Macroeconomic Case

Macroeconomic

The current macroeconomic climate is one in which the US is experiencing a deep recession that has been going on for several years. The unemployment rate is at 8.2% as of June 2012, whereas the average from 1948 forward is about 5.7%. However, the inflationary rate is approximately 2.3%, which is 1.5% lower than the past average rate of 3.38%. Despite this information, it feels like the dollar buys less and less each passing day. The culmination of the mortgage backed securities crisis along with the collapse in housing prices and the related drop in the US Stock Market resulted in a dramatic decrease in individual wealth in the US. The recession was likely started by a number of contributing factors which included things like the mortgage crisis as well as a rise in energy prices that resulted in less disposable income that had powered the US economy through consumer spending. When all of the spending stopped the credit markets froze further creating a lack of capital that contributes to the ability of businesses to invest and create jobs. While the recession looms in the minds of everyone there are also problems with high unemployment as we are now entering the longest period of high unemployment since the Great Depression. Unfortunately one of the tools used by the FOMC in their attempt to spur the economy was the release of billions of dollars in bailout funds as well as a dramatic increase in government spending that has resulted in an oversupply of dollars in circulation which creates the opportunity for inflation or hyperinflation as the resulting drop in the value of the dollar causes the price of everything from groceries and household goods to increase or potentially skyrocket in cost. Currently the FOMC has used every tool at their disposal in an attempt to spur the economy without success. It was believed that the bailout of many large banks would allow credit markets to continue to operate as normal. However, what has happened is a strict tightening in the credit