America's Failed Economy Analysis Essay

Tags: political power economic growth unemployment government money aig capitalism economy politicians insurance economists

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Aggregate demand is something that is a topic of interest. The Obama Administration bailed out banks in the United States and Wolff mentions Great Britain in a sense bailed out their banks by continuously printing and borrowing money. Banks are the reason for shift in aggregate supply and thus aggregate demand. The United States government as Wolff remarks, gives limitless credit and almost zero interest on banks, supplying them with an endless source of money to do as they will. They took risks because of this endless source and it led to the aforementioned bailout.

From this risk emerged ‘credit default swamps’ that served as insurance for loans but were not regulated as insurance. The biggest one, AIG, had banks come to them to ask for reimbursement for defaulted loans. Companies like AIG could not pay and thus the banking crisis occurred. Although banks like Goldman Sachs emerged unscathed, from these negative actions came a problem that continues today, unemployment.

Unemployment is something economists thought capitalism would prevent at least regarding reaching high levels. However, that has not been the case. Even with government intervention, capitalism has led to an increase in unemployment and even though the article discussing unemployment is nine years old, unemployment is still a major issue in the United States, especially regarding obtaining full-time employment.

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Now that the undiagnosed bubble has burst, the true riskiness of supposedly safe assets has been revealed and the financial system has demonstrated its fragility. U.S. households have seen $13 trillion in wealth evaporate. More than six million jobs have been lost, and the unemployment rate appears headed for its highest level since 1940 (Krugman, 2009).

Such efforts to inject money into the economy through ‘regulation’ and so forth have only resulted in companies making huge profits and not spending those profits on increasing wages or sufficient job creation. People think perhaps regulation could solve this key issue…wrong!

When it came to regulation, Capitalism was regulated after the Depression according to Wolff from the 1930’s to the 1970’s. During this period companies, board of directors were all regulated, and it allowed for economic growth in a capitalist society. Wolff stated that some considered that period, ‘the good times’. Then when Reagan came into office and deregulated everything, that was when things became chaotic. However, Wolff points out, the second regulations kicked in, corporations tried to find….....

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References

Krugman, P. (2009, September 2). How Did Economists Get It So Wrong? Retrieved from https://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?mtrref=www.google.com

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