The Failure of the Federal Reserve System
It´s really hard to understand what Ben Bernanke the chairman of the FED was doing in the last months. Hasn´t it always been the main priority of this facility to ensure price stability? Things have changed ostensibly, but which reasons had Ben when he lowered the prime rate constantly ? Did he want to be nice to the stockholders , beware the U.S. economy of a recession, or just help to allay the U.S. foreign depts ? To be honest I don´t know his intention but I can imagine that the government wanted to have a working economy ahead of the coming elections.
The phantom of the stagflation
But the problems which this policy implicated now slowly appear, because the coming recession is not the same like the one in 2001. The difference is that the inflation rate is much higher as it was in 2001 and so America now faces a stagflation. Stagflation a really accused word by every economist, fundamentally means nothing else as recession and inflation to the same time. Sounds funny but that´s a really nasty thing because when you want to fight the inflation you raise the prime rate but that is toxic for the conjuncture. So it´s a doom loop and the only way to solve this problem is to raise the prime rate and to sit out the recession.
The Low Dollar as a slide effect
A few month ago the international top-model Gisele Buendchen properly the best paid model in the word, said that from now she only accepts Euro for her work.
The reason was that the government didn´t want to have a recession now, and so the only thing the FED could do is to pour more and more money into the banking system with the hope to boost the economy. But this had slide effects, the Dollar was loosing in value more and more, because when the society has more money for the same amount of goods the money is loosing it´s value and that´s what we call an inflation. This again has effects on the international economy for example the high oil price can definitely be affiliated to the low dollar, the reason Oil is noted in USD and when the money is loosing in value you have to pay more for it. But there are also positive facts especially for the U.S. export economy here you can list very high rates of growth cause for example me as a European can afford more goods for my euros when I buy it in the U.S.
All in all we can say that the coming months won´t be easy, but in my opinion the fight against the inflation is definitely more important as the one against the recession.
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U.S. elections from an European point of view
It is probably the most important election in the world, the presidential election of the United States of America, but this time we got a big change in this election which probably opens a new door to freedom and emancipation.
I´m not an American but as an European I am very happy to see that now for the first time in the history of the United States of America a woman and a man with Afro American roots stand for this task at the same time. No matter who wins the fact that they also got the chance shows a new level of emancipation, which stands for a modern, enlightened America.
But who do the Europeans prefer? I skimmed through the biggest European newspapers and came to the result, that there is no clear result. The only thing I recognised is that Hillary Clinton and Barack Obama are definitely the stars of this election and if the Europeans could vote they would probably pick one of them.
However the question who Europeans want can´t be answered so easily. The question what Europeans wish can. Most Europeans await changes in the US environmental, trade, and foreign policy. Especially, problems like the climate change should be taken seriously by the United States. Also problems like the Iraq which destabilised the whole Middle East should be avoided in the future. But that are just wishes the decision lies in the hands of the voters. Personally I wish you a fair election and the best for your country so may the best win.
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