Mr. Greenspan argued that US is towards slow but sure inflation. In other words, after a year or so the econimc growth of 0-1% will probably stabilize. He refrained from talking about the monetary policies although he did mention that 7 interest rate cuts by the Fed Reserve is a measure to fight with the inflation.
I am sugessting some other approach to fixing the deep rooted problems in the US economy. We have been witnessing the unemployment issues( about 5+%) for a while now. We are also startled at the possible effect of the housing problem in USA. Indeed it has an impact on the financial institutions as their return on investment seems pretty bleak, given a fall in prices in 20 US states according to the article.
Mr. Greenspan predicts a write off to the financial institutions as inevitable in future. I however, have a different viewpoint on this issue. I would rather give the financial institutions an option to invest the money they are supposed to be getting in the manufacturing sector and in Research and Development to cut down the cost of production of goods and services in general. This way the US economy can go back to the basics of being more independent when it comes to fighting the global rise in wages of the workers. Yes, indeed we are all interdependent but there is nothing that stops us from improving our infrastructure to be less dependent on others. The financial institutions will have a consolation that they still own the money but at the cost of diversification. But government can give something else they can cheer about. May be they can borrow money from the fed at low rate 5-7 years from now.
Further, I also recommend training their skilled workforce to a level where they can be called "high skilled" labor. Guess what! In the process you have become more self relient as far as your strength of human resource is concerned. If there is a proper infrastructure setup that can only become better with the time, 30 million population is no joke. Same analogy can be applied to other type of workers.
For sloving the problem of low class worker US is still flexible with its imigration policy be it in the favour of Mexico or some other country.
Process improvement and more automation means there is a likely hood or lay off. But because of new manufacturing units coming into the picture, end of the day it may get even.
Rise in global food pricing primarily because of hike in oil prices and growing purchasing power of the growing economies, as predicted by some of the economists could also be fought. US already has their own refinary which has become more developed since their inception. Not chosing to use them is strictly a decision that ensures security in future. OPEC - I guess, the fight is on.
With a huge geographical boundary with adequate agricultural land and technology to assist, focus to promote agriculture is not as bad an idea. Negotiation with third world countries on subsidy to agriculture can be put to back burner for a year or two. But even that cannot solve the problem, more options need to be given to the agriculture sector. This doesn't seem like a sector where US should be so frightful.
End of the day it the net household savings and the purchasing power of individuals that will drive the prices of the households again. It's a economic cycle and the financial instituions should not be worried that much. After all, they also have insurances agains huge loans.
First thing first, economy has to be fixed. Some of the proposed measures can do lot of good to the economy.
There could be other measures that can be taken.
In next article.
Folks,
If you take this article kindly point your website to this url.
In my "International Business" class during my MBA in NorthWest Missouri U
More reviews about the Moving Away From Conventional Economic Policies