How long will the bad economy last?

Question

I'm afraid that when I graduate college, there will be no good jobs out there for me, even with a degree in a good field (science). I can't get hours at my part time job and I know many others who are still jobless. Many companies are in hiring lockdown, and prices of things keep going up up and up! I have no desire for a car anymore because it costs so much to maintain it.

This is just my personal story, other's may be very different from my own.

What is happening and what needs to happen in order to fix this?

Answer 1

I'm sorry about the situation you're in.  I think a lot of people are facing difficulties that have similarities with you.

People are finding it hard to pay bills, deal with high food prices, find a way around the high gas prices, and being hurt by inflation in general.  I'm not saying you're going through those difficulties, but I know a lot of people are going through economic hardships.

Its also pretty difficult to find a job these days too.  I'm not sure about science though.  What field are you interested in (science is pretty broad).  I think research and pharmacies always need people, so that could work.  Keep looking I'm sure you can do fine.  Maybe you could try internships.

What is happening is a bunch of econ problems exploding at the same time.  One of the problems is high gas prices.  Part of the problem is caused by President Bush's policies in the Middle East (particular Iraq).  The tensions his policies have caused (esp in manner it uses to confront Iran and fight in Iraq- which has not gotten better until recently, even so its still messy) have contributed to rising gas prices.  When tension rises, so do gas prices (I think because of speculation).  Also, the oil supply is low, so that makes gas prices higher.  Furthermore, a lot of dollars are being used for the sale of gas...and bc the dollar is our currency, that means prices of oil go up too.

An effect of gas prices going up is the cost of other goods going up too.  Many things depend on gas.  Transport companies move items around.  So, as price of gas-oil goes up, so does the price of transportation, and thanks to that, price of food and other things that depend on transportation goes up too.  That is why the price of rice and other food- as noticed in recent months- is high.  Other contributing factors to high price of food is bad weather and possibly the use of ethanol.  There is debate that says that ethanol leads to higher food prices b/c there isn't enough of it being used to grow food.  But that's controversial.

Another factor to gas prices being high (and thus food and other prices getting high) is the demand by China and India.  China and India are growing so they need more oil.  Thus, with their high demand, gas prices go up.

However, the causes of high prices/slow economy aren't limited to overseas.

They're home as well.  Lately, the housing market has been doing poorly.  Why?  Mortgages- either not being paid back and/or mortgage fraud.  Let's start with the second point, mortgage fraud.  Mortgage corporations have been ripping off people (not all businesses but some have been scamming people) to buy their fradulent mortgages.  After a while, the companies took the people money and left them with no good mortgage to pay off their homes.  Therefore, a lot of people found their housing prices too high, could not afford any futher payments, and had to give up their homes (foreclose). Not all mortgage business has been illegal though.  A lot of it is legal.  But, some of it has had problems.  Here's what happened. (Now is my section about mortgages not being paid back).  Mortgages were also given to people with incomes that weren't that high.  This is what I heard from others on this site (I learned about this recently).  The companies gave them to people who don't have much money.  Unfortunately, the customers (those who don't earn much) were not able to make enough payments on the mortgages.  Problems came from that.  Consequence: A lot of mortgage companies went out of business or had to be rescued by our government (FED).  So, we have a very poor housing markets now.  Foreclosures, in number, are shooting through the roof.  Not many homes are being sold.  And many people are losing their houses.

Adding onto this problem is the national debt.  For years, our country has had high deficits.  High deficits come from having less money to take in (taxes) than the money spent (taxes/revenue are not sufficent to cover the enormous spending we've had over the last several years). To make matters worse, we've also had huge tax cuts over the last several years (sometimes they can be efficient, but the rich were given BIG tax cuts and those are inefficient.  Tax cuts are meant to encourage people to spend their money.  That causes growth.  Nevertheless, the rich don't spend much of their income (in comparison to other socioeconomic groups).  So there hasn't been much growth from these tax cuts).

Failed tax cuts+ much spending = HUge deficits.  That's a huge problem.  The more deficits we have, the higher our national debt is.  National debt consists much of our deficits.  In order to pay this debt, we have to use our dollars.  With debt going up, we have to print more dollars to pay it.  Printing more dollars= dollars become devalued.  The more printed, the more the dollar goes down.

To sum this part up deficit up->debt higher -> need to print more dollars -> Dollar value goes down.

As a result, with dollar's value down, everything costs more.  The dollar becomes currency with less worth and everything becomes (increasingly) expensive.

Unfortuantely, there's more.  Americans have been depending a lot on credit.  They have been spending on credit to the point in which it has become fiscally irresponsible.  The result of this is they end up in a lot of personal debt (not national debt).  So, besides dealing with high prices, a lot of Americans must deal with personal debt (along with the dollar being less value and inflation).

Speaking of inflation, there are other factors that cause it too.  The FED (Federal Reserve) has tried to combat the economic slowdown.  They tried by lowering interest rates, and by doing so, their purpose was to cause economic growth (it comes with int. rates being lowered).  However, doing so has had adverse effects.  The more interest rate becomes lowered, the higher inflation is.

I spoke a lot so okie. Let me summarize the problems:

Gas prices high:

- Supply of Oil is low

- Demand for Oil in China and India are high and increasing

- Bush's foreign policy has caused (contributed) gas prices to soar too (less likely to pump more oil when tensions are high and speculation contributes to high prices too).

-Dollars being used in the transaction (oil business).  More dollars used equals more expensive prices.

Food Prices high

-Cost of transportation high thanks to big gas prices

- Thus, price of food higher due to high gas prices

- Bad weather (and maybe lack of ethanol usage in food producing) has led to less food produced (higher prices thanks to small production).

Mortgage crisis

- Mortgage fraud, fradulent loans have caused people to lose their money

-Loans to people who can't pay them back.  Many mortgage businesses went out of business or in hot water (financial trouble and had to be bailed by government).

National Debt

- Inefficent Tax Cuts and spending (excessive spending thanks to wars)

- Deficit up leads to higher national debt (deficits caused by not having enough tax-revenue to make up for huge spending).

- Huge spending contributes to national debt.  To pay national debt we need dollars.  With more dollars made, value of dollar goes down and things are expensive (inflation).

Inflation also caused by FED

-FED, in response to poor economy, has tried to address the issue

-They lowered int rates to attempt to create economic growth.

-However that has led to higher prices-inflation.

Credit Crisis

- Too many people spend on credit and depend on credit to pay fees, expenses, etc.

- High debt.  Personal debt soared for many people.

SOLUTIONS

(I'll keep it short) - Investigate mortgage fraud and clamp down on fradulent companies (also try to get people more educated on getting safe mortgages).

- Invest more in alternate energy (long term solution)

- Give incentives to make fuel efficent cars (less dependent on oil)

- Increase supply of oil to lower prices

- Work with other countries on reducing oil dependency (and learn from other countries in how they invest in alt. energy and better enviornment)

- Don't keep giving tax cuts to oil companies.  They are only getting richer and profits have grown.

- Increase revenue.  Take out inefficient tax cuts.

- Reduce spending.  Do it carefully and cut down spending (especially unncessary spending).

- Reverse Bush tax cuts.  Put taxes on the rich.  They make most of the income in this nation (those with $250 K and more)

- Work with our generals to develop plans and strategies that will work for Iraq and Afghanistan.  The more we do this and help increase reconcilliation, the less we'll have to spend on the wars, the less time the two countries will need our presence, and the less tension there shall be in the Middle East.

- Pay down the national debt (it will take a while but its necessary).

- Something should be done to help inc. food production and/or (more likely) help struggling farmers across the globe (but not the ones that are pretty rich).

- Moderate our foreign policy.  Its too aggressive.  Promote more peace and diplomacy (strong diplomacy.  Iran is a threat but we cannot be too weak.  Yet we can't afford to worsen tensions either. A balance is necessary). Restore our image, that will help gas prices go down (b/c tension will be down and there will be fewer worries).

- Americans will have to stop depending on credit so much.  Credit isn't bad but people overdid it.  They'll need to be more financially responsible, perhaps the govt should develop partnerships and help people become more educated in responsible usage of credit.

Hope this helps.  Good luck!

Answer 2

My personal view is that the economy will take longer time than people think to get back on track, but I cannot argue on this without making it long. So I just out it as an assumption.

You know that in a recession everybody suffers. However, even in a depression, people still work and get jobs. The idea is to find a recession-proof career, develop necessary skills and hope that the wind turns your way when you are ready. I do share your fears, as I am graduating soon and currently looking for job (although I am not in the US now, which probably makes it easier for me)