Crisis in the United States of America

 

‘Crisis’, a word which definition in the Oxford Dictionaries is ‘a time when a difficult or important decision that must be made’, also ‘a time of intense difficulty or danger’. Crisis are deemed to be negative changes in the security, economic, political, societal, or environmental affairs. In every type of these affairs, there are different types of crisis, for an example in the environmental affairs, we can speak about natural disasters or endangered species. United States of America (USA) is a nation like others, every nation can have their crisis and different difficulties.

By Razvan Stanciu

Inequality is increasing in the USA as a result of financial capitalism / Photography. Razvan Stanciu

“The Bubble”

High approval rates led to a massive number of homebuyers, which made the housing prices grow very high. Homeowners started to borrow against their homes as they thought that they were going to be lucky. The “bubble” burst by the high number of Single-Family Residential Mortgages Delinquency Rate, it all started in August 2006 and reached the peak at the first quarter in 2010. This high rate led to a fast devaluation of the financial instruments (mortgage-backed securities, Credit Default Swaps). The market (buyers) for these securities banished and banks who were heavily invested in these assets began to experience a liquidity crisis. An example of bankruptcy is Lehman Brothers on September 15, 2008. Others banks experienced it like Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford and Bingley, Fortis, Hypo and Alliance and Leicester. a US federal announced the following day with a rescue of $85B to AIG. Everything paid by the government, everything made much more difficult to borrow money, the resulting decrease in buyers caused housing prices to go very low.

Systemic Crisis

Another analysis, different from the mainstream explanation, is that the financial crisis is a symptom of another crisis much deeper, which is a systemic crisis of capitalism itself. The theory of the economist Ravi Batra is that the growing inequality of financial capitalism produces a continuous number of bubbles that burst. And this results in depression and major political changes. He also says that the “demand gap” in relation with the growing wages and productivity explains the important dynamics to stock market developments. Robert Reich attributes the current economic situation to the stagnation of the wages in the United States, especially to those who work pèr hours which they comprise the 80% of the workforce.This situation forced people to borrow to reach the cost of living.

 

The crisis is particularly acute for low-skilled workers / Photography. Razvan Stanciu

Military Spending

There is a huge spending on the military force in the United States.

In fiscal year 2015, the military spending is projected to the account a 54% of all federal spending. We are talking about a total of $598.5 billion, when we are speaking about military defense it includes: all regular activities of the Department of Defense; war spending: nuclear weapons spending; international military assistance, and other Pentagon-related spending. Leaving behind other important spending like now: Food and Agriculture ($13.1 billion - 1%), Transportation ($26.3 billion - 2%), Social Security: Unemployment and Labor ($29.1 billion - 3%), Science ($29.7 billion - 3%), Energy and Environment ($39.1 billion - 3%), International Affairs ($40.9 billion - 4%), Housing and Community ($63.2 billion - 6%), Veteran’s Benefits ($65.3 billion - 6%), Medicare and Health ($66 billion - 6%), Government ($70 billion - 6%). Making a total of $1.11 trillion. Meanwhile the government receives differents news of manifestations in differents places, causes like unemployment, hunger or education. One of the causes of this huge growth of military spending is the following case of September 11/2001, the military spending has increased a 50 percent adjusted for inflation.   

It also includes about $16 billion in military expenses for the Department of Homeland Security, which was established in 2002. It also gets funds that they are not designated as military spending, including funds for enforcing the law.

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