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Whats happening to US Economy? - Not Good!

Asian.Century

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What’s happening to the US economy?

Projected recovery in consumer spending failed to occur; Businesses respond negatively to weakness of household demand

The American economy has recently slowed dramatically, and the probability of another economic downturn increases with each new round of data. This is a sharp change from the economic situation at the end of last year – and represents a return to the very weak pace of expansion since the recovery began in the summer of 2009.

Economic growth in the United States during the first three quarters of 2010 was not only slow, but was also dominated by inventory accumulation rather than sales to consumers or other forms of final sales. The last quarter of 2010 brought a welcome change, with consumer spending rising at a 4 percent annual rate, enough to increase total real GDP by 3.1 percent from the third quarter to the fourth. The economy seemed to have escaped its dependence on inventory accumulation. This favorable performance led private forecasters and government officials to predict continued strong growth in 2011, with higher production, employment, and incomes leading to further increases in consumer spending and a self-sustaining recovery. A one-year cut of the payroll tax rate by two percentage points was enacted in order to lock in this favorable outlook.

Unfortunately, the projected recovery in consumer spending didn’t occur. The rise in food and energy prices outpaced the gain in nominal wages, causing real average weekly earnings to decline in January, while the continued fall in home prices reduced wealth for the majority of households. As a result, real personal consumer expenditures rose at an annual rate of just about one percent in January, down from the previous quarter’s four percent increase.

That pattern of rising prices and declining real earnings repeated itself in February and March, with a sharp rise in the consumer price index causing real average weekly earnings to decline at an annual rate of more than five percent Not surprisingly, survey measures of consumer sentiment fell sharply and consumer spending remained almost flat from month to month. The fall in house prices pushed down sales of both new and existing homes. That, in turn, caused a dramatic decline in the volume of housing starts and housing construction. That decline is likely to continue, because nearly 30 percent of homes with mortgages are worth less than the value of the mortgage.

This creates a strong incentive to default, because mortgages in the US are effectively non-recourse loans: the creditor may take the property if the borrower doesn’t pay, but cannot take other assets or a portion of wage income. As a result, 10 percent of mortgages are now in default or foreclosure, creating an overhang of properties that will have to be sold at declining prices. Businesses have responded negatively to the weakness of household demand, with indices maintained by the Institute of Supply Management falling for both manufacturing and service firms. Although large firms continue to have very substantial cash on their balance sheets, their cash flow from current operations fell in the first quarter. The most recent measure of orders for non-defense capital goods signalled a decline in business investment. The pattern of weakness accelerated in April and May.

The relatively rapid rise in payroll employment that occurred in the first four months of the year came to a halt in May, when only 54,000 new jobs were created, less than one-third of the average for employment growth in the first four months. As a result, the unemployment rate rose to 9.1 percent of the labor force. The bond market and share prices have responded to all of this bad news in a predictable fashion. The interest rate on 10-year government bonds fell to three percent, and the stock market declined for six weeks in a row, the longest bearish stretch since 2002, with a cumulative fall in share prices of more than six percent. Lower share prices will now have negative effects on consumer spending and business investment. Monetary and fiscal policies cannot be expected to turn this situation around. The US Federal Reserve will maintain its policy of keeping the overnight interest rate at near zero; but, given a fear of asset-price bubbles, it will not reverse its decision to end its policy of buying Treasury bonds – so-called “quantitative easing” – at the end of June. Moreover, fiscal policy will actually be contractionary in the months ahead.

The fiscal-stimulus program enacted in 2009 is coming to an end, with stimulus spending declining from $400 billion in 2010 to only $137 billion this year. And negotiations are under way to cut spending more and raise taxes in order to reduce further the fiscal deficits projected for 2011 and later years. So the near-term outlook for the US economy is weak at best.

Fundamental policy changes will probably have to wait until after the presidential and congressional elections in November 2012.

Whats happening to American Economy

:wave::wave::eek::eek:
 
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USA needs to cut defence budget and put extra money to encourage investment into its country.

Its USA own fault spending billions on defence.
 
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US wouldn't stop spending billions dollars.

(ie. Libya, Syria, military permanently in Iraq and Afghanistan, Drones missions, interefences on China Sea, supporting insurgents and Talibans via CIA, new project Space Shuttles, new small wars, covert operations ongoing on Iran, fifth generations JSF planes, many numerous events.) Next five years, debt will rapidly to 21 trillions and Americans food stamps dramatically increased past few years.
 
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let's see how much lower the debt ceiling can go...
 
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USA needs to cut defence budget and put extra money to encourage investment into its country.

Its USA own fault spending billions on defence.
What is India's defense budget in percentage of the budget?
 
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BANKRUPT = USA

Mathematical equations

0 times 0 = best case scenario

Worse case scenario

40 trillion dollars in debt

Break away states - yep I can see it now


1- New Yorkrain
2- Californistan
3- United Redneck Country
4- Kentucky friend chicken state
5- Land of Tornadoe
 
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Instead of bullying China and instigating hate and division in Asia and in the Arab World, instead of constantly blaming China for its own incompetence, the US war criminals should focus more on how to revive its economy and increase consumer confidence. Now the US is doing military exercise with Vietnam, a country whose vietcongs had killed thousand of US soldiers and kept hundreds as Prisoners of war while the US itself had committed mass killings of vietnamese women and children by using chemical weapons, so the US war criminals in an attempt to contain and isolate China is even ready to ally with its worst enemy. The US war criminal will ally itself with any country having a litigious issue with China, lets hope China and Cuba has a litigious issue so that the US could lift the embargo on Cuba. Likewise lets hope China and Hamas disagree so that the US could support the Palestinians. Look forward for the US to lift the weapons embargo on Vietnam.
 
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The americans are going bust. Even 20 years ago we knew that americans fate was sealed. It was all laid out in in Liars poker a book written around the late ninteys by an american who used to work at Saloman bros. It started by saloman brothers securitising of mortgages and creating specialized financial instruments in the late 70s early 80s that few in banking and even fewer in politics understand the full significance of even today.
 
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BANKRUPT = USA

Mathematical equations

0 times 0 = best case scenario

Worse case scenario

40 trillion dollars in debt

Break away states - yep I can see it now


1- New Yorkrain
2- Californistan
3- United Redneck Country
4- Kentucky friend chicken state
5- Land of Tornadoe

Just one thing I disagree with there is best option they are going bust
 
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The americans are going bust. Even 20 years ago we knew that americans fate was sealed. It was all laid out in in Liars poker a book written around the late ninteys by an american who used to work at Saloman bros. It started by saloman brothers securitising of mortgages and creating specialized financial instruments in the late 70s early 80s that few in banking and even fewer in politics understand the full significance of even today.
And every few years someone always predict that 'this' year is when America will collapse. The last time we supposed to collapse was mid-2010.
 
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its due to a failed business model and their inability to change with time..USA and of many west european countries economy was based on "sood" or in english "compound interest" with banks being the main gainers/....Banks got greedy...started charging too much.fees/fines/interest and there came a point when public and businesses could pay no more.....people and businesses started going bust and a chain reaction started.....
Banks are behind rising food and fuel prices...once again a wrong move...as they are taking away peoples spending power...
only way out is to get rid of an economy based on loans lendings mortgages and most imlortantly get rid of Banks as the fore runners of the economy.
 
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