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Why does the US economy matter? | Start Here - YouTube
Channel: Al Jazeera English
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Let’s talk about the world’s biggest economy
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because it affects
just about everyone
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Depending on what
you read
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the US economy is well on
the way to recovery
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after the crisis caused
by COVID-19.
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The whole world is trying to get back on track.
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But how long that
will take
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depends a lot on the Americans.
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So who really created the strong US economy
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before the pandemic hit?
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Is the recovery
starting to slow?
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And is inequality getting worse — not better?
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By some measures
China these days
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is considered the biggest economy in the world.
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But when you
look at the value
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of all its goods
and services
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the United States
is still No. 1.
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So what is the
American economy?
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It’s Silicon Valley
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Hollywood
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oil
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manufacturing
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finance.
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It’s pretty mixed.
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The US is also the most important export destination
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for a fifth of all countries.
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That’s because Americans consume a lot.
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So much that they’re the engine of the US economy.
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And it all ripples
throughout the fabric
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of the global economy.
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Another reason the US economy matters to all of us
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is that the US dollar is the undisputed king of currencies.
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Most global transactions and trading in things
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like oil and gold are
done in US dollars.
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It wasn’t always
that way.
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Countries used to settle international transactions
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in gold.
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But after World War Two
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countries needed
more flexibility
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to rebuild their economies
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and chose to peg their currencies to the dollar.
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That’s because the US had the most gold at the time.
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A strong dollar can
be good or bad
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depending on
who you are.
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Japan needs the dollar to be stronger against the yen
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so American consumers
can afford
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more Japanese products.
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But a country like Turkey would rather a weaker
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US currency because banks and businesses there
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hold a lot of debt
in dollars.
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In other countries a strong dollar can fuel inflation.
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In Argentina that pushes up prices for basic things
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like food.
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And in the US a
strong greenback
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makes imported
goods cheaper
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but it can harm US manufacturers by making
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their goods more
expensive abroad.
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Overall, though, the
dollar is largely seen
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as a safe currency.
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During the pandemic
it actually rose.
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Lately the US dollar has
gone up and down.
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That has to do with
all sorts of things.
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Even a tweet from
President Trump
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can help or hurt
the exchange rate.
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But a lot rides on how the US economy performs.
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So how is it doing?
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Economies are measured using GDP
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which is the total value of goods and services
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produced in that country over a period of time.
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And you can see that over the last 10 years
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the US economy has
been growing.
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Last year GDP rose
by just over 2%.
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But it took a while
to get there.
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Like the rest of the world the US economy was devastated
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by the financial
crisis in 2008.
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President George W Bush started the clean-up
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shoring up banks and
rescuing US companies.
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The Federal Reserve also played a massive role
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buying bonds and keeping interest rates low.
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And all that continued under President Barack Obama.
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Congress spent hundreds of billions of dollars
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on things like social security and tax relief.
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By 2009 the US
had started
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its longest economic expansion on record.
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Then President Donald
Trump stepped in.
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The economy did
keep growing.
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But the 4-to-6%
boost he promised
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well, that didn’t
happen.
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Trump added his
own touch.
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He cut regulations to make doing business easier
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and got Congress to
pass tax cuts
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for American workers
and corporations.
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The promise, there, was to help businesses
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reinvest money to
create jobs.
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But it didn’t always
work that way.
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A lot of those companies used those tax savings
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to buy back stocks and boost their value instead.
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Then there’s Trump’s trade policy of putting America first.
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He ripped up international trade deals
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saying they were unfair and hurt American manufacturing.
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And that led to
a trade war.
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The US slapped penalties on hundreds of billions
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of dollars’ worth of
Chinese goods.
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China responded
with their own.
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China also found ways around some of those tariffs.
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The main thing about
Trump’s tenure was
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that the American
public started to feel
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a whole lot better
about the economy.
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And that had an
important effect.
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So the economy was
in good shape
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and the US jobs market
was on fire.
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Then COVID-19 came along and pushed the economy
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off a cliff.
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The US economy slid 5% in the first quarter.
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when it officially fell into recession.
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then in the second quarter it nosedived
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at a record annual rate of more than 30%.
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The pandemic still
isn’t over.
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But the focus now is on the economic recovery.
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In the third quarter of 2020
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the economy bounced back a record 33%.
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The Federal Reserve helped by unleashing a range of
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measures to keep
credit flowing to
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businesses and households.
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Like cutting interest rates to make borrowing cheaper.
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Congress also allocated trillions of dollars in aid
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to keep workers and businesses afloat
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and jumpstart growth.
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That’s a lot of money.
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The stock market also came roaring back.
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One reason was that tech companies benefited from
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the shift to people
working and learning
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from home.
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You know what else is up?
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House prices.
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Mortgage rates are
at a record low
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so people who own shares or homes — they’re doing OK
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But what about the rest?
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Well, some economists are saying this is the most
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unequal recovery in
American history.
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We also know that
economic recovery
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is starting to slow down.
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COVID-19 is still spreading
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some of that financial help we talked about has expired
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and Republicans and Democrats in Congress
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can’t agree on the next
aid package.
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Getting the US economy
back to its
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pre-pandemic strength
could take years.
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And how long the virus
sticks around
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will make a difference.
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will make a difference.
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It’s like an ecosystem.
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And on that basis the US needs to do well
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for all of us to turn
the corner.
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If you want to get a better understanding of the
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stories in the news
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you can find all of our episodes on YouTube.
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Just look for Start Here.
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You can also find us on Al Jazeera’s Facebook page
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and on our website aljazeera.com.
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Make sure to subscribe wherever you’re watching
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and we’ll see you next week.
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