No Recovery: Longest Sustained Fall In UK Real Wages In Recorded History

Why is there no sustainable recovery?

Because of the policy errors of the West to save the corrupt financial system, but abandon the people whom 'the system' is intended to serve.

You may read the story about why the Bank of England is likely to keep interest rates low, which accompanies this graph, in the Financial Times.

The Anti-Humanism of the New American Century

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power as well.

Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

The fully financialized recovery is not sustainable. In fact, it closely resembles a Ponzi scheme.

The Fed creates enormous amounts of money, which it carefully feeds into the financial system through its Banks and their associated Funds. This is a 'trickle down approach' to monetary stimulus.

The monies created are directed primarily towards the same types of activities that have been dominant in the financial system for the previous ten years at least: financial speculation, building of monopolies, acquisition of assets for repressive exploitation through rents, and the transfer of wealth to the top one percent through largely non-productive activities.

The result can be seen in the continuing plunge of the velocity of money, which is a measure of how much actual GDP related activity is being generated by the additions of monetary growth. Most of the growth we are seeing is only on paper and in accounting gimmicks, and not in real advances and improvements in the standards of living and infrastructure.

 In fact, one can make a good case that all those things that are dependent on longer term planning are suffering greatly, and even being 'hollowed out' for the sake of short term greed.

This short term mentality that has been engineered into our social, economic, and legal structures is going to bring about a cycle of booms and busts. We have seen two busts thus far, and are working on a third. And the third time might be the charm.

The forces of the anti-human are growing stronger and more strident. They are hungrier for power, and having laid waste to some areas, move on to others in a cycle of perpetual war and acquisition until exhaustion or collapse. The only imperative these new Lords of the World have is 'more.' 

It is only in this context that some of the recent decisions that are being made and actions undertaken can be fully understood.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

"Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming. Yet most Americans are not sharing in the recovery. While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid. Corporate profitability is not translating into widespread economic prosperity.

The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees."

William Lazonick, Profits Without Prosperity, Harvard Business Review Sept. 2014

h/t Wall Street On Parade

We Are Still In a Financial Crime Wave

In his recent column The Opposite of Stagflation Paul Krugman says that:

"One of the truly amazing (and disheartening) things about the Great Recession and its aftermath has been the continuing insistence of many economists that it’s somehow a supply-side slump, driven by the evils of Obamacare or something. This tends to come from people who view stagflation in the 1970s as having permanently refuted all things Keynes.

So I guess it’s worth pointing out repeatedly that the recent slump shows all the hallmarks of a demand-side shock; in particular, rising unemployment has been associated with falling inflation — the opposite of stagflation."

So I guess its also worth pointing out that the opposite of stagflation is not economic stagnation with declining inflation, but steady growth with very modest inflation. But given it is Paul K. we'll grant that he is assuming inflation as a reference point in this.   And in focusing in on the model battles, he is saying that we are indeed seeing stagnation, but there is deflation as his form of the Keynes model would predict.  Huzzah!

 

I will put aside for now his assertion that we are seeing declining inflation.  I think it might be said we are seeing little inflation growth overall, but with inflation appearing in certain product segments and assets.  But this is, I believe, an artifact of the way in which the Fed is pursuing very significant, top down monetary stimulus in a system that is still distorted and corrupted by the financial sector and its moneyed interests.  A few at the top are taking the greatest part of the monetary growth, and their demand is not for common goods but for luxuries, and monopolies, and more financial assets.

And so Paul Krugman is triumphant, because he would then go on to say, as he often does, that all we have to do is pour massive stimulation in to the economy from the fiscal side, and the demand side of the economy would recover as consumers could use their wages to purchase more goods.  Problem solved. 

 

And its a good piece of intellectual land to stake out, because no matter what the actual outcome in the real world, Paul will be able to argue that he was right if there is a favorable outcome.  Or if not, then it would have been favorable except that the government did not provide enough stimulus.  I would be inclined to believe that even if stagflation does eventually show up, he will argue that it was some other anomaly that does not affect his model.  A model that is too narrowly focused, and yet with too many degrees of freedom, to be useful.  

 

This works for Paul because his focus is sufficiently narrow and circumscribed, which is the failure of most economic models to provide any actual benefit for the real world, and are unsuited for the purposes of making policy decisions except at the most advisory level.  It allows him to almost completely ignore the facts on the ground, what really happened to cause the financial crisis, and what forces exist to keep it stubbornly at work despite massive top down monetary stimulus by the Fed.  

 

But like the housing bubble, when reality throws an economist a curveball, I have no doubt he will search his many hundreds of columns and find that he mentioned it, once.  And I suppose he may have mentioned reform once or twice as well.

 

His heart may be closer to the solution than the Austerians, but his mind is still carrying water for a system of learning, a method of distributing the benefits of productivity, and a political mindset that is more of an impediment to progress that an aid to it.. This is what happens when a vibrant set of theories from an original mind like John Maynard Keynes suffer from the arteriosclerosis of political dogmatism.  And after all, economics is a disgraced profession.

 

It is the hallmark of what Chris Hedges has called 'the death of the liberal class,' and along with it, the death of its conscience and sacrifice of moral principles to expediency in the service of power.  Few better representatives of this than the Clintons and Obama, and their acolytes in the status quo.  But they are presented as the alternative to an opposing political point of view so base as to almost redefine hypocrisy and greed.

 

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

h/t Yves Smith, et al.

The Recovery™ In One Chart

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas.  The wealth of another region excites their greed; and if it is weak, their lust for power as well.  Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich.

Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

Funny thing, human nature. Despite all the trappings of progress nothing ever seems to change except the names.

Empire is now called 'war on terror.'

Panem et circenses. Washington is certainly a circus, and we know who is getting all the bread.

The Recovery™ - Bubble Back To the Bar For the Hair of the Dog That Bit You

"Double, double toil and trouble,
Fire burn and cauldron bubble.

Cool it with a baboon’s blood,
Then the charm is firm and good...

By the pricking of my thumbs,
Something wicked this way comes."

William Shakespeare, Macbeth, Act 4 Sc. 1

And why would we expect anything different, given the lack of serious reform and the careful targeting of the monetary expansion into the hands of the same old TBTF financial firms that have been distorting markets and misallocating capital for their own advantage since the repeal of Glass-Steagall?

The best way to cure the damage from a widespread, real economic collapse in the aftermath of a financial asset bubble is surely a continuation of the failed policies of the past, and yet another asset bubble targeting the most wealthy in the hope that something will trickle down to the rest.