Friday, March 12, 2010

Slowly, Americans are regaining their lost wealth

http://www.forbes.com/feeds/ap/2010/03/11/personal-finance-us-net-worth_7429532.html

Key Terms:
Mortgage - a conveyance of an interest in property as security for the repayment of money borrowed.
Net worth – the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards.
Business Economics - Business Economics is concerned with economic issue and problems related to business organization, management and strategy. Issues and problems such as the following:an explanation of why firms emerge and exist and expand: the role of entrepreneurs and entrepreneurship; significance of organizational structure; the relationship of firms with employees, the employees, the providers of capital, the customers, the government; the interactions between firms and the business environment
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Description: The economic activity being described here in about how American consumers are slowly regaining their faith in the economy, becoming increasingly more comfortable with spending, and regaining their wealth, in little increments at a time. However, although people are regaining their wealth which is reflected in the amount of consumer spending, the economy is not expected to return to its pre-recession peak until the year 2012 unless other factors push that estimated year back. In the previous two quarters, the gain in economic portfolios and household net work was mush less than it currently is, rising 1.3% in the fourth quarter. In 2009’s second quarter, net worth experienced another increase by 4.5%. Despite these gains, the net worth would still have to rise 21% to return to the net worth peak, before the recession hit, of $65.9 trillion. Stocks rose by 4% and investors in the stock market gained during the fourth quarter, while others, such as holders of 401K retirement accounts seen their balanced retrogress by 2-3% from the ends of previous years.

Analysis: This economic activity is occurring particularly because people are “spending their health to regain their wealth.” Instead of spending their accrued wealth on insuring them to have good health, it is now reversed. People have become so distraught and desperate in the times of this current recessions peak, that they are spending ample amounts of time trying to work to continue to provide for their families and themselves, so that they can maintain their livelihoods and survival. The cost of doing this is contracting or increasing more of their longstanding or new health concerns because of the dearth of sleep and rest they are getting and the accumulating stress they are putting on their bodies and minds. However, the benefits of doing so have generated more money for their family income and, therefore, allowed the consumers to have more money to spend.

Explanation: In essence, this economic activity is occurring because of the personal sacrifices and tole the recession has taken on them personally as well as their families. People are realizing the need to survive and the measure of obtaining substantial survival requires more than relaxing, which prompts them to do something to regain their lost wealth that they previously had before the recession hit. This article laments the loss of peoples’ personal savings and huge decline in income. However, more people are now investing in the stock market to gain their wealth, others are sacrificing their wants to ensure their needs, and others are desperately trying to keep and maintain a decent job by working long hours as much as they can just to sustain their living.

Prediction: I see great potential for a full and healthy recovery of the U.S. economy. At this rate, although there is still an immense amount of work to be done, I do believe consumers will continue to generate their wealth, redeveloping their savings and contributing to the economic growth by spending more since they are now granted more to spend. I hold these beliefs because the net worth percentage rates have steadily increased significantly over the last three consecutive quarters, the new stimulus that the President is working on implementing, and the results that the Federal Reserve have already disclosed about the gradual growth the economy is now undergoing.

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