Friday, August 13, 2010

The American Economy

Today America is stumbling in its economic field. Europe is debt strapped while China is booming. Today in the world of globalisation every economic incident in any nation spill its effect over the other nation. Today three questions stands in front of USA regarding the economical factors. It is to be calculated how far is the depth of the economic slowdown and what policies can be taken for the recovery. The next question which arises will be regarding the economic challenge which is coming from China. The third one is about the future reconstruction of the USA economy.

The debt in USA has been rising since 1990s.This has raised concern for the US non financial corporate health. It is vulnerable to the economic downturns.
The corporate debt has grown rapidly in recent years. Nealy 46 percent rise has been observed between 1995 and 1999 from the last years.High level of debt has concerned many observers and they feels that the corporate sector has been vulnerable to economic slowdown.

It has to be analysed how the corporates will face the economic challenge and the correction in the market and large rise in the interest rates. The leverage rate of the corporates will remain manageable with current level of high borrowings. Any change in the interest rate will push sectors liquidity risk to the relative high level of borrowings. The heavily indebted firms are vulnerable during the economic slowdown as their needed debt service was not returned easily. These actions will lower the nation’s overall productivity. This will hamper the economic cycle of the nation. When the productivity of the firm is hampered it may cause bankruptcy and will result in large cost tot creditors, employees and the stakeholders.

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