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Slow Growth
Slow Rates Sink States
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  • Anthony

    Long term zero rates can leave perception that money/capital has no real time cost. But, more to point, yes WRM economic growth affects people’s attitudes and since 2008 (as you allude) we have witnessed such world-wide. Perhaps because in some way the fear of moving down the economic scale is more compelling than the opportunity to move up, slow economic growth often hardens both attitudes and perception of people/country affected. Some economist have argued that there exist at such times (a stagnant economy) the perception that one person’s gain is necessarily someone else loss (people who get ahead are perceived not only as doing so at other people’s expense but as directly disadvantaging others). For that reason, economic growth for democracies (but really for any social organization) if not sine qua non certainly helps to mediate societal frictions (people respond differently to hopes of having more than to fears of having less). So here’s to growth and honesty as benchmarks helping to address the disquiet you infer.

  • Jacksonian_Libertarian

    “Economic forecasting is always an uncertain business, and the weird economic reality we’ve inhabited since 2009 (near-zero interest rates, slow growth, low inflation, and asset bubbles) is something nobody really seems to understand.”

    All of these facts are indicative of a deflationary depression, and it isn’t coincidence that the Fed stopped “Quantitative Easing” in October 2014 and the economy has since turned down.

    It isn’t that nobody seems to understand, it’s that almost nobody is willing to face the Truth. The Truth is that America and most of the world is 7 years into “Great Depression 2.0”. Economies naturally rollover into deflation when private debt reaches an unsustainable level in a low inflationary economy. What little inflation people see is “Consumer Inflation” mostly caused by the EPA’s alcohol in fuel mandate which has tripled the price of Corn and all its thousands of products, and not inflation in the overall economy.

    This is all the Fed’s fault, they could have pushed for “Quantitative Easing” and inflation during the Housing Bubble. They could have raised interest rates and bank capital requirements to shut down the expansion of private debt. Now those 2 tools are gone, as you can’t lower interest below 0%, and no body wants to borrow now and the banks want to lend only to people and businesses with perfect credit. That leaves them with only “Quantitative Easing” and in a normal inflationary economy the $1+ Trillion per year the Fed has been printing would have created massive inflation. The FACT that it hasn’t is proof positive of a deflationary economy.

    Deflation is a trap, the only way out is a huge reduction in private debt, either by forgiving the debt or a large enough inflation that debts shrink in value and become easier to pay over time as wages rise.

    I believe that the Fed should payoff all foreign held US Treasuries some $6+ Trillion. And then put that money with the $2+ Trillion already held by the Fed, and use it to create individual and inheritable private Social Security Accounts for every citizen. This would increase every American’s net worth by about $30,000 and fix the Social Security Ponzi Scheme at the same time. With $6+Trillion in cash outside the US, America’s trade deficit would reverse itself, inflation would reignite, private debts would become manageable again, and the economy would turn around and start growing again. Once America’s economy was growing again, it would pull much of the rest of the world out of the ditch it is in.

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