What are the main causes for the drop in American economy?

Question

I understand that gas prices eat up a lot of citizens money, leaving them will less to even pay bills with, which could be a reason why the economy isn't being as stimulated as it used to be. What are some big reasons for the drop in American economy? If you have any links to some sources, that would be great too!

Answer 1

The American economy is changing rapidly, but not necessarily "dropping." The low cost of the dollar against other currencies means our imports are up, and foreigners are buying up our properties, including our luxury homes and yachts.

It is going to take another generation before things begin to feel "right" about our economy. The people who used to make big wages have had them cut, sometimes in half. Then again, some industries that are shipping overseas need more workers.

And because we are making the Mexicans enter our nation legally, food prices are going up because there are fewer people to harvest the food. Also, the government is driving up the price of food by subsidizing corn at the expense of wheat, so that bio-fuels can be manufactured.

Answer 2

This whole situation is giving me a strong sense of deja vu.  I have seen this before.

Back in the 1970s we had a period of 'stagflation'--that was a new word they coined at the time to describe it.  Inflation went to double digits and interest rates went up too.

This was the result of two things.  (1) A huge debt from a long, unproductive war (Vietnam).  And (2) a sudden doubling of the cost of gas and diesel fuel.  This rise in energy costs made everything cost more that was shipped by truck--which in the US is just about everything.  Both these conditions exist again today.

Republicans love to blame this on Jimmy Carter, but actually it began two presidents before him.  Nixon actually implemented wage and price controls to get a handle on inflation, and Ford had the WIN program 'Whip Inflation Now'.

Bad stuff like this makes people lose faith in the economy, and when that happens its like a self-fulfilling prophesy.  People don't buy things, they especially don't borrow money to buy stuff they don't really need or can't really afford.  And this lack of consumer spending ripples throughout the economy.  Companies don't sell stuff, so they lay people off, unemployment rises and that makes consumers even less confident, so there's a spiral effect.  Stocks go down so people lose faith in the stock market and sell their stocks, which of course makes stocks go down further.

Our problem is that we're fascinated with the short term.  We just care about the next election, the next quarterly stockholders' report, etc., and we don't look past those things.  Any president can spend us into huge debt to stimulate the economy in the short term because he knows that when the bill for this debt comes due some other president will be in office.  I think the Bush administration just got overconfident.  They got their timing wrong.  They expected the economy to collapse like a house of cards under the -next- administration.

Answer 3

The main cause is too much borrowing for consumption purposes.  Many people and governments in USA have been borrowing lots of money and living it up beyond their means.  And now some of those debts are catching up with them.  Many people cannot pay.  And whether they like it or not.  They must exchange their appearance of wealth for the trappings of poverty.

That's what normally happens to people who borrow huge amounts of money and live it up like the wealthy folks.  Sooner or later their bills catch up with them.

Answer 4

the price of gas is outrageous, food prices have gone up, the price for electricity and natural gas is crazy high and no businesses are doing well enough to increase pay to catch up with the current cost of living. Its terrible!

Answer 5

President Bush.

Answer 6

This is a lot worse than the seventies.  I wish people would stop comparing.  In the seventies, mom's were still able to stay home and raise their kids.  

This has been slowly happening since the eighties, after Reagan was done with our country, people could no longer just have one bread winner in the household and survive.

People work more.  It used to 9 to 5 or 8 to 4, now it is 8 to 5 leaving even less time at home.

Paychecks stopped keeping up with inflation a long, long time ago. People get paid less nowadays for the same job than they did in the seventies.  

It has slowly been getting worse and worse until the housing market pushed it over the edge and then the gas prices.  Soon it will take 3 working people to support  a modest household.

Answer 7

Hi,

There are many many many reasons why the economy is jacked up.

The biggest reason is this housing crisis. People bought houses they knew they could not afford, or they bought houses and maybe lost a job, or had a death in the family, or divorce, many circumstances that made it difficult for people to make their monthly mortgage payments and so they fell behind and were foreclosed on.

Many people are not on the foreclosure tract..but have mortgages that are far more than the house is worth, so if they tried to sell it, they's could not recover. With so many houses in foreclosure and with people being late on payments..banks are not longer making it as easy to buy a house. If you were a home builder there is virtually no work because there are already too many houses available. Becuase of the pinch people are in..they are no longer eating out at restaurants, using coupons more, no longer shopping at the mall, instead going to walmart, or dollar stores. some becuase of gas prices are walking more than driving, or riding bikes now. Car dealerships are having problems getting rid of trucks and suv so much so that GM and Nissan are offering buyouts to their workers to trim workforces becuase of the loss of money from all those suvs noone is buying. People want to get rid of suvs becuase the price of gas is eating up their wallets, but most are stuck becuase they have to fufill their lease. those who bought are turning their trucks in but at a significant loss in value.

becuase of the way the stock market is, people who had retirement money wrapped in the market have lost significant amounts of money for retirement. one old guy i know had to start back working becuase he took early retirement a few years back and figured his investments were enough..but things are tighter now.

it is taking longer for people to find a job, people are losing jobs, some jobs are cutting back the pay for its workers..this squeezes people not to mention the cost of food and utilities and everything.

another aspect is the city governments. If in your city there are alot of people that had homes that were foreclosed on, and the people now have to move in with grandma, or get an apartment..that is one less family that the city can charge property taxes on, or other fees...multiply that by 100s and the city is now losing income. Add to the equation gas prices rising( to fill up the police cars, fire engines, government cars, run the equipment for park maintenance) and now cost have gone up. so more outgo and less income they have to raise the money some way so they will either cut back on services, raise taxes or both.

the next few years is going to be crazy..i don't know if it matters who will be in office, things will get worse. under one person it will be worse and under someone else more worse. But we are in for hard times either way