Undoubtedly world’s largest economy affects just about everyone across the globe, depending on what you read, hear or practice. The US economy is well on the way to recovery after Covid-19. The markets are buoyant, consumer confidence is decent or nonetheless it is stalling and leaving millions of people behind food insecurity homelessness and it is not going to be repaired anytime soon. The whole world is trying to get back on track but how long that will take, depends a lot on the Americans, what happens in the US really does have an impact on the rest of the world. So who really created the strong US economy before the pandemic hit? Is the recovery starting to slow down and is inequality getting worse? Not better by some measures, China these days is considered the biggest economy in the world. But when an instant peep is driven at the value of all of the goods and services divided by the number of people holding wealth or residing in the country, the US is still at the top. So what is the American economy? Pre-dominantly the Silicon Valley, Hollywood, oil, manufacturing, finance and above all the consuming power of the Americans, pretty much amalgamation of all these.
The US is also the most important export destination for a fifth of all countries, because Americans consume so much that they’re the engine of the US economy. The main driver is consumer spending, it accounts for roughly two-thirds of US economic growth. That’s literally consumers putting their hands in their pockets going out and buying things and it all ripples throughout the fabric of the global economy. So when the consumers are doing well in US, it actually means that businesses and employees and consumers in other parts of the world do better as well. Another reason the US economy matters to all of us is that the US dollar is the undisputed king of currencies. Most global transactions and trading in products and raw materials like oil and gold are done in US Dollars. However, it wasn’t always that way. Countries used to settle international transactions in gold but after World War II, countries needed more flexibility to rebuild their economies and chose to peg their currencies to US Dollar. Because the US had the most gold at the time.
Technically, a strong dollar can be good or bad depending on what country’s economy is being discussed. Say, Japan needs the dollar to be stronger against the Japanese Yen, so American consumers can afford more Japanese products. But, a country like Turkey would rather a weaker US currency because banks and businesses in Turkey hold a lot of debt in US Dollars. In other countries, a strong dollar can fuel inflation. In Argentina, where basic food products see a continuous price hike which proportionally supports cheaper imported goods in the US. The very process can harm US manufacturers anyway, by making their goods more expensive abroad overall. Though, the dollar is largely seen as a safe currency.
During the pandemic, it actually rose to the worst economic crisis in the last 70 years and there has been a safe haven everyone is banking on and no, it is not gold. It is the US Dollar lately, the US dollar has gone up and down including all sorts of factors, even a tweet from President Joe Biden or Former President Trump can help or hurt the exchange rate but a lot rides on how the US economy performs. So how economies are measured using GDP? which is the total value of goods and services produced in that country over a period of time. It has been observed that over the last 10 years, the US economy has been growing. Last year, GDP rose by just over 2 percent, but it took a while to get there like the rest of the world, the US economy was devastated by the financial crisis in 2008.
President George W. Bush started the cleanup, shoring up banks and rescuing US companies, the federal reserve also played a massive role buying bonds and keeping interest rates low, all that continued under president Barack Obama’s tenure. Congress spent hundreds of billions of dollars on initiatives like social security and tax relief. By 2009, the US had started its longest economic expansion on record, then Former President Donald Trump stepped in. As soon as he took charge of the office, he moved rapidly to revive the US economy, the economy did keep growing but the four to six percent boost he promised? well that didn’t happen. He came into office and inherited an economy that had been strongly growing since 2010 so for six or seven years growth was already baked in. Trump added his own touch, he cut regulations to make doing business easier and got congress onboard to pass tax cuts for American workers and corporations.
The promise was to help businesses reinvest money to create jobs, but it didn’t always work that way, a lot of those companies used those tax savings to buy back stocks and boost their value instead. Trump’s trade policy of putting America first jumped in parallel to ongoing policies. He ripped up international trade deals stating they were unfair and hurt American manufacturing. The US has lost about 5 million manufacturing jobs over the last 20 years and about 91,000 factories. Another fact observed was over the past few years, tensions arise between US and between some of its trading partners including China.
China, perhaps, is the only country, that led to a trade war with the US. The US in return, slapped penalties on hundreds of billions of Dollars’ worth of Chinese goods. China responded in its own way. China just rerouted those imports through other countries. The main factor about Trump’s tenure was that the American public started to feel a whole lot better about the economy. Which laid an important effect. When consumers feel confident about their financial prospects they’re more likely to spend, they’re more likely to go out and buy things on credit so the economy in this regard, has been shaping up positively.
The US job market was on fire before Covid-19 jumped in. The pandemic pushed the economy off a cliff, stocks crashed to their worst losses in over 30 years, The US economy slid 5 percent in the first quarter when it officially fell into recession then in the second quarter it nosedived at a record annual rate of more than 30. The economy went from some of the lowest unemployment rates in American nation’s history to levels that have not been seen in most of our lifetime. The pandemic isn’t over but the focus is on the economic recovery in the third quarter of 2021. The economy bounced back a record 33 percent, the federal reserve helped by unleashing a range of measures to keep credit flowing to businesses and households like cutting interest rates, to make borrowing cheaper. Congress in this regard, also allocated trillions of dollars in aid to keep workers and businesses afloat and jump start growth.
A lot of money was injected into the economy which resulted a big help to US households and a big boom to the economy. It actually helped consumer spending as independent surveys have observed that some states reopened, also, a very sharp recovery in the stock market also came roaring back, tech companies played a vital role in the reviving boom. They benefited from the shift, people working and learning from home. What else is up? house prices mortgage rates are at a record low and lockdowns have inspired many homeowners to sell their digs for bigger ones in the suburbs so people who own shares or homes are doing okay. But what about the rest? while some economists are with the view that this is the most unequal recovery in American history, those at the top those who can telecommute, who can do their business by zoom are doing fine in fact many of those individuals are continuing to receive incomes and yet they’re spending less and saving more. As a result, their wealth is going up. Contrary to somebody who cannot work remotely, they’re not doing well right. A survey revealed that one in three renters did not pay their rent on time in the first week of September 2021. A very sharp trend in racial disparities is also observed. Considering the current situation, economic recovery is starting to slow down amid pandemic which is still spreading. US Federal Reserve Chairman Jerome Powell warned that without more aid coming from the federal government the US economic recovery is in jeopardy, the outlook for the economy is extraordinarily uncertain. There are still roughly 11 million people still out of work due to the pandemic and government does not want to see the recovery going off the rails in the world’s largest economy. Getting the US economy back to its pre-pandemic strength could take years and how long the virus sticks around will make a difference. We know the world economy is interconnected it is like an ecosystem and on that basis the US needs to do well for all of us to turn the corner.