How to Fix an Economy? - Paper Example

Introduction

The economy of the United States has not been performing well recently, but President Trump is in a position to fix the issues that are triggering the problem. Various strategies that the Trump can undertake may include ensuring that the American economy is enjoying an absolute advantage, taming inflation, make the market competitive, support human capital develop and immigration, encourage business diversification, and introduce laws governing the capital requirements.

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The United States can manage to enjoy the absolute advantage through manufacturing goods at low costs than the rivals for this will ensure that the commodities will be selling at low prices in the world market. This will increase the market base for the American goods leading to the appreciation of the American currency and economy in general (Donaldson & Hornbeck 805). The citizens will find it hard to buy goods from outside the country since they will be retailing at high prices in comparison to the ones manufactured locally. The balance of trade will be achieved as the nation will manage to raise its levels of exports and reduce the imports.

The president can ensure that the banks are following the capital requirement regulations that determine the least amount of funds that they can hold. The laws are set with the goal of ensuring that the banks are not in an investment position that can raise their risk of default (Millet, Hoffman & Morin 20). It also works towards making sure that the entities hold adequate funds for sustaining the operating losses when they are still facilitating the withdrawal processes (Kandil 110). The capital requirements usually constrain the loans and credits that are advanced to businesses, and this means that cutting them will assist in the growth of the economy, increase on the jobs levels and boost the lending process that will ensure that the economy has adequate funds to finance various projects. When the banks are relying on a healthy business model, a high level of capital requirements leads in the achievement of a stable financial system since these institutions will manage to absorb losses when they have more equity (Jimenez, Ongena, Peydro & Saurina 2130). It will enable the financial sector to be more stable to avoid occurrences, such as the ones experienced in 2008 when the world economy was hit by the credit crunch and fell to depression. The large buffers will enable the financial institutions to avoid cases of falling back to the government seeking for assistance to mitigate their losses an indication that they will avoid taking risky loans (Antoniades 1800). Trump can ensure that the bank capital is regulated and that the institutions have adopted a healthy model of doing business to make sure that high capital requirements costs are mitigated by the adoption of a lower risk premium on the expenses incurred in seeing funds.

When Trump maintains stable prices for the goods in the market, inflation will be tamed for it can lead to the collapsing of an economy. A situation that leads to the continued rising of the commodity prices is not favorable for the economic growth for it lead to the demand for the goods to reduce. There are no consumers in the market who are ready to purchase commodities at high prices when the alternatives are selling at relatively low prices (Warsh). Taming corruption is a great move that will save the country a lot of money that can be used in developing other sectors of the economy. A lot of public funds can be stolen by a few people at the high position meaning that they will not be used for the intended purpose. The projects they were supposed to fund will not be completed and they may lead the American government to borrow to finance its activities, and this will only place a burden on the taxpayers.

Trump can improve the economy by making American a competitive market for the various goods and services being manufactured. The issue will ensure that there will be no specific company that will manage to control the prices in the market. The cost of commodities will be determined by the forces of demand and supply meaning that all the manufacturers will have the chance to sell their goods when they follow the required procedure of having quality commodities that are selling at reasonable prices (Martin & Javalgi 2045). The president should encourage diversification by the various market players with a move to reduce the chances of incurring risks. Companies should invest in various commodities so that when one of them is not performing well, the losses incurred can be compensated with the profits made from the sale of another. Therefore, the organization will manage to remain stable until the market improves.

The economy comprises of different components among them the organizations, labor, capital and the other factors of production. Trump can improve the state of the economy by ensuring that human capital that plays a critical role in the growth and stability of the economy is improved. The skills and knowledge that the workers possess will determine the rate at which an economy grow considering that with a high-skilled workforce, rates of innovation will increase leading to expansion of the industries and the other sectors of the economy (Hansen, Conroy, Toppinen, Bull, Kutnar & Panwar 1260). The president should ensure that the institutions of learning are equipped with the necessary tools and capable trainers to ensure that the graduates are qualified to hold the various positions in the market. Understanding the economics and the management of the available resources will be critical in achieving comparative advantage since the resources are usually scarce and the various stakeholders should ensure that there is efficiency.

In the recent past, Trump has been critical of allowing immigrants into the country for various issues, such as the need to ensure American is secure from criminal attacks. However, what the president does not understand is that not all people moving to the country are criminals. A significant number of them are of good character, and they are highly skilled and allowing them into the country will be a plot to raise the American economy (Lins, Servaes & Tamayo 1790). Many nations in the world are seeking skilled immigrant and foreign entrepreneurs due to the many benefits that the stats derive from having these groups of people within their economy.

A move to stop them from entering the country will lead to job costs and reduced rates of the economic growth leading to the international leadership in the entrepreneurships and innovation suffering. Therefore, Trump should be on the front line and seek for the immigration rules to be reviewed and strategic reforms implemented that will ensure that the country is allowing immigrants to work and live in America (Just & Anderson 195). If Trump observes all the above measures, the American economy will improve, and programs will be put in place to curb any problems that may arise.

Works Cited

Antoniades, Adonis. "Liquidity risk and the credit crunch of 2007-2008: evidence from micro-level data on mortgage loan applications." Journal of Financial and Quantitative Analysis 51.6 (2016): 1795-1822.

Donaldson, Dave, and Richard Hornbeck. "Railroads and American economic growth: A "market access" approach." The Quarterly Journal of Economics 131.2 (2016): 799-858.

Hansen, Eric, et al. "Does gender diversity in forest sector companies matter?." Canadian Journal of Forest Research 46.11 (2016): 1255-1263.

Jimenez, Gabriel, et al. "Macroprudential policy, countercyclical bank capital buffers, and credit supply: evidence from the Spanish dynamic provisioning experiments." Journal of Political Economy 125.6 (2017): 2126-2177.

Just, Aida, and Christopher J. Anderson. "Dual allegiances? Immigrants' attitudes toward immigration." The Journal of Politics 77.1 (2014): 188-201.

Kandil, Magda. "The adverse effects of real exchange rate variability in Latin America and the Caribbean." Journal of Applied Economics 18.1 (2015): 99-120.

Lins, Karl V., Henri Servaes, and Ane Tamayo. "Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis." The Journal of Finance 72.4 (2017): 1785-1824.

Martin, Silvia L., and Rajshekhar Raj G. Javalgi. "Entrepreneurial orientation, marketing capabilities and performance: The moderating role of competitive intensity on Latin American international new ventures." Journal of Business Research 69.6 (2016): 2040-2051.

Millet, Guillaume Y., Martin D. Hoffman, and Jean-Benoit Morin. "Sacrificing economy to improve running performance-a reality in the ultramarathon?." American Journal of Physiology-Heart and Circulatory Physiology (2017).

Warsh, Kevin. "America Needs a Steady, Strategic Fed." Wall Street Journal (2017).