Introduction to Business Essay Example | Topics and Well Written Essays - 500 words - 2

Introduction to Business - Essay Example Firstly it is the case that there is a strong public debt burden in the United States which can be attributed to the inability of the government to reign in its spending. Building on this point it is the case that according to the U.S. Treasury department approximately 23% and 21% of U.S. treasury securities are held by the central banks of China and Japan respectively. The solution to this problem would be for American voters to press their politicians to practice fiscal discipline. A second major problem facing the American economy which has negatively affects the economy recently is the American trade deficit which according to the CIA World Factbook (2010) reached a record $840 billion in 2008, in simple terms more is coming in than is going out. While many people would take a mercantilist viewpoint and argue that people should â€Å"Buy American† a simple solution would be for American manufacturers to simply look at what foreign products are filling this consumer gap domestically and look to find new ways to better serve their domestic customers. As a last major problem affecting the Ameican economy would be the sub prime mortgage market and credit default swaps that have helped fuel the economic downturn from 2007-2010. In terms of how credit default swaps work, they act as a type of insurance policy that backs investments and the way that they have arguable exacerbated the financial crisis is that the instruments help encourage investment in riskier investments. As far as sub prime mortgages are concerned it is the case that house prices growing every year it made sense for lenders to support buyers whose credit history was questionable (Owing to the fact that the buyers would see favorable returns in their housing prices). However when the bubble burst and the lenders sought their compensation from buyers it was the case that many people defaulted. The obvious solution for this circumstance would be for stricter regulation on