A dreary jobs market, stagnant GDP, declining household income, falling wages, workforce reduction, anemic production… You name it. The economy’s clunking down the road like an old Cutlass Supreme.
No matter what fixes are made, the thing can’t seem to fire on all cylinders. A blown head gasket’s replaced and the very next day the spark plugs are fried. Replace those and a piston ring blows.
Now, five years after the death of Lehman and the subsequent Great Recession, the recovery’s as lethargic as a junk yard dog. Perhaps it needs a good kick in the rear to bare its teeth and put up a fight. But where would the kick come from? We have a few ideas…
From our perch, we see an economy that’s larded over with too much debt and funny money. If you recall, all the stimulus was supposed to boost demand and GDP growth. Before long, new jobs would appear faster than they could be filled and a new era of prosperity would be upon us.
What a crock of horse puckey that’s turned out to be. Instead it has resulted in a magnificent handicap for everyone.
Elegant Fiddle-Faddle
Did you know there are now 47.7 million people receiving supplemental nutrition assistance? Somehow 16 percent of American’s are unable to provide for their daily bread without the benevolent hand of government helping them out.
In 2008, the year Lehman disappeared from the face of the earth, just 28.2 million people were enrolled in SNAP. In other words, over the last 5-years SNAP has grown over 40 percent. Over this same time, U.S. GDP has increased just 8.9 percent.
Did you also know that taxpayers – that’s you – spend $200 billion a year paying people not to work? Unfortunately, that’s the cost of granting government paycheck for life to an abundance of able bodied Americans.
What’s more, on the monetary side, the flood of cheap credit has been an utter failure. Since 2008 the Fed’s tripled its balance sheet yet the economy’s still at a net loss for jobs. Through all their elegant fiddle-faddle, the Fed’s succeeded in proving that creating massive reams of money doesn’t miraculously create jobs.
Here at the Economic Prism we take these recent experiences, bang our head against the wall, and conclude that, just maybe, it’s time to try something else. In fact, perhaps Congress and the Fed should not add more fiscal and monetary stimulus; but rather, they should subtract it.
End Stimulus Now!
Sure, taking stimulus away may result in something very bad happening…especially when dependents find their government checks have been cutoff. So, too, reducing the lard may free people from their oily slumber. Here’s what we mean…
“Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system,” advised Treasury Secretary, Andrew Mellon, at the onset of the Great Depression. Alas, the callous words of Mellon fell on deaf ears. The government attempted to bailout the economy and succeeded in turning a downturn in the business cycle into a 10-year economic depression.
Today’s contemporary politicians and central bankers, by continually propping up an over indebted economy, haven’t allowed markets to purge the rottenness out of the system. Instead, they’ve erected a mammoth class of dependents.
When it comes down to it the country can no longer borrow and spend its way to prosperity. There are too many obligations. There are too many dependents. They are too massive for the productive class to support. So why bother extending it out any further?
Instead, dial it back. Reduce the lard. Stop QE. End stimulus now. Get it over with so people can pick up the pieces and get on with it – the quicker the better.
Sincerely,
MN Gordon
for Economic Prism
