What Causes the Middle Class Squeeze

In earlier times, families leading a middle class lifestyle enjoyed the security of a reliable job, a secure home, proper health care facilities, education for children and a few getaways with the family, to have a good time together. People were able to maintain this lifestyle with their earnings. The middle class income range during that time was sufficient to provide a sensible living for them. But, since past few years, middle class families are facing problems in maintaining their lifestyle. Rising inflation and poor increase in earnings are adding to difficulties of the people.

The term "middle class squeeze" refers to a situation in which the income of middle class families does not suffice to keep up with rising prices or inflation. On the other hand, people falling under the high income category are not affected. This happens because the overall increase in their wages is high enough to remain unaffected by inflation. Studies reveal that the average rise in income of people that fall under 1% of top earning group, was found to be 42% whereas, people falling under the bottom 90% category, gained only 4.7%. It is clearly evident from this statistics that high income group are enjoying a significant rise in their disposable income while the middle class is getting squeezed between the soaring prices and not-so-enough disposable income.

What Causes the "Squeeze"?

There are several factors contributing towards middle class squeeze. Rise in inflation is directly affecting the prices of consumer products and services. Basic requirements like food, housing, education, energy, etc., are observing significant price rise. It is getting difficult for people to manage this price rise with their income. Let's check out the causes of middle class squeeze.

Basic Necessities

Real Estate
Home is the basic need of every individual. Rise in real estate prices lead to increased expenditure towards housing. People also find it difficult to purchase a house due to high costs of real estate, causing them to strive hard to make monetary arrangements for buying a property. Also, people owning homes tend to sell off their property to gain liquidity in order to meet basic living requirements. Statistics reveal that less number of Americans own homes now as compared to what they did during the 1970s.

Energy
Electricity, fuel and other energy products have seen a significant rise in their prices since the year 2000. The direct and indirect costs associated with rising energy prices have created much pressure on middle class people. In the year 2006, families spent $155 more on energy products as compared to what they did in 2000. This expenditure has risen even more today owing to rising inflation.

Education
Middle class families believe in education as for them, it is the only key to a secure and fulfilling life. But nowadays, the costs of education is also rising. People tend to take loans to pay college fees thus, increasing the burden of expenses.

Health Care and Insurance
The cost of health care and insurance has also seen a vast increase from what it was earlier. Increased health care costs have forced people to skip treatments in case of any health issue. The premiums to be paid for insurance policies have also increased. According to a survey, people paid around $153 towards insurance premiums which was increased to $226 per month in 2005.

Other Contributing Factors

Changes in Disposable Income
Earlier, the rise in disposable income of middle class families was enough to manage inflation. But now, the situation is different. Today, the effect of inflation on commodity prices is so high that even a significant amount of rise in the salary, leaves a person with insufficient disposable income.

Rise in Debt
It is observed that Americans are using credit cards more often to match up with their expenses due to which, a household is spending more than its total earnings. This is increasing their debt and monetary burden.

Decreasing Savings for Retirement
Increase in expenses has left middle class people with less savings. As their savings are reduced to a large extent, they have less money to manage the expenses after retirement. This reduces their retirement security.

Job Insecurity
In 2003, majority of the people who filed for bankruptcy were leading a middle class lifestyle. Job insecurity puts additional tension on the middle class as they have no other means to survive, if they lose their jobs.

All the above factors play a role in creating the middle class squeeze. The year 2011 is expected to further increase the extent of the 'squeeze' on middle class families ever since 1982 which is associated with the Falklands War. Americans believe that they are being squeezed very badly and if the inflation is not controlled, they will be soon be observing the worst economic crisis of all times.

Federal Reserve to Keep Interest Rates Low for Next Two Years

The Federal Reserve board met yesterday to come up with a plan for stemming the overwhelmingly negative economic tide that has overcome the country in the wake of a very public battle over the federal debt and a downgrading of the nation’s credit. The result was a bit shocking, as the Fed determined that it would keep interest rates low – almost at zero for the official inter-bank Fed Funds rate – for at least the next two years. For a board that rarely comments publicly on the direction of rates for more than a few months at a time, the long-term commitment to keeping money cheap was surprising.

Also interesting is that there were three dissenters among the board, the largest number of members disagreeing with an official action since 1992. The move propped up the equities markets, which had been obliterated over the course of the past several days, and also drove down the rate on short-term Treasuries. In addition to the move to keep rates so low, the Fed has also hinted that it will take further steps if necessary.

That is very thinly-veiled language that indicates that QE3 may be coming, a process by which the Fed would purchase Treasury securities or, in essence, print more money. Said Alberto Bernal, the head of emerging markets fixed-income research at Bulltick Capital Markets, "If they have to act they will. They didn’t act today because they didn’t want to send a specific message of panic." Still, the Fed did note that the growth of the U.S. economy was expected to be very slow and that unemployment, currently at 9.1% nationwide, would improve slowly as well.

What is the Gang of Six Plan

Two groups have been working the gang of six. In 2009, a group was working on 'health care reform bill' and in 2011, second group has been working on reducing the national deficit and preventing the ceiling of national debt; their proposal is called the Gang of Six plan. This plan was presented on July 19, 2011.

The Gang of Six plan is bipartisan plan that aims at solving the problem of deficit and avoiding debt ceiling. This plan has already received a nod by the current President of United States, Mr. Barak Obama.

The senators of the Gang of Six are Democrats - Dick Durbin, Kent Conrad and Mark Warner; and Republicans - Mike Crapo, Tom Coburn and Saxby Chambliss. This group is led by Mark Warner. However, the final proposal was eventually presented by only 5 senators on account of resignation of the senator, Tom Coburn. He quit because of a disagreement between him and the other senators on cutting the Social Security and Medicare. Coburn said, "The only way we get out of this problem is increasing revenues,".

Mentioned below are the three documents that were presented as a part of the Gang of Six Plan.

1. Gang of Six Summary
2. Gang of Six Slides
3. Gang of Six Charts

The plan focuses at slashing the national deficit by $3.7 trillion/ $3.6 trillion over a period of 10 years as per Congressional Budget Office's 2011 baseline or by slashing $4.65 trillion/ $4.55 trillion as per the original fiscal commission baseline. It also will aim at stabilizing the publicly-held debt by 2014 and reducing it to 70%, by 2021. Finally, the plan mentions to impose an unprecedented budget enforcement.

The Gang of Six plan has three legislative parts. The main features are mentioned below.

Part One

i. Cut deficits by $500 billion, by implementing aggressive deficit reduction down payment, immediately.

ii. Cut discretionary spending on security and non-security over 10 years.

iii. Spending money more efficiently on health care to strengthen the Medicare and Medicaid.

iv. Reforming the tax code by abolishing the $1.7 trillion Alternative Minimum Tax and reduction in marginal income tax.

v. Tightening government's budget process by imposing security and non-security firewalls and spending caps.

vi. Reforming social security for future generations by ensuring 75 year solvency.

Part Two

i. Cut deficits by $500 billion, immediately by implementing aggressive deficit reduction down payment.

ii. Imposing statutory discretionary spending caps through 2015 and implementing various budget reforms.

iii. Shifting to the chained-CPI, a more accurate measure to calculate inflation, from 2012.

iv. Repealing the Class Act.

v. Implementing policy changes such as freezing congressional pay and selling unused federal property and making unemployment insurance more effective.

vi. Implementing a comprehensive deficit reduction plan that includes discretionary, entitlement savings and tax reforms. This will require the committees to report within six months, the legislation that would attain real deficit savings in entitlement programs over 10 years.

vii. Submitting a report within six months for reforming taxes by broadening the tax base, lowering tax rates and generating economic growth, by the finance committee.

viii. In order to curb the wasteful spending by the government on programs to curb fraud and abuse, a program integrity savings of $26 billion must be achieved.

ix. Reviewing total spending on health care in 2020 to increase efficiency.

x. It has been mentioned in the plan that a expedited floor consideration should be provided for a consolidate bill meeting the instructions mentioned in the plan.

Part Three

i. Only if deficit bill has received 60 votes, a social security reform can be passed.

ii. The social security reform should ensure 75 year solvency.

iii. If a social security bill does not receive 60 votes, vitiation of the votes on deficit reduction bill can be allowed.

There are two ways to measure social security which are '75- year actuarial balance' and 'Cash flow balance'. The plan states that the social security reforms should be met by both these tests.

Even though the Gang of Six Plan has received appreciation from the President, the proposal is still being critically evaluated for changing the way inflation is being measured and the tax reforms suggested in the plan.

President Obama said, "We have a Democratic president and administration that is prepared to sign a tough package that includes both spending cuts, modifications to Social Security, Medicaid and Medicare that would strengthen those systems and allow them to move forward, and would include a revenue component,". We now have a bipartisan group of senators who agree with that balanced approach. And we’ve got the American people who agree with that balanced approach."

Create Jobs in America: Stop Building Banks

Lately, there’s been a lot of talk amongst socialist types (i.e. Warren Buffet) about letting tax cuts for the wealthy expire and closing tax loopholes for a few luxury items. They’ll give you all types of skewered statistics about wage disparities and tell you that the richest 400 Americans have accumulated as much money as half of the country. They may even get you wondering how a reasonable person could support any sort of break for these ultra wealthy folks when they’re hoarding all of the money but not creating any jobs, despite the "job creators" moniker given to them by some apparently confused politicians. These people are engaging in what is commonly called "class warfare" or, in some circles, "poor people trying not to starve to death". What they fail to realize, however, is that those jobs are right on the horizon, we just have to do two things- keep the tax cuts and stop building new banks.

This may be hard for you to comprehend if you don’t have a sophisticated economic mind like I do (which comes in very handy in my job as a truck driver), so let me explain. On August fifth The Federal Reserve reported that cash held by U.S. banks rose over eight percent to $981 billion. Shortly afterward, Bank of New York Mellon announced plans to start charging fees to clients who have too much money in their bank, a scenario that one analyst said "I've never seen (this) happen, not in 25 years". Clearly, it is getting to a point that the richest Americans are simply running out of room to store their money. "What does this mean to me, an everyday Working Joe?" you might ask. That’s a good question, Joe, and here’s the answer. When the vaults are so overstuffed with cash that the bank just can’t accept anymore, then, finally, the job creators, being encumbered by all that extra undepositable money, will do America the favor of creating some jobs.

I know what you’re thinking- "Wow, this is a dream come true. I knew trickle-down economics work and the economic policies of the last thirty years weren’t just a big scam. I should be employed again anytime now" but you need to do your part, too. You see, in a lot of places, new banks are still being built. I live in Port Charlotte, Florida, a small retirement community that no one would ever have heard of if not for Hurricane Charley, and we currently have three new banks under construction. This gives the wealthy new places to store their money, which holds them back from creating jobs. There’s an old Native American saying that goes like this- All politics is local. So go to your local zoning board meeting and tell them "I need a job. No new banks." That will solve part of the problem, but we still need to fill those existing vaults. They’re getting hard to close (one guy has to push while another person turns the lock) but until they’re completely overflowing with greenbacks- no job for you. Write your local congressperson and state senator and tell them to keep all the tax cuts and maybe make a few more.

If we all follow this simple plan banks everywhere will soon be busting at the seams with cash and America will be on the track to gainful employment for its citizens. Also, if you can, maybe just take your next unemployment check and send it to some random billionaire to speed up the process.

U.S. Deficit "Super Panel" Gets Its 6 Republican Members

The so-called "super panel" that will supposedly meet, come up with a solution to the country’s massive debt problem, and then have their suggestions put to a vote is starting to take shape more and more as of yesterday evening. The panel, officially known as the Joint Select Committee on deficit Reduction, will seek to find $1.5 trillion in budget savings over the next 10 years. While it’s likely that the panel will come up with something to save that much, one question is whether it will actually be enough. Government spending has gone awry over the past decade, and politicians seem absolutely addicted to it.

Yesterday, the six Republican members that will sit on the 12-member panel were named, with House Speaker John Boehner appointing Representatives Dave Camp, Jeb Hensarling and Fred Upton, while in the Senate Mitch McConnell chose Jon Kyl, Rob Portman and Patrick Toomey. Said McConnell when making his selections, "All three of these nominees understand the gravity of our situation and all three will bring the kind of responsibility, creativity and thoughtfulness that the moment requires."

The first three members named to the panel – Senate Democrats Max Baucus, John Kerry and Patty Murray, will be joined by three Democratic members of the House after Nancy Pelosi makes her choices. Speaking of the massive U.S. debt, Boehner said, "Our debt and deficits are a threat to our economy, and America cannot achieve long-term job growth until we take action to address this crisis. This joint committee presents an opportunity for both parties to bring to the table their best ideas, debate them on the merits, and ultimately come together to do what's best for our country."

The World Economy

Great Financial Crisis? What Great Financial Crisis?

That seems to be the attitude in 2011. Which worries us at EconomyWatch.com, because we do not believe that the underlying problems have been solved. If anything, they have been exacerbated.

But first, the numbers, taken as ever from our Economic Statistics Database.

World Economic Statistics at a Glance - 2011 Forecast

World GDP (PPP): $78.092 trillion
GDP Growth Rate: 3.3%
GDP Per Capita (PPP): $11,100
GDP By Sector: Services 63.4%, Industry 30.8%, Agriculture 5.8%
Growth In Trade Volume: 6.953%
Industrial Production Growth Rate: 4.6%
Population: 6.768 billion
Population Growth Rate: 1.133%
Urban Population: 50.5%
Urbanization Rate: 1.85% (125 million people move to cities every year)
The Poor (Income below $2 per day): Approx 3.25 billion (~ 50%)
Millionaires: Approx 10 million (~ 0.15%)
Labor Force: 3.232 billion
Inflation Rate - Developed Countries: 2.5%
Inflation Rate - Developing Countries: 5.6%
Unemployment Rate: 8.8%
Investment: 23.4% of GDP
Public Debt: 58.3% of GDP

Market Value of Publicly Traded Companies: $48.85 trillion, or 62.6% of World GDP

Sources: EconomyWatch.com Economic Statistics Database, CIA World Factbook, IMF, World Bank

The World Economy in 2010 was worth $74.007 trillion in GDP terms, using the Purchasing Price Parity (PPP) method of valuation. This is expected to grow to $78.092 trillion in 2011.

The overall global economy averaged a 3.2 per cent growth rate between 2000 and 2007, suffering a slight dip in 2001 - 2002 thanks to the Dot Com Crash, but continuing to grow throughout that period. In fact 2004 - 2007 were boom years. The Emerging Markets, led by the giants of China, India, Russia and Brazil (the BRIC countries) had been posting 7 per cent - 10 per cent growth rates for years. Property and stock market booms had brought consistent growth in North America and Europe. Investment was bringing economic development to much of the Middle East and Africa, and even Japan was recovering from its deflationary 'Lost Years'.

Economic conditions within these countries play a major role in setting the economic atmosphere of less well-to-do nations and their economies. In many aspects, developing and less developed economies depend on the developed countries for their economic wellbeing.

Theories were even circulating that thanks to the growth of the developing world, we might enjoy years of unfettered growth, as new markets would go through successive growth spurts and counter the effects of slowing growth elsewhere. It was suggested that Asia was 'decoupling' from the US and able to grow under its own steam thanks to its two 'Awakening Giants'.

Sadly, that turned out to be hogwash, as deregulation allowed western banks to build up unsustainable levels of debt that brought the global economy to the brink of depression.

As the 'Sub-Prime' Crisis morphed into a fully fledged crash then global Financial Crisis, 2008 started to bomb and 2009 became the first year that the world recorded a loss in GDP since World War II. 2.031% was wiped out of the global economy - or $3.3 trillion of value.

US Economy

The United States of America (US or USA) is the largest and most important economy in the world. In 2010, The US economy was responsible for 20.218 percent of the world’s total GDP (PPP) or US$ 14.624 trillion.

Yet despite leading the world’s economy for more than a hundred years, The US economy is now facing its greatest ever challenge since World War II. This challenge has been a result of both domestic and international factors.

Domestically, the US economy’s frailties were cruelly exposed during the 2008 financial crisis. The US economy has found it harder to recover from the 2008 financial crisis, believed to be the worst financial crisis since the Great Depression, as compared to previous downturns. Consumer confidence within the country is at all time low, perpetuating the slow economic growth since 2008.

On the international front, it is increasingly likely that the US will lose its status as the world’s largest economy. According to the latest IMF forecast done in April 2011, China is expected to overtake the US by 2016. This has come as a major surprise for the global community – previous forecasts had predicted China overtaking the US by 2035 at best.

North America Economy

North America spans the northern continent of the Americas and is situated in the Northern Hemisphere. North America is bordered to the north by the Arctic Ocean, to the east by the North Atlantic Ocean, to the southeast by the Caribbean Sea, and to the west by the North Pacific Ocean. North America covers an area of more than 9.5 million square miles and has a population of nearly 530 million. After Asia and Africa, North America is the third largest continent in the world. It comprises of countries like the USA, Canada, Mexico, Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Haiti.



The North American economy is a diverse one. While the US and Canada is blessed with a modern and sophisticated economic system, the economy of Mexico is still undergoing major developments in sectors like power, transportation and manufacturing.
North America Economy: USA Economic Profile

The US has the largest and the most technologically developed economy in the world, with a per capita GDP of $46,900. Business firms in the US enjoy a greater degree of flexibility compared to businesses in Japan and Western Europe in terms of innovation and expansion. The GDP-PPP of the US in 2009 was $14.25 trillion, down from $14.61 trillion in the previous year. The GDP-real growth rate contracted by 2.4% in 2009, a sharp drop from 2008 levels when the rate was +0.4%. The services sector contributes 76% to the nation’s GDP, followed by industry and agriculture at 21.9% and 1.2% respectively. The unemployment rate in the US was 9.4% in 2009, up from 5.8% in 2008.

North America Economy: Canada Economic Profile

Canada is equipped with a high tech industrial economy, and resembles the US in its market oriented economic system, production pattern and high living standards. Canada enjoyed solid economic growth from 1993-2007. Canada was affected by the 2007-08 recession. In 2009, after showing 12 years of surplus, Ottawa featured its first fiscal deficit in 2009. The Canadian banks, however, emerged from the crisis, owing to conservative lending practices and strong capitalization. Canada’s GDP-PPP in 2009 was $1.287 trillion, down from $1.319 trillion in 2008. The services sector contributes 69.6% to the nation’s GDP, followed by industry and agriculture at 28.4% and 2% respectively.

Economy of California State

Demography And Social Indicators

California Economy : California is the most populated state in the United States. It is located in the far west bordered by Oregon, Nevada, and across the Colorado River, Arizona, Mexico and the Pacific Ocean.

The state owns a more productive economy. Agriculture in the state is gradually yielding to the industry as the core of the economy. The state is considered as a major center for the United States for its motion picture, television film, and related entertainment industries, especially in Hollywood and Burbank.

Social Indicators of California Economy
The state constitutes a total geographical area of 163,696 sq mi; total acres forested 40.2 mil.The total population of the state in July 2004 was calculated at 35,893,799 in comparison to 35,484,453 in July 2003. The net change of the population for 2002-03 was 1.4%. The population density of the state was 227.5 per Sq Mi. With regards to the racial distribution (2000) there were 59.5% white, 6.7% black.

Business and Economy of California
The economy of California plays a very significant role in United States. The state's economy has a dominant force in the economy of US.

According to data given by the California Department of Finance, California's gross state product is $1.543 trillion ("accelerated estimates for 2004 were completed and released in June 2005").

Bureau of Economic Analysis, finds California's gross state product is $1.543 trillion (2004 data, revised June 2005).The GDP increased at an annual rate of 3.1% in the first quarter of 2005.Per capita personal income of the state was $33,403 in the year 2003.

Among the various sectors of the economy, the Chief industries include agriculture, tourism, apparel, electronics, telecommunication and entetainment.

The chief manufacturing goods of the state are electronic and electrical equipment, computers, industrial machinery, transportation equipments, and instruments, foods. The chief farm productsinclude milk and cream, grapes, cotton, flowers, oranges, rice, nursery products, hay, tomatoes, letuce, almonds and asparagus. The major livestock as of Jan 2004: 5.2 mil. Cattle/calves; 680,000 sheep/lambs; Jan 2003: 135,000 hogs/pigs. Energy Production In California
The electricity production (est. 2003, kwh by source): petroleum: 51 mil; Gas: 9.7 bil; Hydroelectric: 34.2 bil; Nuclear: 35.6 bil; other: 331 mil.

Tourist Attraction Of California

    * The Queen Mary, Long Beach;
    * Palomar Mountain;
    * Disneyland, Anaheim;
    * Getty Center, Los Angeles;
    * Tournament of Roses and Rose Bowl, Pasadena;
    * Universal Studios, Hollywood;
    * Long Beach Aquarium of the pacific;
    * San Diego Economy
    * San Francisco Economy
    * Los Angeles Economy
    * Golden State Museum, Sacramento;
    * Lassen and Sequoia- kings Canyon natl. parks;
    * Monterey Pensisula;

Colleges, Schools and Universities In California

    * Argosy University - San Francisco, Orange County
    * The Art Institute Online
    * The Art Institute of California - Los Angeles (Santa Monica)
    * American Inter Continental University - Los Angeles, California
    * American Inter Continental University Online
    * American Sentinel University - Online
    * Brooks College - Long Beach, California
    * Brooks College - Sunnyvale, California
    * Byrant and Stratton College - Online
    * Career Networks Institute - Orange County
    * Capella University
    * Clarita Career College - Canyon County
    * California College - San Diego
    * California Culinary Academy - San Francisco, California
    * California School of Culinary Arts - Pasadena, California
    * Central Coast College - Salinas
    * Coleman College - San Diego, San Marcos
    * College America - San Diego
    * DeVry University - Fremont, Long Beach, Pomona, West Hills
    * DeVry University Center (DVUC) - Irvine, California
    * DeVry University Center (DVUC) - San Francisco, California
    * Jones International University Online
    * Maric College - Bakersfield, Modesto, Palm Springs, Stockton, San Diego California
    * Mt Sierra College - Monrovia
    * New Horizons Computer Learning Center - Anaheim, Los Angeles
    * Northwestern College - Sacramento
          o Rancho Cucamonga
    * Redstone Aviation - Los Angeles
    * San Joaquin Valley College - Bakersfield, Fresno, Modesto, Rancho Cordova, Rancho Cucamonga, Visalia
    * South University - Online
    * University of Phoenix
          o Northern CA Campus
          o Sacramento
          o San Diego
          o Southern CA
    * University of Phoenix Online
    * University of Redlands - Burbank, Rancho Cucamonga, Redlands, Riverside, San Diego, Temecula, Torrance
    * Western Career College - Citrus Heights, Emeryville, Pleasant Hill, Sacramento, San Jose, San Leandro, Stockton, Walnut Creek
    * Westwood College of Technology - Anaheim, Inland Empire, Los Angeles
    * Westwood College of Technology - Online

Canada Economy

Canada is the 9th largest economy in the world based on GDP (current prices, US dollars) and the 14th largest based on GDP (PPP). Since the 2008 global financial crisis, the Canadian economy has re-emerged as one of the strongest advanced economies in the world. In 2010, Canada’s GDP growth (constant prices, national currency) stood at 3.071 percent – the highest it had been since 2004.

Prior to World War II, agriculture was the primary driver of the Canadian economy with over 60 percent of the population living in rural towns or farms. Canada had struggled to recover from the Great Depression, with Gross National Product falling by 43 percent and exports dropping by 50 percent between 1929 and 1933. By 1933, unemployment had risen to more than 25%.

World War II marked a major transformation in the Canadian economy. Manufacturing, mining and services grew rapidly to meet the demands of the war and agriculture production became more mechanised and efficient.

As a result, there was an upturn in industrial production and manufacturing in Canada. New jobs were also being created while industries benefitted from a highly trained and diversified labour force that had arisen during the war.

Today, the Canadian economy strongly resembles that of its neighbour to the south, the US. Besides having similar patterns of production and living standards, Canada has also adopted a market oriented economic system.

However unlike the US or most other advanced economies, Canada’s primary sector, namely the logging and oil industries, remains an important element to the economy.

Canada’s manufacturing industry is also highly valued by the economy – the automobile industry for example attracts major investments from US and Japanese automobile companies with multiple manufacturing plants set up in Canada.

 Canada’s economy also distinguishes itself from the US, whereby it is a net exporter of commodities while the US is a net importer. Furthermore, the Canadian banking industry is considered to be fairly conservative compared to that of the US.

Despite the differences, Canada’s economic progress is closely tied to that of the US. Following the signing of the 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA), trade and economic integration between both countries have increased significantly. The US is Canada’s largest foreign investor with heavy investments in mining, smelting, petroleum, chemicals and machinery. Often, Canadian economic policies have been adjusted in order to adapt to changes in the US economy. Historically, even a minor change in the US interest rates has had economic repercussions in Canada.
Canada’s Export, Import and Trade

Although NAFTA dramatically improved trade between the US and Canada, disputes still remain pertaing to intellectual property rights, softwood lumber, beef, tomatoes and other agricultural products.

The US is Canada’s largest and most important trade partner. In 2009, 75.02 percent of Canadian exports were directed to the US, while 51.1 percent of imports came from the US.

Commodities dominate trade between the US and Canada. In agriculture, both countries are its counterpart’s largest export market – the US imports more than half of Canada’s food products while Canada imports nearly 20 percent of the US’s food product.

The energy trade is another critical element in US-Canada trade. Canada is the US’s largest oil supplier, accounting for 16 percent of US oil imports and 14 percent of US’s natural gas consumption. Besides sharing hydropower facilities on the western borders, national electricity grids in Canada and the US are also linked with each other.

The UK and China are Canada’s next largest export partners after the US. Respectively, these countries account for 3.37 and 3.09 percent of Canada’s exports. China is also the second largest source for imports to Canada, accounting for 10.88 percent of imports. In 2010, Canada was the 10th largest exporter and 12th largest importer in the world.

Mexico Economy

Mexico is a federal constitutional republic in North America, bordered by the United States on the north and by Belize and Guatemala on the south-east. The south and west is flanked by the Pacific Ocean and the Gulf of Mexico on the east. Mexico’s has an estimated population of 111 million, and its economy is the 13th largest in nominal GDP terms ($1.143 trillion -2009) and the 11th largest by Purchasing Power Parity (PPP, $1.563 trillion – 2009). Furthermore, Mexico’s economy is part of the North American Free Trade Agreement (NAFATA), a trilateral trade bloc in the region comprising of the US, Canada and Mexico.
Mexico Economy:  Profile

Mexico has benefited from the NAFTA; being a free market economy, it has increased its trade with the US and Canada threefold. Furthermore, over 90% of their trade falls under twelve free trade agreements spanning more than 40 countries worldwide. The Mexican GDP grew at an average rate of 5.1% during 1995-2002. The recent economic recession and more specifically, the downslide in the US markets impacted this growth in a negative way. The annual average growth for the GDP in 2005 dipped to 3-4.1%.

In 2009, the economic profile for Mexico took a turn for the worse. Widespread disease in the form of a flu outbreak added to the failing economy in 2009. Policy stimulus proved inadequate against the background of limited fiscal stimulus and monetary relaxation. From an all-time low rate of annual inflation of 3.3% in 2005, this rate has only recently displayed signs of reducing from 6.4% in 2008 to 5.4%. These fluctuations are largely caused by the economy of Mexico’s close association with US business and trade.

Recovery Process: Mexican Economy 2010

For the year 2010, the growth figures pertaining to the Mexican economy indicate signs of a recovery. The Mexican Finance Ministry has increased the growth figures from 3% to 3.9%. This upswing was the result of significant improvement in Mexico’s exports, automobile production, manufacturing and increased imports of consumer goods. Employment is also on the rise alongside an increase in foreign and domestic demand, despite a deep divide in economic distribution, where 32% of the top earners take in 55% of the country’s total income.