Current State of the Economy

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The world economy has just started to recover from a major financial crisis which started in developed countries and spread all around the world. The conditions for the economic development of the country refer to the stage when many tendencies which were actual and working in the past do not serve in the future. For this reason, the governments of the counties together with financial institutions seek to find solutions to the current problems which will best fit the actual situation.

The United States economy is one of the most powerful economies of the world and it is not lacking external drivers of success and development. The processes which facilitate the economic growth are present within the United States. However, despite the success of the majority of the fiscal and monetary policies, some of the government decisions have not brought the expected results.

Partially this can be explained by the fact that each economic process is somewhat chaotic and it cannot be accurately forecasted. Nonetheless, the analysis of the government policies and the policies implemented by fiscal organs shows that in some situations these policies were created blindly without taking into consideration multiple economic players on the market of United States.

World Financial Watch (2012) believes that ‘high gas prices, the Federal Reserve lowering interest rates, and sub-prime mortgages are key contributors’ to the current problems existing in the economy of the United States (para. 1). However, it is important to note that the external market behavior is also important for the reactions of the domestic US market and the key processes on this market.

However, if you ask anyone what the major problems within the United States economy are, the response will not list all the factors together in a raw. It will name the key problem which is both the cause and the result of all the above mentioned conditions – the weak US dollar.

This problem is caused by the inaccurate assessment of the US dollar risk factors on the external markets by the Federal Reserve, and, as a result, the policy with the interest rate started, which is claimed to be a game with multiple players (World Financial Watch, 2012). At the same time, the prices for most of the commodities are growing. Due to the intervention of the Federal Reserve, the real estate prices in the United States have grown dramatically. The New York Times reports that ‘improvement in the housing markets helped bolster economic growth at the end of the summer in most regions of the country, according to a Federal Reserve survey released Wednesday’ (The Associated Press, 2012, para. 1).

While Federal Reserve sees these actions as appropriate in this case, the economists are looking at the steps and solutions taken by the institution as short-term oriented and lacking constructive assessment of the future realms (Lattimer, 2010). Therefore, the weak dollar despite the success in the short-term period, which, according to the information of some researchers, is only a seasonal improvement, will remain weak if no serious interventions by the Federal Reserve take place.

The additional factor, which may not be totally economic, is the political environment which also undergoes major changes at the moment related to the elections taking place this year. The economy of the country typically suffers from crisis during the late stages of presidential elections.

Therefore, the US economy is currently affected by the world economic processes related to the growing commodity prices such as oil and gas, changing interest rates affecting the domestic markets. But the weakness of dollar remains the key challenge for the economy.

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