T Nation

America: Teetering on the Edge of Economic Catastrophe


#1

Facts

-US public and private debt are in the stratosphere, dwarfing 2008 levels.

-The Obama stimulus and Fed policies of the last 7 years have failed; the economy and employment picture are pathetic. 0.7 GDP growth last quarter. Labor participation rate at all time low. Most of the jobs that have been created since Obama took office are low paying, part time, independent contractor, babysitting type gigs.

-At this point, neither consumers nor government can withstand higher interest rates, and even this small rate hike recently sent the markets into a nose dive. If the Fed raises rates, a severe recession will ensue when debtors go bankrupt; but on the other hand, the markets now know that QE doesn’t work, so lowering rates won’t revive the economy, will just bid up asset prices in nominal terms.

-China now has much bigger debt problems than it did when the last recession hit. As a result, they can’t afford to bail us out again, leaving the Fed as the only buyer of US debt once the markets realize we’re headed into QE-infinity.

So where do we go from here? To Hell, that’s where.


#2

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#3

Imagine that, subsidizing people who do shitty work turned out bad. Weird.


#4

yeah, well, at least Bon Scott’ll be there!


#5

The US economy is inarguably in a better position today than it was at the onset of the Great Recession. Anyone who believes otherwise is an ideologue and/or doesn’t have a rudimentary understanding of micro, macro, and international economics 101. Virtually all economic indices demonstrate that the American economy has recovered and is retooled for dynamic economic growth. The failure of other states to keep up with the United States economic recovery is what will limit the American economy more than anything. Could it be better? Of course. But it’s hardly the fire and brimstone that (non-economists) contend. For all of the myriad problems that face humanity, we still live in a golden age.

Top economists’ take on the US economy at the recent Economic Association’s annual conference.

Martin Feldstein
Harvard University economist and former chairman of the White House Council of Economic Advisers under President Ronald Reagan

“The U.S. economy is now in very good shape. We’re essentially at full employment, with the overall unemployment rate at 5%, and the unemployment rate among college graduates a remarkably low 2.5%….Looking ahead, the growth of GDP in 2016 will be limited by the absence of excess capacity in the economy rather than by a lack of demand….The primary risk to the U.S. economy in the coming year is probably the mispricing of assets and the provision of high-risk loans, both of which are the result from excessive reaching for yield by investors and lenders because of the very low interest rates at all maturities that have prevailed in recent years.”

Joseph E. Stiglitz
Columbia University economist and former chairman of the White House Council of Economic Advisers under President Bill Clinton
“I think there is a problem of underlying aggregate demand, that the headline unemployment rate disguises a lot of unemployment and that while it is very good news…there is essentially full employment of college graduates, there are large parts of the American labor market that [are] underemployed or unemployed. And that’s reflected in inflation, inflationary pressures, and one of the reasons wages have been doing so poorly.”

Loretta Mester
President of the Federal Reserve Bank of Cleveland
“The economy has made substantial progress toward the Fed’s goals of maximum employment and price stability—enough progress that in December the [rate-setting Federal Open Market Committee] moved its target federal funds rate up by 25 basis points from essentially zero, where it had stood for seven years. Even with this increase, monetary policy is expected to remain accommodative for some time to come and will continue to support the expansion. I believe this first step on a gradual path toward more normal policy should be viewed as welcome news. It is an indication of monetary policy makers’ confidence that the economic progress we have seen in recent years will continue.”

Betsey Stevenson
University of Michigan economist and former member of the White House Council of Economic Advisers under President Barack Obama
“It’s much harder to achieve sustained economic growth over 3% with declining labor-force participation….Nearly one in five prime-age adults are sitting on the sidelines today and not participating….That points out just how the unemployment rate, the 5% unemployment rate—while it’s a terrific victory in terms of recovery from the recession—it is only a small slice of the underutilized talent in the economy.”


#6

Are these the same ivory tower eggheads who were telling Barney Frank, et al that the housing, mortgage and financial markets were healthy just weeks before the last crash?


#7

You’d have to speak with the parties concerned. It’s unfortunate that anti-intellectual epithets are a substitute for discussion and articulated argument. Those cited are hardly “ivory tower eggheads” disconnected from the practical concerns of everyday; all are former or current practitioners in a discipline that is eminently practical.


#8

Are you for real? Because this economy sure isn’t.


#9

Cogent reaponse. Let me guess, you believe the international monetary system should return to a gold standard.


#10

Bismark, what is a number?


#11

I suppose much depends on where one lives and what business they are in. In my area (north Texas) things are going very well. Every where you look construction is taking place, businesses are hiring, and wages are rising. Housing is at a premium and gas prices are below $1.50 a gallon. Although ‘White Collar’ jobs in energy are being shed; ‘Blue Collar’ jobs have rebounded and are in high demand. Anyone with meager skills, the ability to show up on time, and without a variety of felony convictions is working full time. The public debt issue goes back four decades. (Reagan from 1.0t to 2.9t) (Bush1 from 2.9t to 3.4t) (Clinton from 3.4t to 5.7t) (Bush2 from 5.7t to 11.8t) (Obama from 11.8t to 18t) The US started shedding MFG jobs in the 70s and has never stopped; the economy has been an artificial consumption over production economy for some time now. I’m certain candlemakers resented the gas lamp back in the day. I’m 53 and interest rates are lower now than at any point in my lifetime…borrowing has never been cheaper! There is plenty more to be done; however we are certainly in better shape than we were six or eight years ago.


#12

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#13

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#14

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#15

The foundation has been sinking for over thirty years push…??


#16

Push…
The fact that the manufacturing exodus began in the '70’s and continues to this day doesn’t make the 2016 economy more robust.

Another thing it does is force the US into even more active intervention around the globe in the effort to protect trade stability. It’s more crucial than ever now that the World Policeman walk his beat and swing his baton…all at the expense of the service industry employed American taxpayer.

BCT…careful Push; that sounds like an argument for safety-net governing.


#17

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#18

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#19

Why is the manufacturing sector such a critical part is of evaluating the health of the US economy? Barriers of trade that are used to prop up some manufacturing industries, such as quotas and tariffs, are detrimental to domestic welfare, no?

How does does the manufacturing exodus lead to the United States to use force more frequently? Can you cite a specific example?


#20

I’m not going to enter into a Socratic argumen. If you have a point, make it.