TWO ECONOMIESDIFFERENT REMEDIES

Ha Phuoc VuM997Z244

Nguyen Tran Thao BienM997Z213

Bui Duy DucM997Z202

Patlada Sae-Ching (Nan)M997Z240

Nuntanut Sae-Ching (Vee)M997Z236

Thai Luong ThuM997Z221

Group 6 Members

Economic - China

• The world’s second-largest economy behind the United States.

• Economy prior to reforms in 1978 Economic output controlled by the state Chinese government goal was to make China’s economy relatively self-sufficient Private enterprises and foreign invested firms almost nonexistent.

Economic - China

• Began to reforms its economy in 1978 Establish special economic zones along

the coast to attract foreign investment, boosting exports, and importing high technology products to China.

Allow to operate and compete on free market principles rather than under the direction and guidance of state planning

One of the world’s fastest growing economies with average growth rates of 10%.

China Economy – Problems

• The government started with private capitalism. But in recent years, it has changed to state-owned enterprises (SOEs). In global recession, ($588 billion) stimulus package that China pumped out for big projects went to state-owned companies while the private sector looks to be

getting squeezed out

China Economy – Problems

In 2008 an estimated 300,000 small and medium-sized firms collapsed; from

January to March, exports fell by 19.7%The state sector can simply produce without regard to market demand but the private sector cannot.

• Currently, the power of government is expanding

China’s economic strategy 

• Top-down strategy that favors state-owned interprices.

Result of Top-down strategy 

– State-owned gradually wither away in the face of private-sector competition.

– China surpassed Japan to become the world’s second largest economy this year.

– State-owned companies being first in line for financing by state banks; for state bailouts when they get in trouble.

– Become political power centers in their own right, able to fend off the control of Beijing.

AMERICAN ECONOMICAMERICAN ECONOMIC

“When America sneeze, the whole catch a cold”.

As a 4 wheel full of vitality resilience through dangerous areas filled terrain.

AMERICAN ECONOMICAMERICAN ECONOMICThe U.S. economy has a peaceful escape in

the first years of the 21st century, despite facing many obstacles, the collapse of the stock market, terrorist attacks, wars in Irag and Afghanistan and the scandal from financial groups, the devastating destruction of widespread flooding, the price high energy and the disastrous slide of real estate.

AMERICAN ECONOMICAMERICAN ECONOMICThe economy of the United States is the

world's largest national economy. Its nominal GDP was estimated to be $14.3 trillion in 2009, approximately a quarter of nominal global GDP. Its GDP at purchasing power parity was also the largest in the world, approximately a fifth of global GDP at purchasing power parity.

AMERICAN ECONOMICAMERICAN ECONOMICThe U.S. economy also maintains a very

high level of output per capita. In 2009, it was estimated to have a per capita GDP (PPP) of $46,381, the 6th highest in the world.

In 2009, consumer spending, coupled with government health care spending constituted 70% of the American economy. About 30% of the entire world's millionaire population reside in the United States (in 2009).

AMERICAN ECONOMICAMERICAN ECONOMICFurthermore, 40% of the world's

billionaires are American. The US is also home to the world's largest stock exchange, the New York Stock Exchange. It also boasts the world's largest gold reserves and the world's largest gold depository, the New York Federal Reserve Bank.

AMERICAN ECONOMICAMERICAN ECONOMICThe United States is also home to 139 of

the world's 500 largest companies, which is almost twice that of any other country. A large contributor to the country's success has also been a very strong and stable currency. The US dollar holds about 60% of world reserves, as compared to its top competitor, the euro, which controls about 24%.

U.S. Economy - ProblemsU.S. Economy - ProblemsU.S. Economy - ProblemsU.S. Economy - Problems

The collapse of American housing prices, coupled The collapse of American housing prices, coupled with real estate declines (like Ireland and Spain) with real estate declines (like Ireland and Spain)

Businesses were looking for all measures to Businesses were looking for all measures to hopefully rebuild a new revivalhopefully rebuild a new revival

U.S. Economy - Problems

The drop in home sales, dismal job market in August, the rate of economic growth has slowed.

the government policy maker can not make meaningful interventions in the economy

U.S. Economy - Problems The dramatic expansion of the debt (which

began in the Bush administration) via large tax cuts and two wars the fear that the creditors will be able to request an increase in interest rates.

Interest rate increases could be the cause of inflation, rising goods prices Traders lost faith in the dollar.

U.S. Economy - Problems Instability of the market has made investors

lose faith in the real estate market and stocks

they move to invest in government bonds with interest rates low, but stable.

The Fed has been seeking a graceful exit from its interventions, but the recent economic news has delayed those plans.

U.S. Economy - Problems• The deflation is a fear of the American

Economy. It is both symptom and cause of an economic recession or stagnation.

• The Federal Reserve has used a number of tools to regulate, thus affecting the rates on car loans, mortgages and other forms of credit.

U.S. Economy - Problems Most economists praised the Fed in the

confrontation with economic depression. But the Fed to make more national debt, provoking talk that it was testing global faith in the dollar.

CONCLUSION• In America, No remedy in sight.

o The collapse of American housing prices, coupled with real estate declines in several countries severed

o that artery of finance. The American economy is once again tilting toward danger. Despite an aggressive

o regimen of treatments from the conventional to the exotic.

CONCLUSION• Yet even as vital signs weaken — plunging home

sales, a bleak job market and, on Friday, confirmation that the quarterly rate of economic growth had slowed, to 1.6 percent — a sense has taken hold that government policy makers cannot deliver meaningful intervention. That is because nearly any proposed curative could risk adding to the national debt — a political nonstarter. The situation has left American fortunes pinned to an uncertain remedy: “hoping that things somehow get better”.

CONCLUSION• Deflation assailed the United States during

the great depression. While falling prices can be good news for people in need of cars, housing and other wares, a sustained, broad drop discourages businesses from investing and hiring. Less work and lower wages translates into less spending power, which reinforces a predilection against hiring and investing — a downward spiral.

CONCLUSION

• The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.

CONCLUSION• Now, trouble began when speculative real

estate frenzy ended, leaving banks awash in debts they preferred not to recognize and hoping that bad loans would turn good (or at least be forgotten). The crisis was deepened by indecisive policy, as the ruling party fruitlessly explored ways around a painful reckoning — boosting exports, tinkering with accounting standards.

CONCLUSION• Most economists believe that austerity is the

wrong medicine for the American economy. The world’s largest economy, stalled in a great uncertainty.

• Recent years suggest that deflation may be a gathering force, which would most likely slow the economy and hiring. Falling prices and wages tend to depress business investment.

Q & A