There will be a sustainable recovery in the US when the median wage recovers in relation to inflation and consumer necessities, and the employment-population ratio rises to some reasonable equilibrium.
A rising employment-population ratio itself is no sign of recovery, if consumers must continue to rely on debt to finance their basic necessities. Conservsely, a falling employment-population ratio can be constructive if it is driven by a vibrant median wage, increasing industrial productivity, and excess income as savings, allowing for retirements and more people devoted to non formal employment such as charitable activities, parenting, artistic expression, and elder care, for example. The point is that these measure are not one-dimensional.
As shown by the median wage below, the 'recovery' engineered by the Fed in the aftermath of the tech bubble they created was artificial and totally supported by credit creation and a bubble in housing, with enormous amounts siphoned off the top in the form of financial fraud and corruption.
The basic economic problem in the US economy is related to international trade, currency manipulation, public policy and wage arbitrage by multinational corporations. 'Free trade' interacts with public standards of health, worker compensation, environmental, child labor, and the entire structure of public standards.
Therefore the solution is not amenable to straightforward Keynesian stimulus. This is no cyclical contraction.
It has its roots in the conflict between 'free trade' amongst nations with different standards towards their workers, and various forms of governance. A democratic republic and a autocratic dictatorship do not have the same public policies and attitudes towards the individual and their rights vis a vis the state. How then can free trade reconcile fair wages with what is by comparison virtual slavery? These are the economics of 'the camps' and the plantations, a familiar attraction for the monied interests who have an abiding love of monopolies and oligarchies.
And of course the unspoken problem in the US is the pervasive corruption in and overweighting of the financial sector in relation to the productive economy even today after so-called reforms.
On another note, there is renewed discussion of 'Modern Monetary Theory,' and some have asked me again to address this, as I have done previously. I have only this to add.
I see no inherent problem with the direct issuance of non-debt backed currency as there is sufficient evidence that it can 'work.' Indeed, my own Jacksonian bias toward central banking would suggest that.
I think the notion that the Fed is some objective judge of what is best for the public welfare without effective oversight or restraint is anti-democratic and probably un-Constitutional, at least in spirit, as it has been implemented. And this notion that the FED and the discipline of the interest markets could reliably emulate an external restraint on excessive money creation is deeply flawed.
The problem becomes then how to implement a fiat currency without the discipline of issuing debt through private markets.
This is the important point that most MMT adherents seem to ignore, but it is their greatest area of strength.
One cannot print money at will. The limitation is always and everywhere the willingness of the markets to accept it in exchange for labor and real goods without coercion. To make counter claims is to undermine your own position.
It is a tautology to say that a state that controls its own fiat currency cannot become insolvent in that currency, since they can never lack that which they can create from nothing. The state does not run out of its currency, rather, it runs out of people who will accept it at the official face value.
I would stipulate that central currency issuers can attempt to set arbitrary values, and to enforce them through things like official valuation and wage and price controls. Indeed, practical experience seems to indeed they inevitably must and will become increasingly draconian in their central planning. Dictatorships generally embrace fiat monetary systems without external discipline as policy, but rarely is this a sign of a vibrant economy or a government that respects the individual's rights to just recompense for goods and labor.
The problem with limitless issuance would first appear with necessities that the state must acquire externally, that is, outside their direct sphere of political control. In the case of the United States, for example, oil comes to mind.
I am not suggesting a retur to a gold or silver monetary standard, for that too has its weaknesses and is no panacea. But rather, I am addressing the particular overstatements being made by those who promote the Fed, and those who promote the Treasury, as infallible arbiters of monetary value.
Transparency, oversight, checks and balances are the inherent genius of of the Constitution, and anything that weakens those pillers undermines the democratic Republic.
Most fiat currencies inevitably fail, without regard to their particular mechanisms, because of the weakness and corruption of the people who manage them. This the hard truth that no amount of accounting gimmicks and Utopian central planning can overcome. Such schemes spawn tyranny from their nature, since like a Ponzi scheme they require an ever expanding sphere of absolute control over the daily transactions of the public.
If the inherent evil contained in the concentration of power in a few hands in your concern, then Modern Monetary Theory does not seem to be a viable solution, replacing the Fed with the Treasury, and potentially one form of monetary tyranny with another.
