Feds Waits for the Job Market to Perk Up

 By Bailey Zimmerly

The United States extremely loose monetary policy is the cause of currency wars that many economists see a threat to the world economy. The idea of currency wars is to have a very low value for your currency to aid in your country’s exports, making them cheaper than the rest of the worlds. So it’s basically the devaluation of the dollar to help exports from the United States compete with the much lower prices of a country like China. This is done through increased spending and debt and by keeping the Federal Fund rates at virtually zero. All of this to help increase the amount of money we bring in to help our struggling economy. 

                With uncertainty in the United States economy, the Federal Open Market Committee expects to keep short-term interest rates extremely low until the United States unemployment falls to 6.5%. However this goal remains daunting due to the fact that currently the jobless rate has been unchanged for the past few months at a rate of 7.8%, while the job market created a measly 155,000 jobs in January, the same as February. At this rate the US economy looks as if its recovery efforts are at a standstill, so short-term rates will remain at 0% to 0.25% and the US will continue to buy bonds each month to hold down long-term rates. 

                Another damper to the economy of the United States was the expiry of a 2% payroll tax cut that is going to undoubtedly hurt the American consumer. It is going to stunt consumer spending and hurt the middle class. Although 2013 is expected to have an average growth rate of 2.8%, barely keeping up with inflation, some economists are weary due to an ever-growing debt and the expiry of the payroll tax cut. With all of the uncertainty about the future, the feds for now will wait for the economy to perk up before they begin to raise interest rates, hopefully leading to the end of the dollar downgrade and sigh of relief for the rest of the world. 

                This article is relatable to our own AP Econ class in many ways. It deals with not only the United States economy, but how it affects the world economy. This is an idea that the super-giant United States controls how the rest of world reacts, at least economically. If the United States pushes through, by lowering its unemployment, the amount of working people, and raising its rates, the looming threat of currency wars would be over. All of these terms such as GDP, unemployment, even inflation help to determine the health of the economy. 

                I think that the government should have not let the 2% pay roll tax cut expire because it will hurt not only the poor, but the middle and upper-middle class as well. Two percent of your pay check is a significant amount that could determine if a person eats three meals a day as a pose to two or if a family can buy their children that birthday gift they dreamed of. The government should step back for a moment and re-examine themselves. They should look out for the individual instead of playing games on Capitol Hill. The only way to solve our country’s economic downfall is to lower spending and decrease taxes on all Americans, including the rich who provide the jobs in America, to increasing consumer confidence and strengthen the economy.