Posts tagged plan

Plan to cut down US Public Debt failed

US Government’s Plan (1999) to Cut Down Public Debt

BBC News: Business: The Economy  US to buy back national debt

US Public Debt Data: Wikipedia file

I have found an interesting news article from 1999 about how US government was trying to cut down its public debts.

US government was planning to cut down public debts by paying the debts. The US government expected to decrease its debt of  $3,700 billion to $1,200 billion by 2009. However, as you can see from the actual data collected over 11 years, this plan wasn’t well executed.

The Actual Data of US Public Debt (1997-2008)

Instead of decreasing its debt to $1,200 billion, the debt increased to $10,000 billion. This suggests that the US government’s ‘plan’ to cut down its public debt was a poorly planned/executed policy.

According to U.S National Debt Clock, the US public debt is $13,621 billion or $13.6 trillion (Data Retrieved: 18 Oct 2010 at 12:38:23 PM GMT). I think that this increase in US public debt will someday have a detrimental effect not just on the US economy but on the economies around the world.

This blog post is an ‘add-on’ to the original blog post: Debt Time Bomb, Is It an Impending Death of Pax Americana?

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Obama pushes new bank regulation

BBC News: Click Here

According to BBC News, US President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises. This would restrict banks to be more conservative when coming to investing.

As you know, the collapse of Lehman Brothers was a result of risk-taking investments. In my opinion, this new regulations is an appropriate step in recovering the economy fully. However, this regulation would be opposed by many banks who have been profiting from. “US stocks such as JP Morgan Chase and Bank of America fell sharply as the sweeping planned reforms were announced.” As you see, many investment companies like JP Morgan Chase and Bank of America were profiting a lot from risk-taking investments. Their stocks went down as this new regulation to curb risk-taking investments was announced.

In sum, I think that Obama’s new bank regulation is a necessary procedure in recovering the economy.

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US deficit ‘set to hit $1.35tn’

BBC News: Click Here

According to US congress estimates, US budget deficit is expected to reach $1.35 trillion in 2010. “In 2009, the US deficit hit a record $1.4tn – equal to 9.9% of gross domestic product (GDP) – and the highest since the end of World War II.”

I think the reason for this sky-rocketing deficit are the following:

  • an imbalance between revenues and spending that predated the recession
  • sharply lower revenues and higher spending in the recession
  • the costs of various federal policies implemented in response to the global downturn.

This also is what Congressional Budget Office (CBO) said was the reason.

World economy is slowly starting to recover, however, this was possible with borrowing money from banks. It may seem the economy is improving, however, this ‘deficit’ could be an economic bomb if they keep growing. As economy gets better, United States should have a new budget plans keeping the spending lower than the revenue to halt and minimize the deficit.

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