06 March 2016

Dude, Where's My Recovery?

Happily we see that Anthony Sanders has found a new vehicle for his highly informative column, Confounded Interest, in case you wish to bookmark it.

The failure of the Fed and the regulators and the Solons of government is not terribly complex. What else would one expect if you address the symptoms badly, and do little or nothing to fix the very crux of the problem?

John Kenneth Galbraith said it quite succinctly some years ago. “Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

It is like sending billions in aid to a corrupt, Third World nation, where little of what is sent actually makes it to the people for whom it is intended.

It is not the stimulus or the principle behind it that is discredited.  What we have had is not the kind of stimulus designed to kick start aggregate demand. It has been the sustaining of the status quo, the continuation of a major policy error and widespread financial fraud, resulting in an asset bubble collapse and ongoing financial malaise.

It is the failure to reform, and to target aggregate growth and the well being of the public, which sadly takes last place on the agenda of those who have been blinded and corrupted by the greed and the power of Big Money.

And as we can see in this current presidential election, it is badly straining the social fabric of the Republic, and threatens to tear it apart.  With regard to the history of temptations of the ages, this is a story that is 'as old as Babylon, and evil as hell.'

US Labor Market Still Weak After Trillions In Stimulus
By Anthony Sanders

And two employment indicators show that the US economy is back … to the worst levels prior to 2008. Both U-6 underemployment (total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force) and the employment-to-population ratio still remain grim.
Despite the massive fiscal and monetary stimulus (ZIRP and QE 1-3) thrown at the employment problem.
M2 Money Velocity keeps falling along with real median household income (both lower than in 2007).
While we got stagnant wages and almost 10% U-6 underemployment, we did get big increases in asset prices (house prices and stock market prices).
Industrial production (YoY) and total business sales (YoY) are in negative territory.
The purchasing power for consumers has decreased dramatically since the creation of The Federal Reserve System in 1913 under President Woodrow Wilson. But at least the volatility of industrial production declined. /sarc
At last bank credit growth is back at about 7.5% YoY. Mortgage credit growth (net) has barely broken into positive territory.
So after the $831 billion in fiscal stimulus in 2009 and the trillions in Fed monetary stimulus, dude, where’s my recovery?