Table of Contents
Macroeconomics has large influence on human life. Although, there are two segment of economics, first is macroeconomic and the second one is microeconomic. However, the macroeconomics has large influence on the life style of citizens. By defining the macroeconomics, macroeconomics denotes to the monetary system as well as business activity on the national level. Therefore, macroeconomic situation of any country is important to have a prosperous life style of the citizens (Snowdon & Vane, 2002).
Current macroeconomic situation:
The prevailing economic situation in whole world is not good especially U.S economic condition is at its worst level. Moreover, economic meltdown has been facing by United States of America since last two years. Recession and meltdown economic condition had has affected United States not only at macro level but also at the micro level. The affected sectors of the recession period are residential investment, housing finance, and stocks business. Inflation is one aspect that made the people worry about their living standards and make it hard to even sustain in their daily life. However, the recent monetary policies are particularly prepared to provide relief to the residential investment, stocks business and to strengthen the business. Monetary policy considered most to reverse the recession and supporting the business and finance not only at macro level but also at micro level.
Real estate sector and macroeconomic situation:
The real estate sector was most active sector in the U.S economic growth. After the recession a rapid downfall was noticed in the sector which is still at its down level. The experts have predicted that the recession will continue in coming decades. Because, real estate sector has become the heart of recession that is why the prices of homes has been declined 30 percent and now prices are at its declined level or decreasing with the passage of time. In American economic associations yearly gathering, Martin Feldstein a Harvard University professor and former head of the National Bureau of Economic Research said “It will be difficult to have a robust recovery while housing and commercial real estate are depressed.
This is the second time when U.S real estate sector is facing worst economic challenges. The first one was in 1930s great depression period. Another reason of huge recession pressure on the real estate sector is tinkling U.S Federal Reserve policy consumers are in a heavy indebt and banks are also not issuing new loans. The liquidity of the banks has been fallen down and no rescue steps are concretely taken by the government.
Stock market and macroeconomic situation:
The U.S stock market is also from the most affected sectors of recession period. People have lost their huge investments due to the unending downfall of stocks. The second recession has been happened due to the bad governance and putting the expenditures over the budget. A Deutsche Bank analyst said "the recent downtrend in core inflation has been troublesome,"
The investors were so curious about the insufficient Federal Reserve policies. The U.S government, on the other hand, finding the way-out to deal with the troublous macroeconomic situation covering all the sectors step by step. This is the time to take some concrete steps to safeguard and revive the healthy economical activity. For this U.S congress should take revise the Federal Reserve policy.
Need for monetary policy actions to confirm the right direction:
Economic meltdown has faced by the world especially by United States of America in last two years. The affected sectors of the recession period are residential investment, housing finance, and stocks business. Therefore, monetary policy’s focal points are development of domestic economic activities, and confirming the financial stability. The recent monetary policy is particularly prepared to provide relief to the residential investment and stocks business.
Several actions have taken in monetary policy in light of the financial concerns, which include capital assistance program, public private investment in which private capital will be leveraged with public funds to purchase legacy assets from financial institutions. The capital provided by the treasury to Federal Reserve plans to expand the size and scope of the TALF to include securities backed by commercial real estate loans and potentially other types of asset backed securities as well. Therefore, these measures verify the right direction of the monetary policy.
Effects of monetary policies on the economic production and employment:
Monetary policies are elementals of economic production and assuror of employment. With-out strong monetary policy, the economic stability could not be attained, and if economic stability does not prevail, un-employment will increase and the nation will come under the socio-economic crises. Hence, an analytical and well-defined monetary policy will be the backbone for the economy’s production and employment. A well allocation and flow of money can only cater the entire horizontals of nation’s economic needs. We can analyze the recent situation of U.S economy; it is in the melt down position the financial sector of the country is going down.
The real state and stocks business affected terrifically, at that point, the Federal Reserve department of U.S has taken initiative to give relief to the industry. The recent monetary policies are helping to consol the economic production and retain the people employed.
What should the U.S. Congress and the Federal Reserve do about it?
The alarming situation always needs rapid solutions. In the prevailing U.S economic conditions first step that should be took by the congress and Federal Reserve is to implement the fiscal policy tools. It will ultimately ease the extra stress on the economic system to reducing the taxes and government spending. The money reserved from it would be used into releasing the macroeconomic stress and creating more employment.
The other way is easy money, the amount of money should be increased to be available in the market and to the people. It is usually made possible through bank loans and other monetary measure taken by the government by introducing public finance schemes. These measures can validate the right direction of the monetary policy to reduce the economic tensions.
At the end of paper, the scenario of worst situation of macroeconomic of the United States of America can be realized and the suggestions given to reinstate the real estate, banking and stock market crisis can also be considered to streamline the worst crisis situation. Moreover, the role of Federal Reserve in rescuing and reconstructing the damaged economy is pivotal. Altogether, a determined perusal of the and crisis concrete steps to restore the economic activates is needed. The damaged economy could be more deteriorate if right measures cannot be taken. Therefore, it is not a one man show, it needs a team effort to re-establish the damaged economy.