After analysing monetary policy and the US money supply, what do you think will be the short and long term consequences of the US Budget Deficit used to finance the economic stimulus package as well as the current administration’s economic, social and political goals? Think in terms of the money supply, inflation, the business cycle, interest rates, and scarcity.
Our National Debt is currently at 78% of GDP it is expected to reach 112% within a year. This will be one of unrest in the economy and a constant state of panic for the leadership we will have hyperinflation and a debt increase at a rate faster than produce. It would be like having a rent payment at a multiple that is more than the income. The current administration is borrowing at a rate that is faster than any other time in history, and he needs to be. The scary part is the effects both short term and long term that will be affecting us at any moment. In the short term the quality of life, as we know it is going to have dramatic overhauls. Congress will be facing major decisions on Health Care, the retirement age, and a host of other services. The current debt is continuing to grow and it is creeping up on our GDP #. We will need to tighten our belts, but not to soon…. The economy needs more stimulating.
The long-term affects of this recession will out last the current President, and the debt that remains will be outstanding for only god knows… but the I believe one of the long-term affects will be my retirement will be postponed by seven or so years. I even think the taxes will be well over 50% and more in line with some of the European Union countries. Health Care and how they do business will be re-vamped if not the over inflated cost of Health care may as well just bankrupt us…. This is going to long maybe not any deeper but long…..
Since our debt and GDP are so high and we can’t make enough money to pay back debt/pay for current expenses, it will most likely increase interest rates and taxes as well as NDN1 says, push back retirement for 5-10 more years, maybe more in order for people to afford the increasing cost of living/luxury. We need to create more jobs in order to stimulate the economy and get people spending money so we can start paying back debt without tearing the U.S. to rubble in the process.
We all know that our debt is high and we are facing a recession. It is scary to know that unemployment is growing high and people are losing their job, so they have less disposable income. Sooner or later, It is going to affect our GDP. For the short term, Money supply is less. The possibility of getting a loan is harder because the banks think there is high risk involved. There is more competition over the scarcity of products and resources.
For long-term consequences, the business cycle will reach to its trough after the recession. Hopefully, production, employment and income will increase. We still have to deal with the debt that we have. I am sure the Government will increase the interest rate and taxes rate or push back retirement. For example, people won’t be able to retire till they are 70 or above. There will be a big issue on health care as well.
With the debt percentage so high and projected to increase drastically within the year, there will obviously be some consequences. In terms of short term consequences, people will be less likely to spend more becuase they are affraid of being broke, and will focus on saving their money. This will slow down the economy even more. There will be less money circulated which will make it harder for banks to approve loans and harder for companies to be profitable, forcing them to fire employies which will in turn increase the unemployments rate. As a long term effect, this issues will increase interest rates and taxes for everyone. Another consequence that we discussed in class that will affect this generatiosn and future ones, will be the push back of retirement ages which will cause people to work into their late ages. Obama is making efforts to increase jobs, like his plan to start all the construction that has been going on on the roads and neighborhoods, but this also costs money. Even if the economy snaps back soon, the consequences of this current economic state will linger for a long time!
Its sad to have a country in so much debt. The people and the goverment are both suffering and there seems to be no way out. Although a stimulus package will help the people in the short term it will damage the goverment, just like lowering taxes. But if you bring taxes up to help the goverment recover the people wil stop putting money into the markets. I dislike the thought of making people work longer than they should have. I thought we, as Americans, have been promised a quality of life that assumed we wil have the chance to live out our senior years in peace in return for hard work early on. I do not think they will be able to go back on that promise. I think the goverment will work with the banks to extend new lines of credit to people to keep that industry alive.
Short term consequences – In attempt to increase money supply, interest rates will fall inflation will rise dropping the value of the dollar which increases net exports. Firms will borrow according to the low interest rates fueling the economy.
Long term consequences – Death, taxes and younger generations paying interest on current debt. Thanks in advance.
I would have to say the short term consequences would be unemployment, foreclosures, low interest rates, low deposit rates, high credit card rates. All of these are what people are experencing right now. All these consequences are hurting our economy. As for long term consequences they are taxes, debt, confidence in the banking system. I just hope we can bounce out of this depression and get back on the right track!!!!!
The short term consequences will be inflation and unemployment. Higher taxes will be a short term as well as a long term consequence. There is much more to add but it is a bit depressing and I’d rather not think about it.
The administration is obviously trying to create jobs and keep things moving, I’m not sure it is enough to get us through this mess. Maybe they will reach out to really wealthy people like Bill gates and offer them immunity in exchange for money. They could say, “Mr. Gates, if you give us money you can do whatever you want and you won’t get in trouble.” If he says no, they can just blackmail him and say, “Well if you don’t go along with this we will make your life a living nightmare!” IF that doesn’t work, I don’t know.
short term consequences would be things such as inflation will rise as interest rates will fall, unemployment, foreclosure, higher taxes, credit card rates will rise, and all of these we are seeing already..I’ve had my credit card interest rise even though Ive had perfect credit and have had no problems whatsoever paying my credit cards on time, and its obviously the effect of the economy.
Long term consequences would be things such as the babyboomers generation passing away and the younger generation getting stuck with paying higher taxes and interest for the current debt.
it is a shame that the current problems will last out the current president.
I feel really bad that the current people near the age of retirement will have to wait. I cannot even image how long the “y” generation.. (my generation) will have to work in the future to pay off this debt. Not only that.. to make a living, and to be able to support ourselves. I definately agree with “kmaz” in her above comment. The younger generation IS being stuck with the babyboomers and having to support them even more.
The short term consequences is that we will have more unemployment, and taxes will go higher. One way to fix our economy or pay the debt is by having people spend their money, but how will that happen when people won’t have jobs? The long term consequences is that the next generation is going to end up paying the consequences if the package that Obama asked for doesn’t get handled properly and it will effect health insurance in a bad way and for the people who thought about retiring, it will take longer to for them to make that decision.