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How to choke the Economy motor

Harsh times that are ahead of the U.S. economy. While the last months have
helped many companies to catch ground again, it seems as if this time’s over
and bad times ahead again. The reason for this? The active Sequester Plan.
But not only this plan is responsible for the upcoming desaster.

There’s a tale about “If GM’s fine, the whole economy in the USA is fine”. Today one would say: “If  Wal-Mart is fine, the US-Economy is fine”

Wal-Mart itself has faced the worst fiscal month since seven years. Reason for this was the increasement of the Payroll tax to it’s former level after the very low crisis level.

That means that an average family has about 80 to 100 dollars less in it’s purse and this is also noticeable at Wal-Mart. Less money for the customer means less money for the market as well!

The mass retail industry is for sure an important indicator for the U.S. economy. And the outlook is currently grim to be honest. But if you think, that’s now the only reason, then think again! The Sequester Plan is now also active. But what is the Sequester Plan and how does it relate to the U.S. economy problem?

The Sequester Plan is a mthod to decrease the U.S. debt automatically. In readable numbers this means that the expenses of the U.S. budget are shortened automatically by 85 billion(!) each month(!!!) – A horrible scenario for the U.S. economy!

So what does a shortening of the U.S. budget mean in detail? It means that less expenses from the U.S. budget will result in higher unemployment.

While the Medicare service won’t be affected from the budget shortage, the military service will for sure suffer. One thing, the Representants didn’t want to happen then. But now every attempt to lower the debts of the USA are welcome. The biggest fear will be that the Gross Domestic Product (GDP) will lower by 0.5% and the unemployment rate will again raise over the psychical spot of 8%.

So is the U.S. economy steering it’s economical Titanic directly towards another iceberg?

Why is a budget shortage affecting the unemployment rate so badly? The U.S.A. are still the biggest employer and the most recent layoff wave has killed 500.000 jobs therefore. Now another budget shortening may again result in a massive layoff wave. For instance: The Pentagon employees have to take one day off in the week! Sounds great? Not if you have to do this without pay. So it means that most Employees are working 80% force now, meaning that they have to search for a second job to fill the 20% hole, that is! And which company is hiring people for 20% labor force?

So the Sequester Plan is the wron way to bring the economical Titanic back on course evading the iceberg. The European union has followed a similar system with harsh results, as the latest example, namely the UK have shown. There, the economical power has also fallen to another all-time low. Bernanke itself, president of the Federal Reserve System is from the Repbulicans. And his opinion is also that saving money in such a harsh way might again steer directly into another big recession. A better solution wold be issuing financial credit to upgrade the desolate infrastructure in order to bring new energy into the U.S. economy. The Sequester Plan, however, is saving money, yes, but it is also choking the U.S. economy extremely. And a weaker economy means also less money for the U.S. economy and for all it’s citizens.

The European Union has set the example for this as the troubling countries may have set as a warning example of rigid money saving. That’s why the PIGS (Portugal, Italy, Greece, Spain) countries are currently having massive financial trouble. The expansion is PIIGGS (Portugal, Italy, Greece, Spain, additionally Great Britain and Ireland)

The future looks grim for the USA. And it won’t change that quickly I suppose…

February 28, 2013 Netspark - 1592 posts - Member since: May 9th, 2011 No Comments »

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FILED UNDER :Economy&Finance , News , Thoughts
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