The Economy During Election 2000 Essay Research

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The General State of the United States Economy

There are various reasons for the result of the recent stock market tumble. There is not just one direct cause, for instance, the recent presidential election. It is a result of both the 2000 election and simply just a natural course of events that generally approaches once prosperity reaches a certain level. Whether or not this tumble will make a recovery, we really don?t know? Because of this, the word recession has been booming around news stations. But is our economy witnessing a slow down, or is a recession actually heading our way.

Stocks are experiencing losses in almost every sector, and the damage varies depending on the sector. During the week of December 11th, many of the big gainers have hit bottom, usually somewhere south of $2 per share. An example would be the data management software provider PASW who had a 41.2 percent gain. Yet even with that big jump, shares are only at seventy-five cents leaving the stock market down 86.8 percent for the year. There is a growing list of factors including contested election results, earnings warnings, fears about interest rate hikes, heavy margin calls and, perhaps most significantly, concerns about a slowing economy have exerted tremendous downward pressure on the market. One solution to the problem maybe to have the Federal Reserve change its stand on interest rates. However until there is a clear bottom investors should focus on some of the profitable big players that have taken hits this fall. Companies such as America Online and eBay are at 52 week lows, while Inktomi is at its cheapest price in nearly two years. There are many other companies that stand to survive the shakeout and prosper.

Some say that the economy is semi-sound, except for the United States manufacturers. They have become significantly less optimistic about the economic outlook for the next twelve months and see scant growth in capital spending, reinforcing concern that the economy may lose more momentum in the months ahead. Norbert Ore, chairman of the National Association of Purchasing Management?s Business Survey Committee said ?Manufacturing purchasers are less than bullish about their organizations? prospects for 2000. This upcoming year will definitely be a challenge as far as the manufacturing sector is concerned. We might have a recession in the manufacturing sector, we might have a potential for that, but not a recession in the overall economy.? A recession in manufacturing is possible and further expansion in other parts of the economy would likely keep overall growth positive. The slowdown in this sector of the economy has prompted speculation among market players that the Federal Reserve may soon move to cut interest rates.

The Chairman of the Federal Reserve has a huge responsibility for making decisions which could hurt, heal, or even improve the United States? state of economy. Alan Greenspan signaled on December 5th that the Federal Reserve is finished with the job of raising interest rates to slow the economy and stands ready to cut rates should the nation show any signs of heading toward recession. Mr. Greenspan said, ?the economy has slowed appreciably from boom conditions of the past few years to a more ?sustainable? level.? He then noted that with growth at a ?modest level? there is less of a ?buffer? should the economy be hit by bad news. The role of the Fed is to reassure the markets that steps would be made in order to keep the long expansion going. Greenspan also stated that financial conditions are not as tight as to be a crisis, as they were in 1998, when the Fed had to cut rates in the wake of the global financial crisis. The Federal Reserve keeps the economy going and without it a recession would arise. In a recession unemployment rises rapidly, bankruptcies multiply, layoffs become commonplace, and homes lose value.

According to some people the prosperity of the last five years that has lifted nearly every family will gradually disappear for millions of people, and both consumers and companies will grow cautious in their spending and investing. However a recession almost certainly has not arrived. A recession is defined by economists as two consecutive quarters of declining gross domestic product. But the gross national product, the broadest measure of the value of America?s goods and services, is still growing, if not at the annual rate of more than five percent that prevailed last spring, then at two to three percent.