More Support Needed for Global Economy

The global economy has finally recovered from the economic downturn of 2007 and 2008. Despite successes such as reduced unemployment, lower gas prices and rising stocks in the United States, Europe and Asia show stunted growth.

The Obama administration believes some countries should do more to shore up the global economy and improve growth. Germany, China, Japan and South Korea have huge trade surpluses with other countries that need to be rectified. Chinese currency is significantly undervalued, which causes Chinese goods to be cheaper in foreign countries while imports to China remain more expensive. The massive trade imbalance with the United States is one reason why the Chinese economy has slowed in late 2014 and early 2015.

The semi-annual report made by the White House contends Chinese currency should be worth 40 percent more against the dollar, despite the Chinese government allowing better exchange rates since the last six-month report. Other currencies have been helping other countries' economies, and the White House believes central banks cannot drive growth for much longer. The United States cannot be the only "engine of demand" in the global economy, the report said.

The administration's findings, as required by law, report to Congress on any possible currency manipulators. Although the report admonished South Korea and China for undervaluing their currencies, the administration did not cite either country as a currency manipulator. If the report uses that label, diplomatic talks must be initiated. Congress has increasingly called to label China as a manipulator, but the White House has refused to do so.

The fine balance of the global economy has its advantages and disadvantages for American investors. The dollar remains at 10-year highs against the euro, but that could make American goods too expensive in Europe. To combat higher dollar exchange rates, the White House wants more countries to step up domestic production, increase demand and start exporting.

The success of the global economy relies on several factors. The price of oil, after plummeting in late 2014, stabilized energy markets. Lower transportation expenses, due to less expensive gas, lowers the costs of goods in general. Companies could maintain prices to consumers and use the extra profits to make capital improvements. CEOs predict a rough regulatory climate in 2015, as seen by the White House report.

Yet, American manufacturing is still rebounding, and technological innovations drive the economy forward. More Americans have disposable income to spend on big-ticket items such as appliances and cars, which serves as a bellwether of the economy as a whole. The stock market continues to rise despite corrections from the energy industry. American regulators believe it is time for countries to follow America's example and help growth.

The global economy seems to be booming in the United States, but Asian currencies continue to undervalue American goods abroad, leading to hefty trade imbalances. Any sudden moves to hold currency talks could jeopardize China's slow, but steady, currency improvements.

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