Free Markets, Free People

lost decade


Economically, the whole world has become Japan

We’re talking Japan of “the lost decade” (now a couple of decades old).  We harp about markets and government intrusions here and explain why they’re almost always “a bad thing”.  Well, this is about market intrusion on a grand scale:

One of the consequences of all the stimulus and subsequent QE is that long time traders of our markets know they are screwed up. Consistent printing of money and 0% interest rates world wide have created their own economic imbalances. As the saying goes, there is no free lunch.

Economists such as Taylor, Cochrane, Zingales, Rajan and Murphy have said as much over the past four years. Turns out, they were right and the Keynesians are wrong.

The government stimulus had a multiplier effect of 0. It did nothing for job growth or GDP growth in the US. Combine the inefficiency of US fiscal policy with the continued implosion of Europe, and you have a world wide malaise. In China, because of macro economic effects, wages are rising, costs to produce are increasing. Companies are also wary of both the poor property rights system and the lengthened supply chain. China is slowing down.

Remember all the talk about the multiplier effect of the stimulus?  Yeah, disregard.

Meanwhile in the rest of the world the effects of all these market intrusions/manipulations are having their effect.

As the title says, we’re all Japan now.

Thanks, government(s).

~McQ

Twitter: @McQandO


Meanwhile, back to the mundane but very important stuff–the economy

I think Bob Gorrell’s cartoon fairly represents what we should be talking about now after a week of bin Ladanpalooza.

 

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As Dale said in the podcast last night, it seems much more likely we’re in the 2nd year of a “lost decade” than any real recovery.  You get the feeling, or at least I do, that our so-called economic experts at the tiller of the ship have absolutely no clue as to how to proceed.    Dale also mentions that if we were calculating unemployment and inflation like we used too in the ‘80s we’d most likely be looking at about 18% unemployment and 10% inflation and wearing our “Whip Inflation Now” buttons already.

In the meantime you can literally see the steam escaping the GOP push to trim the budget, cut spending and downsize government.   It’s like everyone in government (and many voters) are still in denial.

If we were to resurrect the Misery Index, I’d dare say we’d be in new territory speaking of misery.  And, as I stated on the podcast, I’m surprised there aren’t those out there asking Ronald Reagan’s favorite questions – “Are you better off today than you were 4 years ago?”

My intent isn’t to sound alarmist, but maybe it’s time to be more than just a little alarmed.  Commodities are rising, wages are flat, and while we did see over 200,000 jobs created this past cycle, 60,000 of them were at McDonalds – literally – and we saw over 400,000 initial claims for unemployment registered.  “Unexpected”, of course.

In fact, it seems that we’re getting sunshine pumped up our skirts with weekly pronouncements that it is “getting better” out there.  Well, I for one am not seeing that.

You?

~McQ

Twitter: @McQandO

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