The United States of America has now been in financial crisis after 1930’s. Since 1930 it has never been in economic and financial crisis. The development made it a sole super power of this world. But now being on war and the fluctuating oil prices, the United States financial system is facing a decline. Due to the current crisis it is believed that unemployment in the country will increase which will also result in unemployment across the world, in the countries which rely on the American firms operating in their territories.

There has been a decline in financial status of European countries as well. Considering the war as the major reason of financial downfall, the European countries have withdrawn from the Iraq war but as the financial system of the world is inter dependent all the developed countries are facing the effects of this financial decline. It has been observed that the bank credit as well as the money supply is contracting in United States which may result in the deflationary trends in economy. The money supply reduction may not mean that the value of currency will increase rather it can shrink the industry and also the investment in the country. Where as the cut in bank credit means that banks are going in losses and new investment bonds and banks are rapidly sold and traded. It is feared that’s this financial recession is like great depression and may result in debt with deflation recession in 2010. This is known as double dip depression of 2010. The experts and think tanks are trying hard to device banking and finance strategies to overcome this crisis.

As the both problems are interrelated, the solution would be of same kind. It has been found by the researches that the loan provision has been reduced in the country around 14 %. This is indeed a big cut of finance and investment. The reduced credit issuing means reduced investment and hence the unemployment will further increase. The money balance is deteriorating rapidly and severely. Approximately the money supply has reduced to about a 5% in United States of America during last year. The factors contributing to the reduction in money supply have not been pointed out yet. United States had such financial issues during 1930s.

The state has been buying the bonds for an ineffective financial strategy. This policy of easing quantitative must be changed to assure the other economic giant economies of the world that United States in not devaluing its debt. However it is also believed that there is a pressure on the banks for increasing the capital ratios. Due to this reason, the banks are cutting the credit by 1% every month.