USA Capital Formation

The US is a nation of immigrants and it has a history of entrepreneurship.  After the Great Depression of the 1930s, the US government tried different methods to shore up the economy by spending and cutting taxes to encourage spending s made by customers.  

Between 1930 and 1960, several bold initiatives were undertaken by the government to influence economic growth.  These policies played a major role in economic growth until 1973.  Periodic credit tightening, loose monetary policies both financed by Foreign Direct Investment and Public Debt were the basis for economic policies as of 1981.

Economic Structure:

The United States is a large country with vast mineral resources and fertile soil. With long coastlines on either side of the country, its industries are vast, varied and are very capital intensive.  Its workforce and productivity make the US an economic powerhouse.  Labor mobility has helped the economy adapt to all conditions.

Now companies and corporations with their capacity for mass production of goods and services have been a driving force in shaping the country.  Banks and investors have also contributed to economic growth by investing capital.

The government uses capitalism to promote economic growth with tariffs and subsidies to industries, put infrastructure in place, banking policies were instituted – the main one being the gold standard – which encouraged personal savings and also investing in productive enterprises.

Promoting Entrepreneurship:

Social, political and business entrepreneurship has always been encouraged in the United States to encourage innovation and also employment by small businesses.  This has become a major driver of economic growth because many people have started new businesses and generated capital growth in the economy.

Major Sectors in the US Economy:

The US has a very diverse market and is bolstered by a strong manufacturing and retail base.

  • Retail is the biggest sector and leads the economy. 
  • Because it is such a vast country, it is along the 2nd largest consumer of energy and fossil fuels in the world.  It is also the largest importer of fuel.
  • Another major industry is agriculture and exports half the world’s supply of grains.
  • It is the largest manufacturer in the world and leads in high technology exports like airplanes, construction machinery, telecommunications equipment, etc.
  • It has the largest stock exchange in the world – the NYSE and the combined capitalization of all companies listed on the NYSE is over $ 10 trillion.

Funding Sources:

Tofund its debt, the US sells treasury bonds within the country and also internationally.  The US has sustained deficits with many countries and reached $140 billion in 2009

Recent economic concerns center on domestic issues like large household debt, national, corporate debt and also trade deficits, in contrast to low savings rates and high unemployment.