Saturday, April 30, 2011

The technical term is 'capital strike'

This recovery has been the most anemic in the postwar period.  Indeed, it is only exceeded in its badness by the 'great' depression where a similarly radical policy mix was implemented.  Our fearless leaders have provoked a ferocious capital strike - businesses aren't hiring or investing because there is so much uncertainty about the policy environment.  From labor to real estate to healthcare to finance to the environment radical change is either being implemented or proposed.  Existing rules are being implemented arbitrarily and with a vindictiveness not seen since Carter.  So with the traditional engine of growth stalled, the only other alternatives to goose growth are ruinous debt spending and the printing press.  Of course this has happened virtually everywhere people have been stupid enough to try it:  England, Australia, Holland, Sweden, France, Spain, Greece.....and it always ends in tears.


DUDE, WHERE’S MY RECOVERY? “Seven quarters into the Obama recovery, GDP growth has averaged an annual rate of only 2.8 percent. In contrast, since 1970, the first seven quarters of previous recoveries averaged 4.6 percent. The poor growth rate is especially surprising since the preceding recession was so severe, there should have been ample room for high growth as the unemployed returned to work. For example, the Reagan recovery followed a similarly high unemployment rate and saw the economy grow at an average annual growth rate of 7 percent . . . . The slight decrease in unemployment – currently at 8.8 percent — has been touted as good news. Yet that slight drop has largely been the result of job-seekers giving up looking for work and leaving the labor force. On top of that, the new jobs that have opened up have primarily been temporary jobs, the number of permanent jobs has actually fallen.”

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