Us Economy Issues

The U.S. economy and its markets faced one of its most turbulent weeks, January 21 - January 25, 2008, since 2001. On Tuesday, the Dow Jones industrial dropped close to 600 points first thing and then came back up after Ben Bernanke announced a three-quarter-point interest-rate cut. The week ended showing continued market stress. This stress was not only in the U.S. stock market but also the markets around the world dependent on the U.S. for exports. The world's markets which have shown their concern as they have moved synchronously with the U.S stock markets, especially with the rising volume of trade, open flows of capital, and tighter economic integration. Recession seems inevitable as the U.S. faces problems with excesses and defaults in the subprime lending and housing markets along with the decline in consumer expenditures. There are more and more people leaning towards the belief that the U.S and the rest of the world may be moving different directions. The U.S. has had falling demand for exports from countries such as India and China and where the U.S. was India's largest trading partner, it is now China. The United States is showing signs that it is becoming dependent on the generosity of foreigners, especially with the value of the dollar losing its strength. Because of the downslide in the U.S. economy, a bipartisan deal has been made that allows taxpayers making less than $75,000 to receive $300.00 in hopes to encourage consumers to spend. This stimulus package deal would also include tax cuts for companies and increases in loans for Fannie Mae and Freddie Mac. This deal will not pull the U.S. out of the place they presently are but will help them from continuing downward. The United States will continue to struggle for awhile as it takes care of large bad debt and credit issues.

These events that were discussed in this article related with a few microeconomic issues that we have discussed in class. The main discussion point in this