Economics: So What’s the Problem For Me?

By | February 12, 2008

Just a couple of weeks ago, the Federal Reserve called a special meeting in order to cut the interest rate by three-quarters of a percent. (I won’t explain here, but the Fed’s interest rate is the primary controllable variable which has a significant impact on the economy.) While that may well not mean much to most people, I’ve never heard of the Fed holding a special meeting, and never heard of them changing the interest rate by more than a half-percent, and that only rarely. The economy may or may not be in trouble, but the problem is that it’s a delicate balancing act. It has proven resilient against some crises, but again, it’s not invincible. If one part breaks, the whole thing could come crashing down hard.

So combine an economy which is reeling from the serious blow of the housing market bust, a federal budget which is bloated to the max, and an ever increasing national debt of enormous proportions, which means higher and higher interest payments, and we could be seeing a recipe for serious trouble. Even if the economy remains strong, interest payments are an increasing burden, and could well outpace our ability to pay them and keep all of our government programs running.

But again, what does this actually mean for us, your average citizen. It means that we could end up pay as much or more than we do currently in taxes, yet have significantly cut public services. Less money for healthcare, education, roads, parks, defense, social security and the list goes on. What’s more, it effects things such as the value of the dollar and the U.S.’s power in the world. What that means is potentially more jobs and stronger economies in other countries rather than the U.S.

(to be continued)

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