The United States Economy Will Take Seven Years to Recover

Although the United States is struggling with its liquidity crisis, it did not resort to quantitative easing to alleviate its situation because it has been learned from Japan and England that quantitative easing does not benefit the economy in the short term [Editor’s note: Quantitative easing is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system, generally through buying of the central government’s own bonds to stabilize or raise their prices and thereby lower long-term interest rates].

Economists calculated that even though the present implementation of quantitative easing managed to increase the wealth effect of stocks and assets, this also represented a 0.25 percent in the country’s GDP. Besides, this measure will not have a significant effect on the current falling property prices, nor will it help banks and large enterprises that manage large sums of funds or smaller banks that provide loans to smaller businesses.

The United States’ economy is facing a debt crisis and, because of that, Americans do not dare to consume or buy properties. There is only hope for recovery of the economy if the United States absolves most of its debt.

When will that happen? In seven years! The United States is a Christian nation that absolves its debts every seven years. This is stipulated in its legislation, though it has indirectly encouraged violations. When that time finally arrives, Americans can resume their consumption and purchase properties again. Jobs will also be created — most of the unemployed in the United States are represented by those who belong to the real estate and financial sectors, as well as youths who find recruitment difficult (further evidence of structural unemployment).

No one will absolve the American government of its debt. In fact, the interest on the national debt that the United States has accumulated constituted 30 percent of federal expenses in the recent financial crisis. This is because Americans and businesses are insured by the government. As such, the United States can only print money and implement quantitative easing, so that the American dollar will continue to be devalued. If the American currency devalues by 50 percent in 10 years, then its debt will be halved. The amount of American dollar reserves that China has will also be halved!

With regard to the current quantitative easing approach, the currency of more developed nations has appreciated the least. Out of all the countries that have experienced currency appreciation, China has appreciated the least, but has increased its competitiveness significantly. Since Japan, Taiwan and other Southeast Asian economies maintain a stronger control over their currencies; their currencies have also appreciated minimally. As a result of the current quantitative easing strategy, the price of bulk products has risen, causing demand-pull inflation. Hence, China can only gradually increase their currency and interest rates to curb this inflation.

China wants to establish a global market, and enterprises across the world all said that they would want to produce in China. In these seven years, the United States can only develop its external market and hope that China will accept more of its exports. The United States is more receptive of Chinese students immigrating to the United States or going there to pursue their studies. In fact, the number of Chinese voters has increased by 40 percent in the past few years. These Chinese residents purchase American houses, pay international tuition fees and still maintain economic relations with China, even after immigration, so as to help the exports of small and medium enterprises.