Question

In: Economics

Friday’s report of first quarter growth should show economy is strong and no recession in sight...

Friday’s report of first quarter growth should show economy is strong and no recession in sight

question: give your thoughts and opinion on this topic in 350 words

Expert Solution

The US Fed adopted accomodative monetary policy stance after series of hikes past three years because the economy in 2018 slowed down below 3% stagnant growth, inflation bottomed out at 2% levels and employment reached its full level at 4.7% causing the Fed to stop further hikes and pause the Quantitative easing program. This is clear indication of robustness in economics as macroeconomic numbers are at desired levels and the economy takes substantial shape in terms of dollar appreciation and reduced trade deficit all thanks to Impirt sanctions on Iran and China.

The forecasted growth this year by varuous credit rating agencies depict that US real GDP set to touch 4% which is phenomenal considering low inflation and unemployment numbers.

Had the US Fed raised interest rates again, this would invert yield curve and bring in recession which has already seen stagnant growth and repugnant inflation numbers .

The underlying issues before the quarter growth results are depicted below and their most probable solutions are also discussed briefly.

If you were President of Us what would you do to Improve Economy ???

The biggest issue been surfaced is US China Trade War, Immigration Laws, US National Debt, Foreign Relations policy

US and china have great history of trade wars however recent times has been largely due to sanctions been imposed on china by USA.

Recently, USA slpped tarrifs on 40% of chinese goods. which has caused prices of US goods to go up substantially becuase cheap imports fro china have been stopped.USA has also stopped cheap imports of steel and as a result Chinese government too has imposed substantial tarrifs on USA goods.

As a result, there has been currency devaluation in China to make it goods look more cheaper and attractive and has started selling Goods in emerging markets. US goods however have become more costlier and hence sales have decreased.

Chinese government has aggravated trade war by imposing fresh round of tarrifs , however before G20 summit which will be held in 2018, such issues will be resolved.

Since, China has imposed tarrifs we see there has been lack of entry of chinese workrs and visas in USA which has nullified the clear cut winner. Because of trade war, India has managed to export steel and aluminium to US markets and hence has been the greatest beneficiary.

Given the Presidential Power following economic strategies need best case implementation :

Resolution of NAFTA deal with negotiation as well as maintenance of great relationships with South Korea on denuclearization by maintaining an eye on all developments
US China pact and removal of tarriffsby signing of MOU and economic cooperation
Immigration laws been relaxed by allowing H1B for Indians who look to create startups IN UsA and generate more employment
Debt refinancing and additional taxation on corporates with large market Capitalization to decrease debt in short term.
Increasing interest rates to appreciate dollar and control inflation and money supply in market

References:

Bailey, Martin Neil, What Happened to The Great American Job Machine!? The impact of trade and electronic Offshoring.

Cline, William R 2004. Trade policy and Global Poverty. Washington : Institute for International economics

Goldman Sachs, 2003. Dreaming with BRICS: the path to 2050. Goldman Sachs Global Economics paper 99

Zoelick, Robert B 2001. American Trade Leadership : What is at Stake? Speech before Institute of International Economics washing mton, September 24.

Schott, Jeffrey, 2004. Free trade agreements :US strategy and Priorities. Washington: Institute for International economics

Rahul Sunny answered 1 year ago

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