Archive for the “World Economy” Category

The US dollar is weakening, the real estate market is in trouble, unemployment is slowly climbing, and gas prices are higher than they have ever been.

Many economists believe the US is headed into a recession or may already be there.  President Bush, however, disagrees.

His stance seems to be one of preventative measure.  The Economic Stimulus Package was put into effect recently, giving millions of taxpayers ‘free money’ to help jumpstart the economy.  This program is giving $600 to each taxpayer, $1200 to couples, and $300 for each dependent child.  The hope is that this money will offset spiking fuel prices and send consumers on a shopping spree giving the economy a boost.

President Bush is also attempting to convince Congress to make his tax cuts permanent, disallowing tax hikes in the future.  This will hopefully “create certainty in the tax code.”

Will the program be enough to strengthen the spiraling economy?  That is a question that quite a few economists are debating.

While President Bush, during his State of the Union Address, expressed that the long term stability of the economy would be fine, he made it clear that the short term problems need to be dealt with before the situation gets any worse.

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The US dollar is weakening for many reasons.  Attributing factors include high gas prices and the failing real estate market.

Rising gas prices are causing American consumers to spend less money on extras than averages in the past.  This causes major companies to earn less profit, making their stocks look less inviting to foreign and domestic investors.  To combat this, the US government has created an economic stimulus package.  The goal is that taxpayers will take this incentive check and use the money on a spending spree, thereby jumpstarting the economy.  Unfortunately, recent polls have shown that many will use the money to pay bills instead.

The Federal Reserve has been reducing interest rates to help stabilize the real estate market and take some financial pressure off of homeowners in hopes of stalling the mass foreclosures of late.  While this does help homeowners, it also deters investing when US interest rates are lower than those of foreign counterparts.

Having a weak dollar is not all bad, though.  Since foreign travelers get more for their money, the US is an ideal vacation area.  Companies also find their prices much more competitive in foreign markets.

While there are positives and negatives for a weak or strong dollar, going to extreme in either direction can be dangerous to the US economy.  With the Federal Reserve keeping a close eye on the direction of the market, it is possible the dollar will begin to stabilize.

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If you have gotten gas recently, you might have noticed that the price of fuel is a little bit on the high side.  Reaching prices over $3.50 in some places, it is only natural to wonder how much higher they will rise.

Many people wonder how gas prices can be so high and the oil companies can make such exorbitant profits at the same time.  Part of that answer revolves around the fact that gasoline is an inelastic product, meaning that no matter how high prices get, the demand will not usually decrease as a result.  It’s a lot like cigarettes… or crack.

The Organization of Petroleum Exporting Countries is a group of countries that produce oil.  The organization basically controls everything to do with oil in those countries, including price.  Now, this group is not a monopoly, but it does control two-thirds of the world’s oil, so it does have some monopoly like powers, and their job is to make sure that investors in oil get the best return on their money.

For the summer holidays, especially Memorial Day and the 4th of July, prices will most likely increase.  This is a long standing trend.  The good new is that they are supposed to level off to somewhere under $3.50 a gallon afterwards.  You never thought you would be so excited about $3.40 a gallon, did you?

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