How will a smaller US economy impact upon the rest of the world?
As the US authorities take the rather drastic action of reducing base rates to 0% - 0.25% there is concern that a further contraction of the US economy will impact each and every country around the world. Even though the last few years have seen the emergence of places such as China and India into the economic top league, it is still the US which is the engine room of the worldwide economy.
If the US economy continues to contract this will impact upon imports and exports to the US, and around the world, which will have a significant impact on profitability and business transaction levels. There is real concern that the US authorities have now shown their final hand by reducing interest rates to the current level and have few tools left in their economic box. If the 0% option does not work and the ongoing rescue package does not have the desired effect it really is a guessing game as to what the authorities can do next.
Even though the UK economy is currently among the weakest in the world this situation could get seriously worse if the US economy continues to struggle.
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