Skeptical of Big Economic Gains

Posted: November 27th, 2013

Skeptical of Big Economic Gains

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Some Skeptical of Big Economic Gains

Introduction

Various problems such as high prices of gas and severe storms have affected the economy of the United States for the first three months of the year. Some economists comment that growth between January to March was a temporary slow down that would be followed by a stronger expansion of economic gains for the rest the year. However, the increase of gas prices has left many people depressed and it seems that the government is looking for ways of implementing spending cuts. The spending cuts might make the state and local governments strain in raising the economic growth that has already been squeezed by their budget crises. This could drag the economy of the United States and those countries that have been affected by this crisis throughout the rest of the year. Therefore, there will be no economic gains the rest of the year because of the negative impact of bad weather and price increase of commodities.

Assumptions of the economy

Some economists assume that there would be no economic gains for the rest of the year because of the negative factors experienced in the economy. Aversa (2011) reveals that the annual rate for U.S economy was 1.8 percent during the first three months of the year when compared in the previous quarter, which was 3.1 percent. This is an indication that there would be no significant economic gains for the rest of the year because the economy is growing weaker. The Department of Commerce on Thursday said that the economy is at it worst peak compared to the last spring when the debt crisis for Europe slowed the economic growth to a 1.7 percent annual rate. Moreover, the Gross Domestic of the Product (GDP) is affected every time someone purchases a commodity. Consequently, the U.S has a trade deficit when calculating their GDP since their importation of goods exceeds their exports.

Novales, Fernandez and Ruiz (2010) point out that the economy always advances from one stage of development to another in a recurring manner and it is bound to make gains over the next quarters. However, some economists assume that the economy has no hope of growing marginally and this means that there will be constant savings and high rate of unemployment. Some economists are downplaying the effect of increased gas prices on the economy for the rest of the year (Aversa (2011). They predict that the prices of gas will become stable and the economy will grow at a certain pace for the next three quarters. However, some predictions are that the price of gas would increase but not become stable. Therefore, this would push prices higher nationwide in the late summer and the economy would not expand.

The devastating tornadoes and other harsh winter conditions have led to negative effects on the economy such as delayed constructions and especially those in the commercial constructions sector (Aversa, 2011). The economists foresee that the home-based industries would suffer from their worst sales unless the weather becomes better. The housing sector is likely to drag the economy behind and it will take years for industries to return to the standard. Financialists argue that the economy has no hope of growing marginally in the coming quarters of the year. This is because of the recent slump in the value of goods and services in the major sectors of the economy such as the construction and oil sectors due to bad weather coupled with political unrest in the oil producing nations.

Lastly, layoffs are increasing and the manufacturing activities in the Northeast expanded slightly thus the economic growth is projected to pick up its fall but not speed up the recovery. Moreover, the economy would collapse more in case the government would fail to reach for an agreement. The private research group suggested that the U.S lawmakers should agree to increase the borrowing limit and avoid a disastrous default on the debt. Some industries are reducing their workforces and the layoffs have increased indicating the economy is not making any improvement.

My view

Basing on the above assumptions, I can point out that the U.S economy has no hope of achieving economic gains because the prices of commodities are ever increasing. Consequently, the U.S needs to balance the trade deficit because the trade imbalances may affect the GDP in the economy thus the economy will not achieve the economic growth. Moreover, increased gas prices will affect the entire globe because prices will increase and people may not be in apposition to afford the price of gas. This will force the entire U.S economy to adopt other means of energy sources like use of coal, which will consequently lead to exhaustion of natural resources. In addition, it is difficult to predict the climatic changes and even if predicting them would not help because there are those natural climatic phenomenon that are hard to control especially harsh weather conditions (Aversa, 2011).

Conclusion

Some economists assume that there would be no economic gains for the rest of the year because of the negative factors experienced in the economy. The devastating tornadoes and other harsh winter conditions have led to negative effects on the economy such as delayed constructions especially those in the commercial constructions’ sector. In addition, other economists assume that the economy has no hope of growing marginally and this means that there will be a high rate of unemployment. Lastly, layoffs are increasing and the manufacturing activities expanding slightly thus the economic growth is projected to pick up its fall but not speed up the recovery.

References

Aversa, J. (April 28, 2011). ‘Some Skeptical of Big Economic Gains Rest of Year’. abc News/ Money. Retrieved on July 25, 2011 from http://abcnews.go.com/Business/wireStory?id=13474993

Novales, A., Fernandez, E., & Ruiz, J. M. (2010). Economic growth: Theory and numerical

            solution methods. Berlin: Springer.

.Phillips, K. (2008). Bad money: Reckless finance, failed politics, and the global crisis of

American capitalism. New York, NY: Viking.