The U.S. and the global economy
The current economic woes have affected economies around the world. When U.S.
stocks tumbled following the collapse of investment giant Lehman Brothers and troubles
at insurance monolith AIG in 2008, the devastation on Wall Street reverberated around
the globe. Within hours foreign markets began a downward spiral, and it’s been a roller
coaster ride ever since.
There are a number of reasons why Wall Street has a domino effect beyond our
borders. One contributing factor is that over the years, as global trading and foreign
investments have increased, world economies have grown increasingly interdependent.
U.S. companies are heavily invested in foreign markets, and vice versa, making us all
vulnerable to international events that affect stock values, which can include everything
from political upheavals to natural disasters, poor investment decisions, fraud and more.
The United States has also become less financially insular as more U.S. companies
have expanded their overseas operations. We’ve all read the media reports about
manufacturing, customer service and technical support jobs flowing over seas, further
Due to advances in technology and financial infrastructures, businesses are able to
move more quickly. Reliance on electronic financial transactions, which enable lightning-
fast debits and credits, have removed buffers that once helped delay and sometimes
temper the reaction of markets when the world traded at a snail’s pace. Improvement in
the transportation of goods has also helped accelerate the interdependence of global
The U.S. government is influential as well. With influence comes control, and the
U.S. has prided itself on being an economic superpower for the last century. According to
the Federal Reserve, the U.S. dollar is the most preferred transaction currency around the
globe, accounting for half of the world’s foreign exchange reserves, and the U.S.
Treasury would certainly like to keep it that way. The Federal Reserve regularly conducts
financial business with foreign countries to intentionally boost the value of the dollar.
If the fragility of the U.S. economy gives you jitters, your concerns are not
unfounded. Our business community needs to work harder than ever to ensure innovation
and free enterprise prevail, create jobs and bolster demand for U.S. goods and services.
For the U.S. to continue to prosper, we need to excel in every way, including
productivity, foreign relations, fiscal policies, health care, education and more.
Despite recent events, history shows the cyclical nature of the stock market and
points to a strong likelihood we will weather this financial storm and come out on the
other side stronger. As fear subsides, confidence should return and help American
businesses get back on track toward rebuilding the U.S. economy and thereby improving
the global economy.
The strength of the U.S. economy depends on the willingness of consumers to
spend and invest in American businesses. Talk to your financial advisor to discuss your
financial goals and your risk tolerance before you invest. You can diversify your portfolio
by choosing from an array of U.S. and foreign investments that match your risk tolerance
and time horizon that are balanced to help you avoid excessive exposure to one class of
Daniel J. Lensing, CPRC
Business Financial Advisor
Ameriprise Finanical Services, inc.
14755 No. Outer 40, Suite 500
Chesterfield, MO 63017
This column is for informational purposes only. The information may not be suitable for
every situation and should not be relied on without the advice of your tax, legal and/or
financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or