Wednesday, December 13

Whats Next Economically

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During the past three years, the world witnessed great changes. In 2007, the United States was hit with a subprime crisis which dried all available liquidity from the markets. The world reacted and demand for oil raised dramatically driving crude oil to trade for $135.00 on the stock market. Europe began to suffer after as European banks and investment firms failed in bulk. U.S. voters brought their frustration to the polls and voted in a government controlled and administered by the Democratic Party.

Ironically, change failed to produce sustainable achievements. Yes, the “Great Recession” is officially over, but facts are still the same. Currently, the U.S. unemployment is 9.3%, up from 5% in January 2007 (U.S. Bureau of Labor Statistics 2010). The federal government is split as voters voted the Republican Party to control the House of Representatives. Stock markets are in a constant frenzy due to debt worries as members of the European Union are requesting assistance (The Associated Press and Reuters 2010). Even the great Asian economic powers are concerned. China is currently facing its highest level of inflation since the new century began (MediaCorp Press Ltd. 2010).

How about real estate, did the industry recover? U.S. real estate values have stabilized overall except for high end properties. A different story is drawn internationally. United Arab Emirate, Spain and Japan are suffering from debts related to real estate. Spain saw its national bonds’ grade downgraded a number of times within the last 12 months (Oakley and Mallet 2010).

Domestically, the Obama administration will be forced to work with a different government. Analysts are generally optimistic about corporative governments where the government is controlled by more than a single party. They cite former U.S. President Client and his achievements after 1994 when the GOP gained control of the U.S. Congress. There is also the success of the French government – split between different parties – in addressing France’s budget worries in comparison with other European nations.

Finally, consumers ought to expect modest inflation as the world recovers from the last economic pitfall. This inflation is the result from redistribution of wealth and more constraint government spending. The United States will continue to dominate the economic world as the world’s leading consumer, but new middle class – from rising economic powers – will compete with U.S. consumers as they become fully accustomed to an American style living.

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