Wealth Building Information

Business After The Iraqi War

The rewarding of high compensation packages to top executives who turned over weak quarterly earnings, or who were involved in corporate scandals, adverselyaffected short-term investing, and collectively contributed to the downturn of the global economy over the last couple of years. Even the help and expertise of FederalReserve Chairman Alan Greenspan and several notable Nobel Prize winning economists in the President's Council of Economic Advisers, wasn't enough to revive theeconomy. September 11 then turned our attention towards terrorist threats against the markets.

Many, including the Bush administration, believed that a short war was the answer to both of these enormous problems. That is, if done quickly, a war would induce anincrease in government spending that will be injected into the economy and a multiplier effect will, in turn, create jobs for the unemployed. But now that it's over and coalitionforces have taken control of Iraq, should we expect to return to business as usual? Unfortunately, this is easier said than done.

The facts are that the underlying and axiomatic problems are still present in the global economy. First and foremost, we have America's account deficit, which is increasingby the second. The cost of the war is certainly adding to this burden and is currently hovering at approximately $20 billion dollars. Some experts say that this cost could reachup to $95 billion dollars. We, inevitably, will have to pick up the majority of this bill.

The United States' Gross Domestic Product (GDP) is also not in good shape. It has trickled down to an annual GDP growth that is expected to reach only 3.1% and bothFrance and Germany have recently downgraded their annual GDP growth forecasts to 2.4% and 2.0% respectively. Moreover, the "uncertainty factor" as I like to call it, mostlikely will keep businesses and consumers cutting back on expenditures for the remainder of 2003.

Fortunately, there are some signs that the economy is beginning to recover. A report that was recently released by the U.S. Department of Commerce showed a rise ofover 2% in retail sales for the month of March and a slight rebound in consumer confidence. Also, the national unemployment rate, which was released by the Bureau of LaborStatistics, remained unchanged at 5.8% for March 2003. While the majority consensus is that the economy will eventually recover, it is apparent that this will definitely takemore time and effort than what most people had originally predicted.

Carlos T. Fernandez is the business columnist for Dominican Times Magazine, a publication that focuses on the Hispanic culture and the issues affecting its communities. Heis also the publisher of a popular financial planning and management website entitled Building Wealth(http://buildingwealth.blogspot.com).