Economy of the United StatesThe economy of the United States is the worlds largest national economy. Its nominalGDP was estimated to be nearly $14.7 trillion in 2010, approximately a quarter ofnominal global GDP. Its GDP at purchasing power parity was also the largest inthe world, approximately a fifth of global GDP at purchasing power parity. The U.S.economy also maintains a very high level of output per capita. In 2009, it was estimatedto have a per capita GDP (PPP) of $46,381, the 6th highest in the world. The U.S is thelargest trading nation in the world. Its three largest trading partners as of 2010 areCanada, China and Mexico.Historically, the U.S. economy has maintained a stable overall GDP growth rate, a lowunemployment rate, and high levels of research and capital investment funded by bothnational and, because of decreasing saving rates, increasingly by foreign investors. It hasbeen the worlds largest national economy since the 1870s and remains theworlds largest manufacturer, representing 19% of the worlds manufacturing output. In2009, consumer spending, coupled with government health care spending constituted70% of the American economy. About 30% of the entire worlds millionairepopulation reside in the United States (in 2009). Furthermore, 34% of the worldsbillionaires are American (in 2011). The US is also home to the worlds largeststock exchange, the New York Stock Exchange. It also boasts the worlds largest goldreserves and the worlds largest gold depository, the New York Federal Reserve Bank.The United States is also home to 139 of the worlds 500 largest companies, which isalmost twice that of any other country. A large contributor to the countrys successhas also been a very strong and stable currency. The US dollar holds about 60% of worldreserves, as compared to its top competitor, the euro, which controls about 24%.Since the 1960s, the United States economy absorbed savings from the rest of the world.The phenomenon is subject to discussion among economists. The US is by far the mostheavily invested-into country in the world, with foreign investments made in the USmeasuring almost $2.4 trillion, which is more than twice that of any other country.The US is also by far the largest investor in the world, with US investments in foreigncountries totaling over $3.3 trillion, which is almost twice that of any other country.Like other developed countries, the United States faces retiring baby boomers who havealready begun withdrawing money from Social Security; however, the Americanpopulation is young and growing when compared to Europe or Japan. The United States
public debt is in excess of $13 trillion and continues to grow at a rate of about $5.48billion each day by direct calculation between January 31, 2010 and August 31, 2010. Total public and private debt was $50.2 trillion at the end of the first quarter of 2010,or 3.5 times GDP. Domestic financial assets totaled $131 trillion and domesticfinancial liabilities totaled $106 trillion. Due in part to the amount of both public andprivate investment, the economy of the United States is regarded as a type of mixedeconomy.The American labor market has attracted immigrants from all over the world and in 2009ranked 16th in terms of net migration rate. The United States is ranked fourth, down fromfirst in 2008-2009 due to the economic crisis, in the Global Competitiveness Report.The country is one of the worlds largest and most influential financial markets, home tomajor stock and commodities exchanges like NASDAQ, NYSE, AMEX, CME, andPHLX.Early developmentThe economic history of the United States has its roots in European settlements in the16th, 17th, and 18th centuries. The American colonies went from marginally successfulcolonial economies to a small, independent farming economy, which in 1776 became theUnited States of America. In 180 years the United States grew to a huge, integrated,industrialized economy that still makes up over a quarter of the world economy[citationneeded]. The main causes were a large unified market, a supportive political-legalsystem, vast areas of highly productive farmlands, vast natural resources (especiallytimber, coal and oil), a cultural landscape that valued entrepreneurship, a commitment toinvesting in material and human capital, and at times a willingness to exploit labor. Inaddition, the U.S. was able to utilize these resources due to a unique set of institutionsdesigned to encourage utilization and extraction. As a result, the U.S.sGDP per capita converged on and eventually surpassed that of the U.K., as well as othernations that it previously trailed economically. The economy has maintained high wages,attracting immigrants by the millions from all over the world.In the 19th century, recessions frequently coincided with financial crises. The Panic of1837 was followed by a five-year depression, with the failure of banks and then-record-high unemployment levels. Because of the great changes in the economy over thecenturies, it is difficult to compare the severity of modern recessions to early recessions. Recessions after World War II appear to have been less severe than earlierrecessions, but the reasons for this are unclear. The Depression of 1893 was one of
the worst in American history, with the unemployment rate exceeding 10% for half adecade.Since the Great DepressionFor many years following the Great Depression of the 1930s, when danger of recessionappeared most serious, the government sought to strengthen the economy by spendingheavily itself or cutting taxes so that consumers would spend more, and by fostering rapidgrowth in the money supply, which also encouraged more spending. Ideas about the besttools for stabilizing the economy changed substantially between the 1930s and the 1980s.From the New Deal era that began in 1933, to the Great Society initiatives of the 1960s,national policy makers relied principally on fiscal policy to influence the economy. Theapproach, advanced by British economist John Maynard Keynes, gave elected officials aleading role in directing the economy, since spending and taxes are controlled by the U.S.President and the Congress. The economy and living standards grew strongly during thisera, but a period of high inflation, interest rates and unemployment after 1973 weakenedconfidence in fiscal policy as a tool for regulating the overall pace of economic activity. Following a series of periodic credit tightening measures designed to combatinflation, a combination of loose monetary policy and record budget deficits, bothfinanced with foreign direct investment and public debt, became routine economic policyafter 1981.The U.S. economy grew by an average of 3.8% from 1946 to 1973, while real medianhousehold income surged 55% (or 1.6% a year). The economy since 1973,however, has been characterized by both slower growth (averaging 2.7%), and nearlystagnant living standards, with household incomes increasing by 10%, or only 0.3%annually. The worst recession in recent decades, in terms of lost output, occurredduring the 2008 financial crisis, when GDP fell by 4.1% from the spring of 2008 to thespring of 2009. Other significant recessions took place in 1957–58, when GDP fell 3.7%,following the 1973 oil crisis, with a 3.1% fall from late 1973 to early 1975, and in the1981–82 recession, when GDP dropped by 2.9%. Recent, mild recessions haveincluded the 1990–91 downturn, when output fell by 1.3%, and the 2001 recession, inwhich GDP slid by 0.3%; the 2001 downturn lasted just eight months. The mostvigorous, sustained periods of growth, on the other hand, took place from early 1961 tomid 1969, with an expansion of 53% (5.1% a year), from early 1991 to late in 2000, at43% (3.8% a year), and from late 1982 to mid 1990, at 37% (4% a year).
Since 1976, the US has sustained trade deficits with other nations, and since 1982,current account deficits; the nations long-standing surplus in its trade in services wasmaintained, however, and reached US$140 billion yearly in 2008 and 2009. In recentyears, the primary economic concerns have centered on: high household debt ($11trillion, including $2.5 trillion in revolving debt), high net national debt ($9 trillion),high corporate debt ($9 trillion), high mortgage debt (over $15 trillion as of 2005 year-end), high unfunded Medicare liability ($30 trillion), high unfundedSocial Security liability ($12 trillion), high external debt (amount owedto foreign lenders), high trade deficits, a serious deterioration in the United States netinternational investment position (NIIP) (-24% of GDP), and high unemployment. In 2006, the U.S economy had its lowest saving rate since 1933. These issueshave raised concerns among economists and national politicians.The United States economy experienced a crisis in 2008 led by a derivatives market andsubprime mortgage crisis, and a declining dollar value. On December 1, 2008, theNBER declared that the United States entered a recession in December 2007, citingemployment and production figures as well as the third quarter decline in GDP. Therecession did, however, lead to a reduction in record trade deficits, which fell from $840billion annually during the 2006-08 period, to $500 billion in 2009, as well as tohigher personal savings rates, which jumped from a historic low of 1% in early 2008, tonearly 5% in late 2009.In 1980, the U.S. public debt was $909 billion - or an amount equal to 33.3% ofAmericas gross domestic product (GDP). By 1990, that number had more than tripled to$3.2 trillion - or 55.9% of GDP. In 2001 the national debt was $5.7 trillion; however,the debt-to-GDP ratio remained at 1990 levels. Debt levels rose quickly in thefollowing decade, and on January 28, 2010, the US debt ceiling was raised to $14.3trillion dollars. Based on the 2010 U.S. budget, total national debt will grow to nearly100% of GDP, versus a level of approximately 80% in early 2009. The White Houseestimates that the government’s tab for servicing the debt will exceed $700 billion a yearin 2019, up from $202 billion in 2009.The U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens andinstitutions held 44% of federal debt held by the public. China, holding $801.5 billionin treasury bonds, is the largest foreign financier of the record U.S. public debt.