Macroeconomic Challenge The current economic situation which faces the US is troublesome.
Foremost among concerns is the slump in new housing sales, the collapse of mortgages, and the so-called outsourcing of jobs. These factors, combined with rising gas-prices, the continuing spikes in health-care costs, and the rising costs of goods and services have provoked many into predicting a recession. As many economists see it, “If you’re looking for inflation signs, you need look no further than February’s 1.3 percent gain in producer prices and 0.4 percent rise in consumer prices” (Stern); and the outlook appears to be worsening. One good reason to belive that the economy may recover sooner than later — or at least the damage of the recession lessened — is the continues activity of the Federal Reserve. Although “Interest rates are starting much lower, and the Fed’s fear of inflation borders on paranoia” (Stern) there is no way to yet determine just how long or damaging the current recession will be.
I believe that the road to economic recovery begins with the housing crisis. If the continuing trends hold, there will be little the Federal Reserve can do to stave off continuedstagflation. The spike in gasoline prices is also adding fuel to the fire of the recession by causing a rise in consumer prices.
In order for growth of the economy to restart, jobs must be created. At present, the strategy of low-taxes and low interest rates is not proving to be enough to move the economy. It is very difficult to predict whether or not the economy will recover in the short term; I think it will, but I feel that some sort of Federal intervention in the mortgage collapse as well as continued activity by the Federal reserve in monitoring inflation and interest rates will be necessary to see any kind of recovery through. ReferenceStern, Linda.
“Start saving,a new period of “stagflation” may be just around the corner.” April 6, 2007. Boston.com.
accessed 4-2-08. http://www.boston.com/business/personalfinance/ articles/ 2007/04/06/start_saving_a_new_period_of_stagflation_may_be_just_around_ the_corner/.