New York City

Great Economy of USA

The United States of America has the largest size of economy in the world. The US real GDP* (Gross Domestic Product after taking inflation into account) in the second quarter of 2014 has become approximately 16,000 billion dollars, which is around one fifth of the world economy. The economic growth was 4.2 % in second quarter of 2014 that was higher than many developed countries. Meanwhile, the US Dollar “$” is the most widely used currency in international transactions and world trade as a reference and a means of exchange nowadays. Moreover, the US dollar constitutes 61% of the world reserve currency according to some statistics. The total national wealth of USA in 2008 was $ 118 trillion (including $ 57 trillion or $ 57,000 billion household net worth). In 2009, 30 % of the entire world’s millionaires were residing in US. In 2011, 34 % of the world billionaires were American. All of the mentioned facts and statistics above are an indication that USA is one of the wealthiest nations on earth.

Hence, in 2014, the GDP per capita (the average annual income of People in US) is about $ 55,000 which ranks one of the top ten in the world. This measure shows that jobs in USA in general are highly paid especially highly skilled ones who are encouraged by this way to migrate to US and benefit that country. Another encouraging factor in US economy is that in 2014 an average 241 thousand jobs per month were created for that year ( not to mention agricultural job opportunities ), thus dropping unemployment rate in October 2014 to 5.8 % , the lowest unemployment rate since 2008 ( though employment rate now has not broken the highest historical record yet).

Unemployment rates in the United States
Seasonally adjusted monthly unemployment rates in the United States

 

The USA has highly advanced technology as this country spends billions of dollars on research and development in science and technology, which helps increase productivity of human labor and machines. The USA, like many developed countries, has a well developed infrastructure and high economic development. Moreover, it is rich in natural resources, for it is remarked as one of the world’s largest oil producer and natural gas producer. A tremendous increase in oil production and natural gas production has taken place due to technological breakthroughs in USA, especially shale oil and gas. Expanding natural gas production extraction and reservation have caused prices of natural gas in USA to drop by 50 %, offering cheaper and more affordable resources of energy, which in turn mobilizes industrial activities and prepares an economic fertile ground for US companies to grow and prosper. In specific, the quantity of oil production has increased significantly by 64 % from 2008 till 2014; thus, diminishing the amount of raw oil (petroleum) imported from more than 60 % to 30 % of all petroleum consumed by USA which is the number one consumer of oil or biggest consumer of crude oil in the world. Mounting production of oil can expand employment opportunities, improve balance of trade and reduce budget deficit. Due partly to renewable energy sources like hydroelectric, wind, solar ,geothermal and biofuels , the consumption of petroleum in USA has diminshed from 21 million barrels daily in 2006 to 18.5 million barrels daily in 2014. New technological innovations can cut down costs, increase efficiency and enlarge productivity in all economic aspects. In specific, labor productivity has doubled in the US since the 1960s till recent years. Due to productivity getting better, the industrial, agricultural and service sectors have grown. Many industrial companies are returning to USA to produce there again. Industrial exports like cars have risen. Agricultural production in US increases 5 % each year since 1990 partially due to technological continuous development and land consolidation, so USA has turned into a net agricultural exporter. Moreover, many large international financial companies are based in USA and grant financial services like money transfers and electronic payments all over the world. Examples of such companies are Western Union, American Express, and Master card. Generally, due to advancing technology, agriculture, industry and services, USA is nowadays the third largest exporter of goods and services in the world after China (First) and Germany (Second).
Another factor contributing to great economic power is that many of the largest international companies are American-based having headquarters in USA. As a clear example, Google has the second largest market value globally after “Apple” company (which is also US based). The Market value of Google has reached 396 billion $ in February 2014 and total assets of Google have reached 121 billion $. “General Electric” is also a well-known American and international company and has recently total assets of around 656 billion dollars and net profit of 13 billion dollars. The enormous presence of huge sized companies in the US contributes to the very big number and value of stocks traded in US stock markets and particularly in New York stock Exchange, where the average value of stocks traded daily was estimated to be 169 billion dollars in 2013. Not to neglect Singapore, Hong Kong, London or others, New York is still up till now a great business and financial center of huge weight and presence in the world. In the world of Media, New York has also substantial importance because 5 out of 10 biggest media companies or media stations in the world are in New York such as CBC and Time Warner for instance.

New York City
One of the biggest business and financial centers Worldwide is New York City
Picture Source : Flickr
User: Darren Johnson
link to original: https://flic.kr/p/dauWoe

One reason that US ( not only NY city) hold so sizeable investments and large operating companies is that USA is enriched with being a multicultural country or a melting pot where all kinds of races , ethnicities, national origins and religions live together to form one nation. It is more open to immigration than Asian and European countries because American people are collections of people originally coming from all over the world. USA is open to immigration granting US citizenships especially to the highly skilled, educated and genius people, who are really and greatly demanded by great companies such as, Google, Face book and Intel. Many foreign scientists who migrate to USA are encouraged by being granted good positions, suitable conditions to make scientific research and plenty amount of money like 500 thousand dollars yearly or above upon accomplishing new important scientific discoveries and technological inventions. Albert Einstein, a German Jewish scientist, who migrated to US during the middle of twentieth century, was adopted and received by USA, where he discovered very important scientific theories. Another example is “ Jerry Yang “ , one of the initial founders of “ Yahoo Company” , has been originally from Taiwan and then moved to live in the US with his family when he was 10. One of the founders of Google was originally from the previous Soviet Union.Immigrants in US, offer a great advantage to the US economically in the long run, since 40 % of the largest 500 companies in the world were established by immigrants in USA or their children according to statistics done by “Fortune” Magazine in 2010. Due to favorable economic conditions in US generally, many new capable immigrants are encouraged to create new companies or invent new products and services that are widely demanded for the purpose of adding value to life. Another statistic shows that 3 out of 4 people holding PHD in USA are immigrants born outside the USA.

A wide range of new comers especially the skilled ones can be acquired or received due to jobs created by both private and public sectors. In Specific, an average of than 241 thousand nonfarm jobs per month were created in 2014 (This is not to mention jobs in agriculture which is very productive and diversified in the huge areas there). Some Statistics show that the number of jobs created per month is on an upward trend or continuous increase in general since 1920 up till recent years as you can see in this chart just below taken from Wikipedia.

 

Number of jobs created per month in USA
Number of jobs created per month in USA

 

The USA, with its great size of economy, abundant natural resources, advanced infrastructure, liberal culture, high wages like many developed nations, enormous population over 300 million people and very big land mass, offers very good chance not only to job creation but also to constructing many new houses, new high buildings and even towers .Not to forget Malaysia, China, UAE or other countries, many high rising buildings and towers exist notably in large US cities such as New York, Miami and Chicago. Besides, Chicago as an example ranks fourth highest in world cities regarding the value of traded real estate properties per year and seventh highest in the world in terms of number of large construction projects done in a city (including its suburbs). In general many are the wonders of high estate buildings in US cities as you can see in these pictures underneath.

 

Chicago City
Chicago Skyline
Source: Flickr
User : Dave Wilson
Original: https://flic.kr/p/agpCPQ

 

In addition, as the US dollar is the most important currency in world trade, it is the most commonly used as a reference in pricing of stocks and oil barrels in world stock markets. Nevertheless, it is the most important among hard currencies and reserve currencies of the world (US $ constitutes around 61 % of the reserve currency of the world), so the US government and Federal Reserve Bank can use printing dollars as a tool to create wealth and clean its financial system from doubted loans. The US government and Federal Bank started since 2013 reducing gradually the amount of money injected into the economy from 85 billion dollars monthly until it reached 25 billion dollars in July 2014.

 

Print US dollars
Printing of Dollars in US (without backup of Gold reserve)
is a form of wealth creation.
“In God we trust” is printed on the 100 $

However, they have kept interest rates very low close to zero percent to revive the economy despite its steady improvement in recent years. It is said that stimulating (expansionary) monetary policy will continue until inflation rises to 2 % and unemployment drops to a certain level. Besides, as the US has the strongest reference currency in the world, it borrows money (through selling treasury bonds) with the value of hundreds of billions of dollars from other countries in the world such as Switzerland, Japan and China. (China alone has investments in US treasury bonds or lends US with 750 billion dollars). Not only can the US government borrow hundreds of billions of dollars, but also US companies as well especially the large famous companies can. According to statistics, US companies have borrowed a total of 13,000 billion $ which ranks the second largest amount of money borrowed after the Chinese companies that have borrowed 14,000 billion dollars.
Another matter that has contributed to the vitality of the US economy is that interest rates on both bank deposits and loans are generally kept low because the US $ as we said before is a reference currency, generally very safe currency, and most widely used in the world (as an example, the US government can borrow money with an interest rate of 2.5 % for 10 years T-bonds). In that manner, both the private and public sector in USA can get low cost of capital to finance, create and develop projects continuously generating profits and making new job opportunities. The inflow of low cost of capital can be used to buy newer machines and more advanced technologies thus increasing productivity and efficiency. Theoretically, low interest rates encourage investments and consumption; Consumption constitutes about 2 thirds of the economic activities of US economy. Moreover, funds are generally abundant in US since 10 out of 100 largest banks globally are US owned. This gives opportunity to finance the US economy more easily. Another factor to induce strength to US economy is the freedom of movement of capital in and out of US market which helps US to be more integrated in the world economy. To illustrate, in 2010, US-owned assets abroad (outside US) have reached 20,315 billion dollars among which are stocks and financial derivatives that bring returns and income to USA. Very good concept in business is to diversify investments in different countries.

Another advantage that the US offers is democratic liberal regime and laws that regulate business environment. Generally speaking there is equality in front of the law and court, where laws apply to all people of different races. Even presidents and well-known large companies are all subject or under the rule of laws. We have seen some examples of US presidents who were accountable to the courts. Moreover, some well- known large banks and companies have paid penalties of millions or even few billions of dollars for violating some important US laws. At the same time, Laws assist in protecting the rights of citizens and companies. For example, taxes paid by US citizens and companies are used to pay pensions after retirement, unemployment benefits, and social benefits to help the poor (who pay very little or no taxes). Nevertheless, taxes are progressive meaning that their percentage rises or falls proportionally according to income level of each individual and each company. Taxes help finance large companies to persist and restructure if facing financial difficulties to return to profit; such is the case with saving General Motors to save the US automobile industry. By saving companies and various industries, they help protect jobs for US citizens. Moreover, reforms and new regulations are continuously made in the financial system and fiscal policy to get the economy performing well and growing such as applying taxes on wealthy US citizens living outside US and pressuring Swiss banks (who are famous for Secrecy law in banking) to give information about US citizens accounts.
In conclusion, what keeps US economy powerful is the good management of the economic resources generally. For instance, it is usual to take measures to reduce budget deficit step by step and simultaneously invest in infrastructure and education (such as granting US university students long term loans to repay after graduation). Specifically, budget deficit was diminished from 10 % with respect to GDP in 2009 down to 7.3 % in 2012 and further down to 4.1 with respect to GDP* in 2013. In addition, US Economic growth has been moderate, yet still better than that of most of the developed world. The useful point is that great achievements in economy are backed up by the fact the board of governors of the Federal Reserve Bank of US are very good and skilled economists. Meanwhile, the International Monetary Fund (IMF) and the World Bank are based in the US, the country which has great influence and share inside them (but not the only one, off course). IMF and World Bank institutions can give credit or back up for loans taken by developing nations to complete development projects. As the US has a large economy, it has a great effect on the global economy directly and indirectly.

Finally, we hope that the US may inspire all countries in the world especially the developing countries whether people or governments to make research and development, have faith and take forward steps to improve their well being gradually.

Peace and blessings to our world

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