Econ 2004 - the Us Economy Today and Its Challenges

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Moreover, the student loan crisis has taken a toll on the student population in America. University in this day and age is becoming more and more compulsory for people who want decent jobs, and college is more expensive than it ever was before; thus, students take out loans to attend classes. This poses a problem when students are unable to pay loans back after college due to unemployment or other expenses. When students have to pay back hefty loans, they are not stimulating the economy in ways that they should be, namely purchasing a car or a home. A majority of a newly graduated person’s income goes toward paying their schooling (at least for a few years), so even stimulating the economy in smaller ways such as clothing purchases and event ticket purchases are becoming increasingly difficult. Since new graduates are a significant part of the population, this threatens the economy because young people have little money to spend compared to the generations before them.

As previously stated, a solution to the problem of the increasing value of the US Dollar will be proposed. Before that can be discussed, it is important for the population to understand when the dollar has become too strong. Two factors have been appreciating the US Dollar. The first is simply because the US economy is doing better; the better an economy becomes, the stronger the currency. Moreover, US interest rates have gone up which in turn have made the value of the dollar rise. In order to avoid a recurrence of the US’s currency in 1981-1982, when no one wanted to invest in other Western countries because the US Dollar was so strong, the government must intervene. While intervening is usually not what the US does in a flexible currency exchange, it must be done in times when the global economy may be in jeopardy. Also, while foreign capital has been attracted to US soil due to higher interest rates, exports are still being hurt by the high value of the dollar. In order to lessen this problem, the US must buy its own currency and pay with foreign currency. However, since banks only have a finite number of foreign currencies, this can only happen for a finite period of time. For example, the US could purchase major car parts from Toyota in Japan by buying US dollars and exchanging those to pay with Japanese Yen. This would start to devalue the strength of the US dollar, and if it is done throughout many other transactions, America’s currency will start to devalue.

The US economy is complicated to understand at times, but when major problems such as the overvaluation of the dollar, decreased labor force, and the student loan crisis are addressed, solutions make this country a better place in which to live. The more people pay attention and understand economic news, the more educated our population will be when solving crises that our economy faces each day.