How International Trade Impacts Local Economy In the US
Most of the businesses abroad contribute a lot to local business. According to new revelations, many towns and cities depend on international trade for employment and business expansion locally. Therefore, international trade is deemed non-functional without local industries and vice versa. Most business people are now realizing the importance of linking local and international trade in order to maximize profits. Many local jobs are emerging from their comfort zones to venture into undeveloped territories in other countries, resulting into greater profits as opposed to the previous situation.
In the recent years, research has indicated that international trade supports one out of five American jobs. In turn, this adds up to 38.1 million jobs across the country. As such, this means that international trade is becoming more and more familiar to business people thus adding to both profits and new risks. Studies demonstrate that this type of trade is gaining an increasing importance, as it plays a major role to the American economy. Local businesses and communities have benefited from it: for instance, a number of job shares have doubled since the early 1990-s. International trade in the US impacts a lot of industries ranging from technology and even agriculture. Today, more than 50 US states depend on international trade for employment and other income generating activities.
The government observes the importance of interactional trade through import and export. Therefore, there are policies that aim at regulating international trade and at the same pay attention to every player's interest. The recent free trade agreements have contributed to the US economic growth. According to the business round table, in 2013 alone America free trade partners have purchased goods and services worth $733 billion. That is 12.6 times higher than what the non-partner countries purchased.
In addition, statistics indicate that countries that practice free trade with US buy larger quantities of American products. The foreign companies also tend to invest in the US and end up creating more employment opportunities. Foreign companies in the US contribute by locating facilities such as laboratories, research centers, and plants situated in America. For America to stand international trade competitiveness, the country has to pay attention to the ability of trading with other economies. Therefore it is important that America continues to come up with new policies drive future growth.
According to the trading economics article, the US GDP rate has been increasing over the years. By the third quarter of 2014, the American GDP rate has adjusted by 3.90. According to interaction bureau of statics, America enjoys the most diversified as well as technologically advanced economies in the world. Various sectors such as finance, real estate, insurance, healthcare, leasing, business, education among others have boosted the overall GDP by 40%. In other sectors, retail and wholesale contribute to 12% US GDP.
Recent studies indicate that US GDP growth has reached the expectations as per Q3. The results show that the US economy has advanced an annualized 4% in the third quarter in 2014. However, this also shows that GDP has slowed down from the initial 4.6% in the previous financial period. The decline in GDP is said to be contributed by a delay in inventory, residential as well as non-residential investment. There has also been a decrease in personal consumption, exports and both personal and public spending. However, as of October 2014, the deficit in GDP began to narrow indicating an increase in economic growth.
US Economic Performance
Despite an increase in GDP, the economic performance of America has been faced with issues since the 2007 recession. The American economy may seem to have survived the recession by a reflection of a boost in the American working history; the history reveals that in the 1990-s workers began to put more effort in productivity growth. The system was now experiencing a 30% increase in production and so everyone was sharing the boom. However, by the new millennium, the economic scene changed drastically. In as much there was continuity in productivity, only a few were benefitting from the results. Ever since, the fruits of productivity go to the pocket of a few whose checks continue to swell. The trend in differences in income has caused a major gap between the rich and the poor and its becoming bigger by today.
Therefore, as much as America is boosting of a swelling profits in both local and international trade, there is still an issue with wealth disparity problems. Today more than ever, more people are complaining of wealth disparity which attributes to issues such as health inequality, unemployment, and expensive living. America stands as one of the best performing economies amidst all the emerging issues, especially during the presidents' Obama administration.
Despite the fact that Americans are hard-working and tolerate inequality, the consequences are proving hard to bear. The economic position of America is moving towards a bigger crisis unless something is going to change quickly. For instance, presently the impact of wealth gap is seen in stagnant wages as well a rise in the cost of housing. Even the policy makers have claimed that the trend is worrying because the economic boom may soon fade.
Unemployment Issues Facing America Today
The American working culture provides that they work for both living and by way of moral obligation. As such, many Americans despite their financial status are employed or working for themselves. Due to high percentage of those working, it fuels the American economy attributing to its position as an economic giant. Employment gives rise to more spending which leads to more employment. The 2007 financial crisis caused a reverse in employment leading to less spending. The 2007 economic crisis led to a series of events that is yet to be recovered. For instance, events like the housing bubble burst caused financial sector to dwindle. As such, banks could not afford to lend anymore. The construction workers and their contracting companies lost their jobs. To make the matters better, tax revenue fell which provided the government with little money to foster development.
Since the declaration to fight poverty by President Lyndon Johnson in 1964, the United States have become affluent. Gross domestic per capita has doubled over the years. Presently, the official poverty rate in the US stands at 25%. The lack of progress in fighting poverty is not only contributed by the great recession, but also a direction between the economic growth and poverty reduction. Poverty is still an issue because poverty reduction is growing weaker than in the past. Many workers have not shared their economic gains for close to 40 years; most of the gains have been going to hands of the elite in the society.
Gradual increasing wealth disparity is expected in a capitalist economy; however, bursts of increasing disparity are unprecedented. For this reason, it is crucial to understand the causes of the financial crisis in order to understand how it contributed to further wealth inequality in the country.
American Monetary Policies
According to the financial post, the American monetary policies have failed. Since the 1950-s the US federal system has been in a position to fight recession issues. The US monetary policy fights recession by lowering interest rates and then slowly raising them again once the economy has stabilized. However, for the last six years, the policies have maintained interest rates at the same level. Some players in the government and the public blame Paul Krugman and Lawrence Summers for the inadequate fiscal stimulus. According to experts, more deficits should have been spent in the past. The US has experienced more deficits in the last two years. On the other hand, some economists blame the Keynesians policies for the failure of monetary policies put in place. They claim that the Keynesians policy interfered with the market economies so that problems incurred could not be corrected by macro economics policies. Fiscal deficits have in turn suppressed the effectiveness of monetary policies. The increase in deficits has caused an increase in uncertainties about future taxes. Research continues to unveil new uncertainties caused by the monetary policies put in place. According to the article, the uncertainties have been reflected in change in regime, which in turn lowers the perceived rate of returns. One of the reasons as to the monetary policy has not restored issues such as consumption, prosperity and even investment is because of the growth in regulations. The increase in regulations has made it impossible to run businesses at a reasonable cost. It has become more and more expensive to run investments and to maximize on innovation. As such, many are left with little to run and opt for employment instead. Since thousands of regulations have been passing, it has deemed it more difficult for the economy to grow steadily.
An article by Ralph Atkins and Michael McKenzie shows that inflation rates are attributed by tumbling oil prices. Recently there has been a fall in inflation rates which indicates that bonds and swaps have strengthened. The federal government is worried about the inflation rates. It is feared that the inflation rates will not recover any time soon. As of 2014, the federal government was hoping for the strengthening of the US economy. However, a few months into year, the economy was dampening by harsh winter weather.
Fed official as well as the larger public continue to raise concerns on the inflation rates. It is believed that low inflation can be tackled by keeping short term interest rates. Low inflation is high on the global bankers as well as finance ministers in the US. They fear the risk of deflation as well as negative inflation. On the surface, flat consumers prices are viewed as a blessing. However, in depth they cause small wage gains, soft global demand which has greater consequences. In addition, small wage gains make it difficult for business and household borrowers to pay their debtors.
Years past the financial crisis, observers have paid attention to the inflation and deflation rates. They have warned that the bankers offering low interest rates stand the risk of pushing consumer prices higher. However, the banks see this as the one of the way out of the great recession. In addition, there has been weak demand in the American economy resulting into low consumer prices by firms. The America monetary policy system has not been keen in dealing with the issue as it came. Since April, 2011, the American economic system has been faced with challenge of low metal and aluminum prices which are supposed to boost the American economy. In the midst of this challenge it is important that the federal system comes up with meaningful policies that will deal with issue of inflation.