persuade the Whitehouse, the congress and the public that the beginning of recovery is only the begging of recovery. At that point, the full employment growths push. By simply changing the direction of the economy from negative to positive does not automatically trigger an inflation problem. This will indicate that just because the economy has turned around and is going up rather than down is going up rather  than down for a month or two or a quarter or two does not mean the business cycle problem is solved. A lot of unemployment excess capacity and slack demand still persists at and after the typical cyclical turning point (Barrel, 1992)

The government offers job training and job training is a pervasive aspect of the life of Americans, Wages and salaried employment is the single largest source of aggregate personal income in the United States. Every person holding a job has benefited from the training. Most job training in the United States is undertaken by private employers in their normal course of doing business, but each year, many Americans in precarious economic conditions use publicly funded job training as a path to employment.

Training comes in many shapes that are not the same and in different forms. There is an important distinction between general and firm specific training.

The general training provides the trainee with skills that apply to many employers in the labor market while specific training mainly offers skills that have value within a given firm or for a given employer. The government finances more of the former whole employers support more of the later since they are its principal beneficiaries.

Both public and private intermediaries have played important role as service providers throughout during the publicly funded employment and training programs. The work forces investment act (WIA) has expanded the role of intermediaries participating in the workforce investment system by establishing new one stop operator roles and excluding local work force investment boards from being direct service providers, unless waivers have been removed.  Intermediaries that provide services under WIA receive funds from local boards to provide direct employment and training services to customers or facilitate work force development in the one-stop environment.

In the recent past, concern about the skills of the US work force has emerged as a persistent public policy issue. The current focus on skills and their importance in the working lives of Americans is not new, rather a renewal. The Federal training policy has its roofs. In new deal public workers programs several factors are tied to the renewed public interest in skill development. Globalization, technological change and the reorganization of work have combined to produce dramatic changes in the demand for workers skill. Today a good job increasing requires a strong base of analytical quantitative and verbal skills. In the United states these skills are produced for the most part by the educational system, followed in sequence by private employers. (OLeary et al. 2004)

While most work force development programs have evolved incorporating lessons learned from previous initiatives, the job corps program, designed to offer disadvantaged youth a one year residential work force development program, has continued virtually unchanged since it was established by the economic opportunity act in 1964.

In the next 15 years, work in the United States will be shaped by a number of forces that includes demographic trends, advances in technology and the process of economic globalization. These key factors have already played a role in shaping the world of work in today economy.

They have influence the size and composition of labor force, the features of the work place, and the composition structures provided by employers. During the last century the US economy was shifting from one based a production to one based on information. New technology had spawned new products and industries had transformed the way firms in established industries were organized and labor was employed. The phenomenon of globalization can be viewed from a number of perspectives.

There is no a single agreed upon definition (world bank 2000) Economic aspects of globalization has seen the flows of goods and services, direct investment and other capital flows, the transfer of knowledge or technology and the movement of people. From this, perspective in the United States, the era of economic globalization affects the size of the markets we produce far the mix of products be consumed and the nature of the competition in the global market place. It also has implications for the labor market, the US workers compete in and the sources of domestic and international labor available to US firms and in addition to the economic dimension of globalization, it also has political social and cultural dimensions such as the balance of power across nations. (Karol & Panis, 2004)

The secular bent of the shah as well as his oppression and dictatorial ways alienated many Iranian groups allowing radical Islamists to overthrew the dictator and in stall a radical Islamic state in its place. The new regime held Washington acceptable for its years of support of shah, and relations between the two countries deteriorated as groups of Iranians took over American Embassy in Teharan.This is in support of explainging to expos the roots of present war on terrorism. (Gareau, 2004).

One of the apparent puzzles in the empirical corporate governance literature is the lack of correlation between the presence of independent directors and the firms economic performance. Various studies have searched in vain far an economically significant effect on the overall performance of the firm. Theory would predict that firms will select the board structure that enhances the chance for survival and success; it competitive market pressure eliminates out of equilibrium patterns of corporate governance whole some predict that corporate governance in the US is already good and therefore marginal improvements in a particular corporate governance mechanism would expectedly have a small effect. The rise of independent directors in the diffusely held public form is not driven only by the need to address the managerial agency problem at any particular form but on how to govern forms so as to increase social welfare. Fundamental changes in the information environment rewarded the ratio of the firms reliance on private information to its reliance information impounded in the prevailing stock market prices.

In conclusion over the period between 2004 and 2004, the central planning capabilities of the large public firm became suspect. The richer public information environment changed the role of directors and special access to private information became less important. Thus the fidelity shareholder value as to the utility of stock market signals found unit in the reliance on stock price maximization as the measure of managerial success. (Gordon, 2007)

The US economy slowed sharply in the fourth quarter of 2005 growing of its slowest rate since early 2003. This is because private consumption was weak largely due to a sharp drop in auto sales as buyer incentive programs ended and gasoline process surged in the aftermath of Hurricane Katrina, corporate fixed investment was subdued and net experts exerted a substantial drag and growth. Mainly indicators suggest that the weakness was concentrated on the early part of the quarter and the economy had subsequently bounced back.  Industrial production has strengthened capital goods orders are firm non fair payrolls increased and consumer confidence has rebounded from its Past Katrina slump.

Consequently real GDP growth issues expected to rebound in the first quarter 7 2006 and average at 3.4 percent for the year as a whole. Strong corporate profits and comfortable financing conditions imply a positive outlook for business investment.

Consumption growth, however is expected to slow in 2006 by about ¾ percent point as a cooling housing market and elevated energy prices more than offset any acceleration in disposable incomes from employment and wage growth with corporate profits expanding robustly and balance sheets in good shape, business investments and employment growth could be stronger than expected, but overall risks to the outlook are slanted to the down side. The large current account deficit 6.4 percent of GDP in 2005 makes the United States vulnerable to a swing in investors sentiment that could put downward pressure on, the dickens and see a spike in long-run interest rates. However a weaker housing market could trigger a more abrupt withdrawal of consumer demand than anticipated.

House prices have grown strongly in recent years providing a boost to economic activity through their effect on consumption, residential investment and employment. (World Economic Outlook, 2006)

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