US+Economy

The economy of the United States is the world's largest national economy. Its gross domestic product (GDP) was estimated as $13.8 trillion in 2007. The U.S. economy maintains a high level of output per person (GDP per capita, $46,000 in 2007, ranked within the top ten highest by most sources). Major economic concerns in the U.S. include national debt, external debt, entitlement liabilities for retiring baby boomers who have already begun withdrawing from their the Social Security accounts, corporate debt, mortgage debt, a low savings rate, falling house prices, a falling currency, and a large current account deficit. In 2008, seventy-two percent of the economic activity in the U.S. came from consumers. As of June 2008, the gross U.S. external debt was over $13 trillion. The most recent estimate of gross public debt was 65% of GDP in 2007. The United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value. In February, 63,000 jobs were lost, a 5-year record. In the early months of 2008, many observers believed that a U.S. recession had begun. As a direct result of the collapse of Bear Stearns, Global Insight increased the probability of a worse-than-expected recession to 40% (from 25% before the collapse). In addition, financial market turbulence signaled that the crisis will not be mild and brief. Alan Greenspan stated in March 2008 that the 2008 financial crisis in the United States is likely to be judged as the harshest since the end of World War II. The unemployment rate jumped to 6.1 percent in August, its highest level in five years. So far, 605,000 jobs have disappeared since January. On July 11, the largest mortgage lender in the US collapsed. IndyMac Bank's assets were seized by federal regulators after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. That day the financial markets plunged as investors tried to gauge whether the government would attempt to save mortgage lenders Fannie Mae and Freddie Mac. The two were placed into conservatorship on September 7, 2008. During the weekend of September 13–14, Lehman Brothers declared bankruptcy after failing to find a buyer, Bank of America agreed to purchase Merrill Lynch, the insurance company AIG sought a bridge loan from the Federal Reserve, and a consortium of 10 banks created an emergency fund of at least $70 billion to deal with the effects of Lehman's closure, similar to the consortium put forth by J.P. Morgan during the stock market panic of 1907 and the crash of 1929. Stocks on "Wall Street" tumbled on September 15. On September 16, news emerged that the Federal Reserve may give AIG an $85 billion (£48 billion) rescue package, on September 17, 2008, this was confirmed. The terms of the rescue package were that the Federal Reserve would receive an 80% public stake in the firm. Gross U.S. liabilities to foreigners are $16.3 trillion as at end 2006.(over 100% of GDP). The U.S. Net International Investment Position (NIIP) deteriorated to a negative $2.5 trillion at the end of 2006, or about minus 19% of GDP. Of major concern is the fact that the magnitude of the NIIP (or net external debt) is quite a bit larger than most national economies. Fueled by the sizable trade deficit, the external debt is so large that many wonder if the trade situation can be sustained in the long term. Complicating the matter is that many of America's trading partners, such as China, depend for much of their entire economy on exports, and especially exports to America. Many controversies exist about the current trade and external debt situation, and it is arguable whether anyone understands how these dynamics will play out in an historically unprecedented floating exchange rate system.
 * US Domestic Economy + Crises ** – Aaron Jeweler – Sep. 17, 2008