Personal Finance Lesson 155 Assignment

In this week’s assignment, I will be giving a 600 word report on the health of our economy, providing sources to support my reasoning.

The current state of our economy is not amazing, and it could definitely be better. Here are some sources that indicate our economy is not great:

Unemployment Rate – ShadowStats

This unemployment rate graph suggests that the unemployment rate is much higher than the government is trying to make people think. The red line is the official unemployment rate according to the government. The blue line is the ShadowStats alternative unemployment rate. You can see that it is a lot higher than the “official” unemployment rate. If you look at the graph, you can see several spikes that mark recessions, with the big spike near the right side of the graph being the COVID recession. Having a 25% unemployment rate is not at all great for the economy!

GDP

This chart shows the GDP annual growth in the U.S. GDP stands for Gross Domestic Product, which is the total value of all the goods and services that our country produces. (Note that this is the measure of the percent change in GDP, not total GDP). In this graph the official GDP shows as being fairly high, and only going below 0% a few times. The ShadowStats alternative tells a different story! It shows that the GDP is actually a lot lower, and has dipped below 0% quite a few times, which means that our country had actually been losing value during those times!

Inflation Rate

The inflation rate is another marker of economic health. This chart only goes up to mid-2023, but currently the official inflation rate is around 3%. That doesn’t sound very high, but according to ShadowStats, it is a lot higher! An interesting thing to note on the graph is that while the official inflation rate goes below 05 a few times, the ShadowStats alternate inflation rate never does! In fact, its lowest was just under 2%. You may be wondering why inflation is bad, so I’ll explain it in a simple example.

Imagine an economy where the total money supply is $100, and you own 10 of those. You would own 10% of all the money, making you very wealthy! Now imagine the government of this fictional economy printing $900. This would bring the total money supply to $1000, and you still own 10 of them. But now you have only 1% of the money supply! It is even more hurtful to the less wealthy people! In our economy, the government can print out money anytime (and in fact all the time), which is constantly making our money worth less and less. Inflation is only helpful for the government, and only during the short run.

Tariffs

I don’t have a graph for this one, but I’ll start by explaining what tariffs are and how they impact our economy. Tariffs are basically taxes on other countries. If you set a 25% tariff on all goods from Mexico, for example, then all the people who bring avocados from Mexico to the U.S. must pay 25% of the price they are selling them for to the U.S. government. This forces the people who are selling avocados to increase their prices so they can make a profit, which makes us pay higher prices for our avocados.

Currently, many tariffs are being imposed on other countries, which is probably going to make stuff a lot more expensive!

Conclusion

According to the reasons I have mentioned, the U.S. economy is not doing great. We are having high inflation rates, high unemployment, many tariffs, and low GDP. I sure hope our economy will be able to recover from this!