Did Washington Save the Economy? Part 1
A "jobful" rebound is unlikely to goose the recovery.
Consequently, job gains from purely cyclical recalls are likely to be modest in scale, slow in coming, and generally not at all commensurate with the jobful recovery scenario. The problem is one of pure math. With government-funded income growth now likely to slow sharply (if not cease), consumer credit still contracting (and not likely to rebound) and private income growth tepid, there’s simply little prospect of sufficient strength in final demand to trigger a rapid or extensive recall of the cyclically unemployed. It will be a slow slog.
At the end of the day, the central missing ingredient is the absence of any apparent prospect for significant secular growth in most job categories across the US economy. Moreover, that ingredient has been missing for more than a decade now, even if temporarily obscured by the past headlong expansion of the HES Complex. Here, the underlying reality is that the American consumers’ great spending spree during the Boom years didn’t fund a corresponding cornucopia of jobs on Main Street. Instead, these dollars flowed to the factories of East Asia and to windfall rents captured by speculators in domestic land, resale properties, and financial products. Stated more graphically, the boom-time spending that didn’t end up abroad flowed in the main, not horizontally to the job market multitudes throughout the American hinterlands but vertically into the towering incomes of the Wall Street few.
Not coincidentally, the recent frantic money-printing by Bubbles Ben and his posse hasn’t changed this condition. In the present case, nearly all of the $1.7 trillion monetization of government and agency paper undertaken by the Fed over the past year has literally been sequestered within the canyons of Wall Street. The freshly minted money so beneficently bestowed either sits idle as book entry excess bank reserves at the New York Fed or has flooded the Fed-controlled repo market where it provides zero-cost funding for Wall Street’s manic trading bots and a fresh installment of the bountiful rents they extract.
This is Part 1 in a 5-part series. Click here to read Part 2. Click here to read Part 3. Click here to read Part 4.
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