Guide to Major Economies
For each country that we will be touring, we’ll start with a quick peek at the important facts and figures, followed by an overview of its economy.
Once that’s out of the way, we’ll visit the country’s central bank to find out some of their secrets.
In this section, we will explore the powerful monetary policy tools central banks employ to control the country’s economy.
Hopefully, we’ll stumble into the room where they keep their printing plates and we can sneak out the back door and sell it on the black market. After that, we’ll discuss the important characteristics that differentiate that country’s local currency from all the rest, as well as hard-hitting economic indicators for that country.
The United States of America is comprised of 50 states and a federal district.
The majority of the country can be found in North America, but the United States also has some territories in the Pacific.
Since its independence from the U.K. on the Fourth of July back in 1776, the U.S. has become an economic superpower not just in the West but also in the whole world.
Being the world’s largest economy, the U.S. plays a serious role in the global market.
Just about any economic development in the U.S., such as a rise or fall in consumer spending or an affair by its President, that is made public, could create quite a hefty impact on economies all over the world!
The U.S. is widely considered to be the richest country in the world, producing about $16.24 trillion in output in 2012. It ranked 13th in 2012 in terms of per capita income – that’s just the country’s total income divided by its population – of about $51,700 in a year.
The U.S.’s main industries are aircraft, automobiles, transistors, telecom equipment, and other industrial materials. Although it might seem that the US economy is heavily oriented towards the manufacturing of physical goods, 70% of its output actually comes from the services sector!
Speaking of trade, one key element of the U.S. economy is that the country is notorious for running huge trade deficits (i.e., the total value of goods flowing into the country is more than the total value of those going out).
The U.S. is also home to the New York Stock Exchange, which is the largest stock exchange in the world. It is also home to the world’s largest bond market, with a market capitalization of over $31 trillion and over $822 billion in bonds traded daily on average.
Being the top economy in the world in today’s globalized market, any domestic event affecting the U.S. also has the potential to affect markets around the world… Yes, even the foreign exchange market!
The Federal Reserve Board, more commonly called the Fed, is the U.S.’s main governing body when it comes to setting and implementing monetary policy.
Monetary policy is just the way the Fed controls the availability and supply of money in the economy and what makes the Fed special from other central banks is that its objectives are based on longer-term effects of its monetary policy.
The Fed has two main objectives. The first one is keeping the prices of consumer goods and services stable and the second one is making sure that there is sustainable economic growth.
In other words, the Fed just wants to make sure that your Benjies don’t lose value and your momma and poppa have jobs!
Within the Fed is the Federal Open Market Committee (FOMC). Currently led by Fed Governor, Jerome Powell, the FOMC is tasked to make sound and rational decisions on monetary policy.
The FOMC has two main weapons to use in its battle against inflation and to achieve its long-term objectives: open market operations and the Fed’s Funds Rate.
Over the past few decades, the Fed and the U.S. Treasury have kept a “strong dollar” policy.
They believe that monetary and fiscal policy should be geared towards a strong exchange rate of the USD, as it would benefit the U.S. and the rest of the world.