Even if US administration prioritizes its debt payments, a default, however small, has the possibility of a lowered US credit rating. That’s bad news in many ways, and good news in a few. This states to the world that the United States is not credit worthy as it has always been. It also could imply that the value of the dollar could reduce with respect to currencies of other countries.

The decidedly shaky environment that could result from these is not something to be wished for. The future issue of treasury bonds will also be carrying a larger rate of interest.

The current deadlock between the Republican Congress and Democrat President Obama has resulted due to a fundamental ideology difference.

President Obama gave the proposal of tax increases and spending cuts to get the debt reduced. However, there is also a need for a ceiling increase in the short term so that defaults could be avoided.

Recently in an edition of Corporate Responsibility magazine 100 best corporate citizens were named and different elements of corporate responsibility were given stress to mark the social responsibilities of the companies. As much as 6 categories were defined such as philanthropy, environment, human rights, climatic changes, corporate governance and employee relationship. All these aspects together made the responsible behaviors of the companies published in the list.

Out of the 100 companies presented in the list, 10 of them were found to have a good financial strength. Their financial strength was calculated based on the financial scores they have earned. To make their financial score noticeable these companies had to broadcast their periodic earnings that make the stakeholders and individual investors in the stock market get attracted towards these companies. The information that they publishes were not just quarter income but also 3 year stocks returns, dividend payments, positive current ration etc. All these information are sufficient enough to show the financial strength of these companies. This must be the common idea but I believe that this is not enough to show in-depth financial strength.

So the corporate citizens who attract most of the investors need to be seen with a fresh pair of eyes. There is a need to dig deeper in the details of the company. There are companies such as Nike which will be overlooked by the investors by looking at the list but it is doing well in the emerging markets. Hence, investing in it will offer a good return in the future.

A snappy list of corporate citizen and their finical foot holding cannot help an investor to decide upon his investment. 

Social spending means the money earmarked for the various welfare schemes by the government to eradicate illiteracy, unemployment and other social evils. Spending was increased for the benefit of education, rural employment, food programs, and agriculture. The poor and rural masses form the large percentage of the country’s population, and are also the core support group for the Congress Party in India.

Social Spending will constitute close to thirty six per cent of the total budget. Pranab Mukherjee also promised to set up a number of measures that will assist in reducing food inflation. Food inflation is causing enormous discontent in India since the last few months. The 11.5 per cent rate of food inflation means hardship for the already impoverished masses.

The long awaited food security bill is another welcome measure. The bill guarantees food for low income families at subsidized rates. This measure, if it is carried out, will be of enormous help to the rural poor.

Mr. Mukherjee also stated that while inflation remains a gnawing concern, he expects the policies implemented by the Reserve Bank of India (RBI) to be of considerable help in moderating inflation. He also expects inflation to be lower on average in the coming year.

The money devoted for social spending will come from the rising tax revenues. India’s fast powered economy will provide an almost twenty five per cent of increased tax revenues. In addition, new taxes have been introduced in air travel and hotel accommodation.

Rapid economic growth is expected in the next fiscal year; “double digit growth” in Mukherjee’s words. The economy expanded by 8.6 per cent in the year gone by, while a nine per cent expansion is forecasted for next year.

A number of state firms are being privatized in part, which is expected swell the assets of the government by Rs. 400 billion. This will mean that the public deficit of 5.1 per cent of the Gross Domestic Product will be reduced by 4.6 per cent in the coming year.

In addition there have been measures to ease the red tape, streamline customs tariffs and taxation.

The military spending has been hiked yet again this year, an 11.6 per cent rise to the total of Rs 1.65 trillion.

The minister also announced steps designed to attract increased investment from foreign sources for infrastructural development. The limit that was set for foreign investment in corporate infrastructure bonds has been increased five fold. India has many power plants, roads, ports and other infrastructure in dire need of development.

On the back of the budget, Shares in India saw a notable jump of 2.23 per cent, which amounts to 412.04 points. The reduction of the fiscal deficit was seen as a step in the right direction.

The suggestion of cutting grants to cities is part of the ongoing attempt to reduce the federal deficit of the United States which has been projected to go above $ 1.6 Trillion in 2011. The House of Representatives passed a funding bill, the substance of which amounted to a reduction of grants to cities by $ 1.5 billion. This amount makes up 62.5 per cent of what federal aid cities and counties receive for development and maintenance of infrastructure, building houses and other developmental activities.

Mayors all over the United States raised their voices against cutting federal grants to cities. The US Conference of Mayors had a meeting with Senate Members to state their opposition to the slashes in programs such as the Community Development Block and others. The reductions were considered too drastic and unwarranted, and Mayors protested against them, saying they were unacceptable.

Except for Wyoming, Vermont and Montana, all states in the United States have cities as the major source of their economic output. Even in states such as Idaho, that are mainly agricultural economies the cities are responsible for the major GDP output.

The study has also discovered that eighty six per cent of the population in the United States is concentrated in three hundred and sixty six cities. These cities are also responsible for eighty five per cent of the exports. Ninety three per cent of people employed in science and engineering sectors have their home in the cities.

However, to look at the stimulus and say it will remain this way is a wee bit foolish. There is a need for financial austerity and that is not being enacted. Will fiscal austerity be a possibility in the future given the burden of US public debt? More to the point, is there a credible road map that has been laid out for fiscal austerity? If there is one, there seems to be no foreseeable way of the government being able to achieve it and stick with it. There are some major challenges that the US has to face up to, and the reason why it will be hard to make any headway on this matter is that Republicans and Democrats make for very strange bedfellows. The ideological divide between the two parties is so large as to make the grand canyon seem…un-grand. And so Congress could be grid-locked into inaction.

Politicians from both sides of the divide just do not see eye to eye on how to tackle this tricky issue. They both do understand that fiscal consolidation is a must, but they just can’t arrive at a consensus. That seems an impossibility. For instance, Republicans are strongly against any austerity measures being implemented when it comes to defense spending and they are loath to raising income taxes, but on the other hand many Democrats see welfare programs as vital and want no cuts on that front. There is a political impasse on hand here, and the lack of a political will to make unpopular decisions such as making tax rate hikes. A stalemate stinks, but it is what we are facing.

It seems to be that Washington will not come up with any solutions any time soon, not through a lack of will but a lack of agreement on what has to be done. Anything one side says will be stonewalled by the other and reaching a middle ground will be difficult. In the meantime, austerity measures that are much needed will continue to go unnoticed and unimplemented and US public debt will continue to spiral. It is a case of as you were.

In a sense, the American economy is a bit like a zombie right now; it’s the walking dead, ambling along in a mindless haze. In a normal, well-balanced economy, consumption and GDP is locked in a sweet, sweet tango while savings is the equal of financial investment. As well, inventories grow in step with consumption and the balance of payments remains at a figure not too alarming. But that is as things would be normally, and things are far from normal right now. Consider the figures as released by the Bureau of Economic Analysis’ advance GDP report. Inventory swelled by $116 billion while GDP only grew by $66 billion in comparison. If that sounds like a load of Latin for you, here it is in simple English; the country is producing stuff at a reasonable rate, but it’s piling up on our shores. Sales only grew by 0.6% and there was a larger growth in imports, compounding the problem.

Consumption grew by a moderate amount but fixed investments grew along at a snails pace, held back by a drop across the board in housing investments ever since the government sanctioned home-buyer subsidies lapsed back in April. Meanwhile, government spending gre along at a fair clip, making the budget deficit scenario we have to face up to still worse since the savings rate is in regression. The American economy has suffered from an economic imbalance that has stemmed from wide-ranging monetary and fiscal policies that are not the need of the hour. Real interest rates are in the red and the government is actually spending more than it earns, like a millionaire’s trophy wife. Savings are not encourages and imports continue to pile up as commodity prices are on the rise. To make a terrible situation still worse, a fresh round of quantitative easing is expected by the Federal Reserve, although the extent of its plan is anybody’s guess.

Some will argue, even correctly, that growth is a lot better than simply contracting. But the imbalances that exist in the American economy are too severe to ignore. There is an imbalance between savings, imports and government spending that needs to be addressed post haste. The cherry on the top is a growing inventory that should be a cause of worry. That is indicative of economic malaise and it is fair to say that those leave their savings in the hands of the American economy at this point in time will find that they have handed their savings to a zombie that is mindless and unmindful of a feeble recovery.

But just how do you justify an expense like that for an economy that is simply being crushed underfoot by a crippling level of debt and unemployment? With budget deficits and a weak economy overshadowing all before it, there is simply no political will to pump billions (forget trillions) of dollars into spending programs aimed at improving infrastructure. Never mind the fact that plans such as these would create several thousands of jobs overnight, it is just extremely difficult for cash-strapped governments to sanction the allocation of such funds. A prime example of that is the recently scrapped plan to construct a rail tunnel between New Jersey and New York. That project would have created 6,000 jobs instantaneously and some 40,000 jobs until just after its anticipated date of completion in 2018. But like many other plans, it remains just that; a plan relegated to the scrapyard of dreams never to see the day of light.

A large reason that the New Jersey governor scrapped that plan was the cost. From an initial projection of $5 billion 5 years ago, the cost has mushroomed to a figure in excess of $14 billion, an unjustifiably large figure in times of frugal economic sensibility. And it’s not just a worry about the initial costs of projects just like these; the public at large and the political masses look at such efforts very gingerly in the light of the debacle that was the “Bridge to Nowhere” in Alaska and the infamous “Big Dig” in Boston. Events such as these put the spending of taxpayers money on any and all infrastructure efforts under very tight scrutiny. Extreme situations such as these only serve to distort public perception of the matter.

So, to sum up the mood then; there is a pressing need to improve roads, railways and all infrastructure available to the American people. But no one is in the mood to pay for it in this economic climate. Cases such as the two mentioned before means that necessary and important infrastructure projects will arguably never see the light of day. Given the political and economic uncertainties surrounding all of this, it is not certain that any proposed plan will ever be fully realized. Spending on infrastructure will help create hundreds of thousands of jobs in the long run, but the public and political will is intent on not spending money while they bemoan the lack of jobs. This is a Hobson’s choice no one wants to make.

And so said, the student will be quiet in the realization that he (or she) has offered an answer that is both insightful and correct. The trade imbalance that China has caused means that it has single-handedly hamstrung economic recovery and taken away jobs from developed countries. But there are two perspectives to every argument just as it takes two to tango; the currency wars as we know it today are as much to do with the Western world trying to hit back as it has to do with China attempting to protect its own interests. Every country is trying to best leverage its own exports in order to get the most out of what is a very barren economic scenario, and one of the best ways to bolster the export economy is to play around with currency values.

And as far as this argument goes, the United States really did fire the first salvo by stating in a very public manner that they wanted to give their exports a boost in order to resuscitate a flagging economy and cut back on unemployment levels that are starting to chart alarmingly high levels. And now, piggybacking on this American sentiment, there are several more countries that are making an effort to do exactly this all across the globe, meaning that China’s efforts by itself were not enough to precipitate a global currency war. If one were to look at it purely from the point of view of monetary policy, the United States is to surely shoulder some of the blame for this game of brinkmanship that we now see unfolding before us.

Indeed, an economist from a think tank linked to the Chinese government launched an attack on the loose U.S monetary policy and stated that it was America that fired the first shot in this currency wars that will see blood shed, hypothetically speaking of course. And it is hard to ignore what is a compelling argument; the U.S was the first to cut interest rates aggressively and it looks towards quantitative easing as an easy option, recently setting things up for a second round of it soon. Nouriel Roubini, the noted economist, does not buy this argument though and pinpoints the Chinese diversification of its foreign exchange holdings as the seminal moment when thing started to go downhill. This drove the value of both currencies upwards and hurt their export competitiveness. And when Japan broke policy to intervene in matters, all hell broke loose.

No matter who you listen to and believe, this much is true; there is more than one perspective on this (indeed, the IMF has a very different take on this) and at its core, it has a lot to do with everyone looking to protect their own interests. And all we can do now is hold on tight and hope the economic roller-coaster that we are all on doesn’t become scarier than it already has.

Speaking at an event, Greenspan was at pains to point out the increase in debt that is being held by the American public. It is, in fact, increasing at such a rapid pace that it is swiftly eroding away any capacity we have when it comes to borrowing. The cushion that we have when it comes to borrowing and servicing our debt is very small, and something has to be done to remedy the situation before it gets a lot worse. Greenspan opined that it is quite possible that American companies are withholding any investments at this time because of the soaring fiscal deficit and this contributes further towards creating an air of uncertainty about tax policies as they may be in the future. Inadequate investment by business in equipment and fixed assets has put the kibosh on U.S. economic recovery that is dependent on industry performing as well as it can.

There is a very real need at this moment to tighten the belt and implement austerity measures. Several government entitlement programs will have to be done away with or cut back and offered reducing the budget as an alternative to raising taxes in an effort to clamp down on the U.S. budget deficit. That said, Greenspan is supportive of the idea of allowing the Bush era tax cuts to lapse at the end of this year. Back in July, the White House Office of Management and Budget predicted that the deficit for fiscal year 2010, which ended on Sept. 30, would be $1.47 trillion. That’s a whole lot of zeros to mull over.

It is imperative that the U.S. fiscal policy be put on a path to recovery over the next decade and the question that remains is whether any action will be taken in a proactive or a reactive manner. If a financial crisis were to loom large over us, will we react then and only then, even if rapidly? Federal debt is spiraling out of control and we need to rein it in. There has even been a slowdown in growth in two quarters this year, and this has prompted policy makers to say that inflation is below the level they have mandated to achieve full employment and stable prices.

• The pace of recovery, and how it has slowed down of late.
• Household spending increasing, but being hamstrung by high unemployment levels and unavailability of credit.
• Inflation not being consistent with its price stability and employment mandates.
• How there will likely be no shift in policy from the September gathering.

It’s annoying in a sense, since the Fed does acknowledge that there is an issue, but this policy is tantamount to just sweeping the issue under the carpet. The Federal Reserve has its stated aims and ambitions for the economy and even as these aims might well not be the met, the Fed has decided to not do anything about it yet. This is made all the more ironic by the fact that the Fed has stated it will do all it can to bring inflation back to levels that are more consistent with levels it sees fit. So why then is the Fed opting to sit back and not do anything right now?

September shows the economy to be in slightly better shape than in August, but it’s still not that good. And, which is worse, inflation is expected to fall further still this month. The next scheduled meeting for the Federal Open Market Committee is in November and it seems as if we will have to wait that long for something of serious consequence to happen and for the Federal Reserve to take another stab at fixing an ailing economy. On the face of it, it does look as if the Fed will be moving towards easing the market at some point, but why delay something that is desperately needed by our nation?

At this point in time, it does seem rather pointless to debate and conjecture about what exactly is going through the minds of the Federal Open Market Committee and all we can do as the watching public is sit back and wonder why the Fed hasn’t yet taken action. But developments on that front are yet to come, and the bottom line of it all is that the Federal Reserve has to do more in order to prop up our economy and boost inflation, and even the Fed seems to acknowledge this one simple fact. It’s just a waiting game that will have to be played, unfortunately.