Obama's challenge
The OECD paints a grim picture of the challenges facing the incoming Obama administration, which takes office on 20 January.
It says that "the US economy is going through an exceptionally difficult period" and despite major policy interventions, it is likely that "activity will get worse before it gets better".
The OECD suggests that the weakness will continue well into 2010.
It also warns that "house prices appear to have further to fall, and foreclosures are widely expected to rise."
The real economy is predicted to decline through 2010
The decline in household wealth of about 20%, due to falls in the stock and housing markets, is likely to affect spending and household consumption.
The OECD broadly endorses the need for a further stimulus plan, saying that "macroeconomic policy should stand ready to provide a renewed stimulus".
But it warns that, "given the underlying fiscal situation, the package should aim to be strictly temporary, timely and targeted" - an approach that appears to differ from the plan for big infrastructure projects that President-elect Obama has talked about.
And it adds that in the longer term, "the ageing of the population and other trends put the Federal budget on an unsustainable course" and says that increased tax revenue and controls on spending will be needed.
Financial disruption
The OECD says that "resolving the financial crisis could be a long drawn-out process", which could require substantial government spending just as in previous banking crises.
It says that the "full effects of the forceful easing of monetary policy will only be felt after financial market conditions normalise".
So it argues that big rate cuts by the US central bank, the Fed, "appear to be roughly appropriate in light of the adverse effect on real activity" of the credit squeeze, and says that "monetary policy should remain highly accommodative for quite some time to support the economy and the financial system".
However, it warns that in the long run, the regulatory system needs to be fundamentally reformed, or else the rescue of troubled financial institutions "could inadvertently serve to encourage imprudent behaviour" in the future.
"A major overhaul of regulatory and supervisory policy is necessary to remedy the deficiencies in oversight that the crisis revealed," the report says.
It also calls for reform of the supervision of mortgage brokers, underwriters and credit agencies to protect borrowers and investors.
And it says, more controversially, that in the long-term "it would be preferable to leave the securitisation of mortgages to the private sector," eliminating or reducing the role of the big government-sponsored agencies, Fannie Mae and Freddie Mac, which were effectively nationalised by the government earlier this year.
What is one problem the United States faces in this article? What do you think Obama should do to help?
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14 comments:
With the many deep problems that the US is facing today, one major problem that everyone is probably worrying most about is the financial disruption. Even though the US economy is going through an exceptionally difficult period, Obama has to come up with a plan and many ideas to make things better. Until things get settled i believe Obama should go along with his emergency rebate energy plan and give $500 to individual workers and $1000 to families. This will help pay off any bills that need to be paid and people have in debt. I also think that staying with the gas prices we have now will make people save a little more money into their pockets. Hopefully things will get better before we reach to the year of 2010.
Clariza Gutierrez
THE U.S IS GOING TROW A VERY DIFFICULT PERIOD IN ITES ECONOMY.THE U.S FACES ALOT OF FORECLOSERS. THE HOUSE PRICES ARE FALLING. THE DECLINE IN HOUSEHOLD IS ABOUT 20%, DUE TO FALLS IN THE STOCK MARKET. NOW ITS EASIER FOR PEOPLE TO BUY HOUSES, BUT SINCE THEY DONT HAVE JOBS THEY STILL CANT AFFORD IT. AND THE BANK ARE GETTING CHEAPER SOW ITS HADDER TO TAKE OUT A LOAN. WE'LL JUST HAVE TO WAIT AND SEE WHAT OBAMA GONNA DO TO HELP US.
JEFFREY CORTES
The United States are facing many problems. One of the major problems that we are faceing is the economic crisis. It is said that one of the reasons why this economic crisis is extrodinary is because it started in the United states. when this country reached the great depression in the 1930's it started in another country. Obama plans to reconstruct road. He plans to give people jobs and have america's infrastructure rebuilt to improve our roads. This will help everyone because people will be given jobs. Its like killing two birds with one stone. With Obama in office he has new plans to relieve the economy. The economy crisis is one of the major issues he has to face in his up and coming term, because if you dont have a stable economy, you cant have anything else, no money for schools, no money for the war in iraq....no money for anything...
-Desteny Bodrick-
We all know that the us is facing many difficulties at this time period. One problem i think is the worst is the financial crisis mentioned in the story. This is the worst one to me because without money what can one really do? nothing. I think Obama should take the time he has now to think about what he wants to do while he is in office so that when the time comes that he becomes our official president he already has his plan layed out and ready to go.
Raysa R.
well I agree with everyone here. The economical finances is really the big issue for Americans at this rime period. Because of financial crisis Obama has to come up with a plan that satisfies many Americans. As Clariza said gas prices should be lowered for some extra money in your pockets.
Gina Lopez!!!
I also think the biggest problem Obama has is the financial crisis like everybody else said. I think this is the biggest problem because this can take us into another depression. I think obama should go and deal with this first because if we can't deal with our money first then we can't deal with anything else
Felix Lopez
The deep problem that the U.S is facing today is about the economy.If people are having struggels now with paying their bills and so on, i dont want to imagine how is going to be in 2010.
Ofcourse Obamas first move should be a recovery plan for the economy.
↑↑Jessica Rodriguez↑↑
Right now the U.S is facing a lot of downfalls. But its not only in the U.S other countries too.The biggest issue is the recession that occuring right now. The stock market isn't doing as good as it use to and thats causing a lot of money problems. We need money to survive and with out money we just heading to another great depression. As the president-elected. Obama has to start thinking right now about a plan in which will help rebuild our economy. A plan that can work out for every one. Hopefully Obama makes the right decision and Saves us all from this crisis.
-Yaniry Ortiz
At this point U.S is facing serious problems with finances there are a lot of forclosures and people having money issues its getting worst each day because things have to be dealt with in a way that can benfit everyone so if it takes to put someone in the hole they are doing it , but as for obama he should come up with some type of plan that can help eveyone with there money problems at least give money that will paid off but i guess we have to wait and see what obama has mind himself and jus then things might be better by 2010.
well i agree with everyone here. this economic struggle is a major problem for everyone. because of the money problems alot of people are being layed off and its getting really hard to find a job today. so i think obama will have to find a way to get rid of the economic crisis and at the same time needs to find a way to do it by helping both the majority and the minority.
roberto green
One major problem that the United States is facing is the shortage of jobs. However Pres. elect Obama is planning on making thousands of jobs to help make the planet environmently friendly. I feel that this is a great idea. Is is going to provide both jobs and reduce things like CO2 emissions in the air. Thus helping the economy and our earth
-Rony
Its obvious that the US is facing many problems right now. One of the major problems is the economy. Like Felix says this can cause a major depression, which many people are afraid it should happen. Obama should really try to come up with a plan to try to help the economy. This will help people get their jobs back and hopefully everything will be back to the way it was.
Charlene Vega
I BELIEVE THAT EVERYONE KNOWS ABOUT THE PROBLEMS THE US IS FACING. THE US ECONOMY IS REALLY BAD LIKE RIGHT NOW. AND ONE MAJOR ISSUE THAT THEY'RE FACING IS FINCIAL PROBLEMS BECAUSE MANY PEOPLE ARE LOOSING THEIR JOBS AND HOMES. THERES PEOPLE WHO ARE HAVING THOSE PROBLEMS AND ARE HAVING TROUBLE PAYING BILLS AND DOING THERE TAXES. MANY BELIEVE THAT OBAMA WOULD TAKE THEM OUT OF THERE PROBLEMS BUT SOME DONT SEEM TO UNDDERSTAND THAT IT WOULD TAKE SOME TIME FOR THAT TO OCCUR. MAYBE IT WOULD BE A GOOD IDEA THAT OBAMA HAS A PLAN A AND PLAN B LIKE FDR HAD WITH THE NEW DEAL WHICH I BELIEVE THAT IT HELPED THE ECONOMY.
*J3NNIF3R SILV3R*
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