Economics

The factors affecting the U.S. economy is examined to explain why the GDP growth was not as it was expected. There were both external and internal factors that affected the slowdown in the U.S. economy. The massive bail out of the American government for its failed financial institutions resulted in tremendous debt obligations to foreign governments. These debt levels are unprecedented and they are reaching a critical point where it might not be palatable for foreign entities already to support the debt consumption of the American economy. The consumer behavior of the American country itself is also another major loophole that needs to change immediately. The large trade deficit the country is experiencing is due to the excessive spending and consumption of American citizens even beyond their capacity to pay for. They are transferring their wealth to other nations with their excessive buying attitude. The American businesses also need to regain their competitiveness which they have lost to their counterparts. This is especially true for the auto and other manufacturing industries based including the software industry. They are under attack either from China or Indias competitive business organization.

Macro Economic Factors affecting the U.S.
One of the reasons why the dollar is weakening is primarily due to the excessive amounts of debts that the U.S. government has started. Although they did this with the good intention to save major financial institutions from collapse, the consequences of doing so has resulted in this situation. The GDP level is exceeded by the debt that the American economy has asked from various foreign debtors. Although the decision was indeed important to save millions from hunger and unemployment, the decay of one of the worlds most respected currency is now literally starting to lose favor in the eyes of many. This is evidenced by the movements of smart investor into buying gold, commodities and stocks with multinational operations. All of these are in preparation for the devaluation that is expected to come.

Another factor that pushes the American economy further down the slope is the spending habits of the average American citizen. The trade deficit of the country has already created more than it can produce in income as a nation. The debt pile from other nations is getting bigger and bigger than ever. The only way to reverse this unwelcome situation is to reverse the behavior of the American consumer themselves. People have to be more frugal on their spending habits.

The American public should spend their time more on working and creating businesses and products that will generate more revenue for their country, (Clifford 2009). The trade deficit stemmed from the behavior of American public that they can afford to keep on buying cheap goods from the rest of the world as their credit is very good and everyone is more than willing to lend them the money needed for it.

Another considerable factor in the decrease of the American economys productivity is the very fact that their costs associated with operating a business are very high. It is no secret that everybody is outsourcing these days to lower labor costs countries. American based multinational companies can benefit from these outsourced operations but they cant possibly outsource all of their operations totally. The best example for this is China. The reason why they have dominated the manufacturing sector in almost all products is because of the fact that they can produce equally or superior products at a fraction of the cost. The resulting unemployment and irrelevance of the American work force stems both from lack of training in new technologies as well as the high costs of salary, (Izzo 2010). There is no way that American businesses can compete effectively with their Asian counterparts is the labor force is already expensive and redundant.