An analysis of the crisis in US economy
- At the national level, there are often mixed results
- An economy of debt due to household consumption
- The financial strength: the importance of the exchange, agents and financial market
- The power of the productive sector
- On the international front, the challenges increase
- The dollar: the remains of an ancient power?
- The balance of payments: a growing problem
- The dominance of international bodies
- Synthesis: the context of the U.S. economy since the subprime crisis
Until the early 21st century, developments in America seemed to contradict the thesis of "decline". The most famous example is that of Paul Kennedy, who predicted in 'Rise and Decline of Great Powers' (1987), the end of American hegemony. However, the early 21st century is marked by difficulties such as the bursting of the bubble of computing (2001) and accounting scandals (Enron, 2001).
The trade deficit was enormous and the sub-prime crisis which began in August 2007, whose consequences are still felt, began to undermine the economic power of the United States. The idea of an American decline was reborn. In 2002, Todd was considering the possibility of a major crisis in American capitalism. Being ignorant of the precise form it would manifest itself in, he wrote in 'After the Empire: Essay on the Decomposition of the American system', "most likely a stock market panic on a scale never seen, followed by a collapse of the dollar chain that would put an end to the economic status" of an imperial "U.S.".
Following the sub-prime crisis and the many losses in the U.S. banking sector, the country's growth declined in 2008. There was even a talk of a recession which was characterized by a continuous decline in GDP for a period exceeding six months. Thus we may ask whether the American capitalist system is experiencing a crisis or not. We will try to highlight the strengths and fracture zones in the U.S. economy, nationally and internationally. At the national level, we will focus on the indebtedness of American households, the financial sector and the productive Americans.
Internationally, we will address the themes of the deficit and the U.S. debt, asking if the dollar is the remnant of an ancient power and finally talk about the U.S. control over international bodies. To conclude, in the third part we will try to summarize, taking into account recent events following the sub-prime crisis.
In 2006, the GDP of the United States accounted for 13,163,870 million (or 27.16% of global GDP) and annual GDP growth was 2.9% per year. Seeing these figures, we could say that American economic power is undeniable. However, by focusing more on aspects of this power, we see that it is riddled with flaws. We develop three main aspects.
The main source of household wealth is the added value of houses. The stock market gains for only their second source of enrichment. Moreover, in 2004, following the bursting of the stock market bubble, Alan Greenspan, former Chairman of the Federal Reserve (the U.S. central bank, the Fed) finds that the appreciation of real estate made it possible for households partially offset the losses on the stock market.
The property prices in the United States have increased in a nearly constant until 2005, with the exception of the early 1990s, when it dropped a few years, especially in California and Texas. It is expected that the average gain after the increase was 2% per year from 1950 to 1998, and 5% from 1998 to 2005.
Tags: American economic power, Alan Greenspan, stock market, GDP growth, U.S. debt, sub-prime crisis, Paul Kennedy, economic status
[...] economy in financial markets since the beginning of financialization.The Basel 2 was intended to control the banking business in this new context of market finance. Financing market, known as direct funding, has become increasingly important in the external financing of companies. The amount of transactions made in the financial markets is unparalleled. The U.S. financial sector accounts, since the late 1990s, have been a more important component of gross national product, and the share of industrial activity. This is largely due to the fact that the stock price of American companies came to a speculative level. [...]
[...] banking sector became very powerful, because of legislation passed during the New Deal to prevent banks from taking too many risks and ruining the depositors who werestill compartmentalized and dispersed.In addition, the Glass-Steagall Act in June 1933 established an institutional separation between investment banks and commercial banks.The former could not receive deposits, and the latter could not buy the shares or place the bonds. Only the investment banks were therefore entitled to issue and sell securities. This institutional structure was still in place in early 1980. [...]
[...] economy is slowing down but there is no fear of a recession.According to Jim O'Neill, an economist at Goldman Sachs, there is a real problem with domestic demand in the country. However, this is partly offset by higher exports. Since the beginning of the crisis, the dollar saw its value drop dramatically, which has encouraged exports. External demand and domestic demand are offset.By analyzing some curves, one is strongly tempted to say that the U.S. is in recession.First, look at the curve of employment in the field of production of property: Even if the U.S. [...]