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 Economy of United States USA - Business opportunities Economy Of United States USA
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The economy of the United States is the largest national economy in the world. Its gross domestic product (GDP) was estimated as $13.8 trillion in 2007. The U.S. economy maintains a high level of output per person (GDP per capita, $46,000 in 2007, ranked at around number ten in the world). The U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. In 2008, seventy-two percent of the economic activity in the U.S. came from consumers.

Major economic concerns in the U.S. include national debt, external debt, entitlement liabilities for retiring baby boomers who have already begun withdrawing from their Social Security accounts, corporate debt, mortgage debt, a low savings rate, falling house prices, and a large current account deficit. As of June 2008, the gross U.S. external debt was over $13 trillion, the most external debt of all countries in the world. The 2007 estimate of the United States public debt was 65% of GDP. As of October 1, 2008, the total U.S. federal debt exceeded $10 trillion, about $31,700 per capita. Including unfunded Medicaid, Social Security, Medicare, and similar promised obligations, the government liabilities rise to a total of $59.1 trillion, or $516,348 per household

External debt: Liabilities to foreigners

Gross U.S. liabilities to foreigners are $16.3 trillion as of the end of 2006 (over 100% of GDP). The U.S. Net International Investment Position (NIIP) deteriorated to a negative $2.5 trillion at the end of 2006, or about minus 19% of GDP.

This figure rises as long as the US maintains an imbalance in trade, when the value of imports substantially outweighs the value of exports. This external debt does not result mostly from loans to Americans or the American government, nor is it consumer debt owed to non-US creditors. It is an accounting entry that largely represents US domestic assets purchased with trade dollars and owned overseas, largely by US trading partners. However, this is not the whole picture, as foreign holdings of government debt currently amount to about 27% of the total, or some 2 trillion dollars.

For countries like the United States, a large net external debt is created when the value of foreign assets (debt and equity) held by domestic residents is less than the value of domestic assets held by foreigners. In simple terms, as foreigners buy property in the US, this adds to the external debt. When this occurs in greater amounts than Americans buying property overseas, nations like the United States are said to be debtor nations, but this is not conventional debt like a loan obtained from a bank. However, foreigners also purchase U.S. debt instruments, such as government bonds, which are forms of conventional debt.

If the external debt represents foreign ownership of domestic assets, the result is that rental income, stock dividends, capital gains and other investment income is received by foreign investors, rather than by US residents. On the other hand, when US debt is held by overseas investors, they receive interest and principal repayments. As the trade imbalance puts extra dollars in hands outside of the US, these dollars may be used to invest in new assets (foreign direct investment, such as new plants) or be used to buy existing US assets such as stocks, real estate and bonds. With a mounting trade deficit, the income from these assets increasingly transfers overseas.

Of major concern is the magnitude of the NIIP (or net external debt), which is larger than most national economies'. Fueled by the sizable trade deficit, the external debt is so large that many wonder if the trade situation can be sustained in the long term. A complicating factor is that many of America's trading partners, such as China, depend for much of their economy on exports, especially to America. There are many controversies about the current trade and external debt situation, and it is arguable whether anyone understands how these dynamics will play out in a historically unprecedented floating exchange rate system. While various aspects of the U.S. economic profile have precedents in the situations of other countries (notably government debt as a percentage of GDP), the sheer size of the US, and the integral role of the US economy in the overall global economic environment, create considerable uncertainty about the future.

The enormous inflow of capital from China is one of the root causes of the financial crisis engulfing the US as of September 2008: China has been buying huge quantities of dollar assets to keep its currency value low and its export economy humming, which has caused US interest rates and saving rates to remain artificially low. These low interest rates, in turn, created the housing bubble (when mortgages are cheap, house prices are inflated as people can afford to borrow more), whose collapse has been a cause in the recent turmoil in the financial markets worldwide. Eminent economists such as Larry Summers (former Treasury Secretary under Clinton) and Paul Krugman had been warning about this pernicious cycle since the mid-2000s.

Imports and Exports

The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world.

As the major epicenter of world trade, the United States enjoys leverage that many other nations do not. For one, since it is the world's leading consumer, it is the number one customer of companies all around the world. Many businesses compete for a share of the United States market. In addition, the United States occasionally uses its economic leverage to impose economic sanctions in different regions of the world. USA is the top export market for almost 60 trading nations worldwide.

Since it is the world's leading importer, there are many U.S. dollars in circulation all around the planet. The stable U.S. economy and fairly sound monetary policy has led to faith in the U.S. dollar as the world's most stable currency.

In order to fund the national debt (also known as public debt), the United States relies on selling U.S. treasury bonds to people both inside and outside the country, and in recent times the latter have become increasingly important. Much of the money generated for the treasury bonds came from U.S. dollars which were used to purchase imports in the United States.

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Economy Of United States".
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