The America's Economic Crisis

The world's largest economy has began to show weakness and drift as a result of a collapse of the housing market, the subprime mortgage turmoil, a severe credit crunch, high oil prices, and the deep devaluation of the dollar. The share prices in Japan, Europe, China, Hong Kong, Britain, France, and Canada already fell on average 5 percent, reminding us of the 1990 Asian financial crisis.

Investors have been lured to overseas markets with the promise that surging growth and solid economic fundamentals in Asia and the Middle East would insulate them from the economic recession in America.

Economic recession resembling the gloom of 1992 market is characterized by decline in housing market, bleak outlook of job opportunity, skyrocketing oil prices, a stock market collapse, a fall in asset value, and the huge federal government deficit and the trade deficit of almost $800 billion.

Rising health care costs reawakened additional fears for the middle class. In a high cost economy in terms of energy, health and financing ― while the equity value declining on average 20 percent if holding the level of income constant ― disposable income of consumers obviously falls.

Although the huge losses from bad loans and corporate earning losses will spur fears for economic woes, partial governmental intervention in the failed market economy hopefully builds up confidence on the part of consumers and investors. Thus consumers continue spending and investors are strongly motivated to increase investment expenditures in response to the falling interest rates.