Causes and effects on the American economy

American economy has for decades been the strongest one in the world. Even today, with the encountered problems, the United States still has the second largest measured gross domestic product ($14,380 billion), after the European Union. However, they do face some serious challenges as the American economy is likely to go into recession. The situation has been created by reasons such as increased consumerism, natural hazards or man made disasters. "Together, these problems caused a marked reduction in the value and status of the dollar worldwide in 2007" (Central Intelligence Agency, 2008). All in all, the American economy is currently at a crossroads. The lines below present some of the most relevant causes and effects on the U.S. economy.

Causes

American has turned from a nation of producers into a nation of consumers; we now have so many malls that they could fit in all inhabitants of North America, South America and Europe, at the same time (VanAlkemade, 2007). The increased consumerism has lead to record high imports, which combined with a focus on services rather than manufacturing (which meant fewer exports), lead to a merchandize trade deficit of a record $847 billion in 2007 (Central Intelligence Agency, 2008)

International causes include the strong emergence of the European Union and its strong currency, the euro; another important cause is given by the conflicts in the Middle East, by the OPEC regulations and by the limited supply of crude oil, materialized in record high prices. Social and demographic causes refer to the aging of the baby boomers, the most prolific generation in the United States; most of the economic growth has been achieved through their work, but their aging leaves the country with jobs that cannot be filled due to insufficient and insufficiently trained candidates. Foremost, the "rapidly rising medical and pension costs of an aging population" (Central Intelligence Agency, 2008) once again throw the country in financial difficulties.

The tragic events of 9/11 revealed a strong economy, capable of regaining from a blast. After it however, the Bush administration fought hard to eliminate terrorism and most of the state funds went to the military; as a result, the United States is now struggling with its highest federal debt. Natural phenomena, such as tornados and hurricanes, have also had negative impact upon the economy.

Effects first effect upon the American population has been that of increased unemployment rate. Agreements of international cooperation, such as NAFTA, have only managed to open the borders to cheap labor force; as a result, American multinationals outsourced their operations to Mexico or other cheap regions, throwing the U.S. citizen into unemployment.