The numbers are rosy. The unemployment rate is officially the lowest it has been in 50 years. The stock market is riding high. The growth rate last year was approaching 4% and even now is fairly solid. What could go wrong? Those numbers hide the fragility.
The unemployment numbers are so low because a lot of people have simply stopped looking for work. The actual unemployment rate in the US might be more like 12% or 15%. Nobody really knows. The numbers for low employment are structurally cooked.
The stock market is riding high just like in 2007 the real estate market was riding high. This is the sugar high from stock buyback programs. The super rich, flush with cash, finding no productive use for the money, are simply buying back stocks. The corporate interests are in this vicious cycle. That is further exacerbating inequality.
It feels like the US and the world simply kicked the can further down the road when 2008 happened. No lasting solution was put into place.
The US deficit and debt are real problems. In the depth of 2009, Obama struggled to put together a trillion dollar stimulus package. I think he asked for more but got only 700 billion. These days the US runs a trillion dollar deficit as a matter of fact. What was thought of a big deficit in 2009 these days is simply routine. A massive budget deficit has become business as usual.
The debt is so big and getting bigger, it is not even talked about. It has been archived in the denial file.
No, I am not talking about Trump. He never was the solution. A lot of people who have stopped looking for work were people who thought Trump was it. And then they realized they have been duped. And in shame, they stopped simply looking for work. It is not a good feeling to realize you have been duped.
I am talking about economic theorists and political theorists and thinkers in general. Where are the economic theorists at? Abstract thinkers like Paul Krugman and Raghuram Rajan do show up in the mainstream media. But I don't see them offering solutions. The very paradigm needs to shift. Big thoughts are needed. The band-aid remedies are as misleading as Trump's demagoguery. There is a poverty of imagination.
Maybe it is time to delink the global economy from the dollar. Just like there was a time to delink the dollar from gold. The place of the dollar in the global economy is the very reason why the US runs such large deficits and debts. And those large deficits and debts come up with a price paid for by ordinary Americans. The current arrangement is not a healthy arrangement perhaps. For a national currency to also serve as the global currency is perhaps too much of a burden on that national currency.
Perhaps the WTO needs a new round of negotiations. Trade is a good thing. There is sound economic theory behind trade, still largely undisputed. But maybe the WTO cannot act holier than thou about the resulting inequality. People are not abstract. People are real. Trade perhaps can no longer be delinked from the inequality it creates. Rises in productivity are good. But the resulting inequality is existential. There is a need for a redesign. People are hurting for lack of jobs in the US. People are hurting for jobs in India. Neither the ruling party nor the opposition party, in either case, seem to have any real solutions. In such a scenario the very democracy will get questioned given enough time.
Trump is but the American Boris Johnson who argues for a "hard Brexit." That hard Brexit will turn Britain into the new Greece. But Boris Johnson trades in anger. He does not care. Those who trade in anger and feast on that anger simply want more people angrier. The best case scenario is self-destruction. A bad scenario is large scale destruction. The world avoided a Great Depression in 2008. This time it might be harder to do the same. Back then the leaders were at least talking. This time that "talk" is missing. Irrationality holds sway.
Elizabeth Warren is the only one with a plan. Her wealth tax is that plan. She has not yet linked that to the idea of a Universal Basic Income. Andrew Yang talks about UBI. But that UBI does not stand on sound financial footing yet. He has not linked it to some kind of a wealth tax. Not yet. But even the wealth tax is mere tinkering. It is sound tinkering. It is a start. But a real solution is a much more ambitious redesign. Where are the thinkers at?
Should there be a 2008 style meltdown, and you never know with Trump playing with fire, the US central bank has little to no option left. When the interest rate is already near zero, how do you further cut it? My thought is the Fed will be forced to do a UBI, a quantitative easing for the people. It will be forced to issue new money and simply give it to every American in the form of a direct deposit each month. The Fed will have nowhere else to go. There is no room for interest rate cuts. The banks are already flush with cash, as are the corporations. So it is not lack of cash that is hurting the economy. There is no room for quantitative easing for the banks. The only option left is a quantitative easing for the people.
But that can only go for a few years. A real UBI will have to be designed and implemented as a conscious choice made by elected leaders. The crisis might force the introduction. But there will be a need for a conscious second act.
The unemployment numbers are so low because a lot of people have simply stopped looking for work. The actual unemployment rate in the US might be more like 12% or 15%. Nobody really knows. The numbers for low employment are structurally cooked.
The stock market is riding high just like in 2007 the real estate market was riding high. This is the sugar high from stock buyback programs. The super rich, flush with cash, finding no productive use for the money, are simply buying back stocks. The corporate interests are in this vicious cycle. That is further exacerbating inequality.
It feels like the US and the world simply kicked the can further down the road when 2008 happened. No lasting solution was put into place.
The US deficit and debt are real problems. In the depth of 2009, Obama struggled to put together a trillion dollar stimulus package. I think he asked for more but got only 700 billion. These days the US runs a trillion dollar deficit as a matter of fact. What was thought of a big deficit in 2009 these days is simply routine. A massive budget deficit has become business as usual.
The debt is so big and getting bigger, it is not even talked about. It has been archived in the denial file.
No, I am not talking about Trump. He never was the solution. A lot of people who have stopped looking for work were people who thought Trump was it. And then they realized they have been duped. And in shame, they stopped simply looking for work. It is not a good feeling to realize you have been duped.
I am talking about economic theorists and political theorists and thinkers in general. Where are the economic theorists at? Abstract thinkers like Paul Krugman and Raghuram Rajan do show up in the mainstream media. But I don't see them offering solutions. The very paradigm needs to shift. Big thoughts are needed. The band-aid remedies are as misleading as Trump's demagoguery. There is a poverty of imagination.
Maybe it is time to delink the global economy from the dollar. Just like there was a time to delink the dollar from gold. The place of the dollar in the global economy is the very reason why the US runs such large deficits and debts. And those large deficits and debts come up with a price paid for by ordinary Americans. The current arrangement is not a healthy arrangement perhaps. For a national currency to also serve as the global currency is perhaps too much of a burden on that national currency.
Perhaps the WTO needs a new round of negotiations. Trade is a good thing. There is sound economic theory behind trade, still largely undisputed. But maybe the WTO cannot act holier than thou about the resulting inequality. People are not abstract. People are real. Trade perhaps can no longer be delinked from the inequality it creates. Rises in productivity are good. But the resulting inequality is existential. There is a need for a redesign. People are hurting for lack of jobs in the US. People are hurting for jobs in India. Neither the ruling party nor the opposition party, in either case, seem to have any real solutions. In such a scenario the very democracy will get questioned given enough time.
Trump is but the American Boris Johnson who argues for a "hard Brexit." That hard Brexit will turn Britain into the new Greece. But Boris Johnson trades in anger. He does not care. Those who trade in anger and feast on that anger simply want more people angrier. The best case scenario is self-destruction. A bad scenario is large scale destruction. The world avoided a Great Depression in 2008. This time it might be harder to do the same. Back then the leaders were at least talking. This time that "talk" is missing. Irrationality holds sway.
Elizabeth Warren is the only one with a plan. Her wealth tax is that plan. She has not yet linked that to the idea of a Universal Basic Income. Andrew Yang talks about UBI. But that UBI does not stand on sound financial footing yet. He has not linked it to some kind of a wealth tax. Not yet. But even the wealth tax is mere tinkering. It is sound tinkering. It is a start. But a real solution is a much more ambitious redesign. Where are the thinkers at?
Should there be a 2008 style meltdown, and you never know with Trump playing with fire, the US central bank has little to no option left. When the interest rate is already near zero, how do you further cut it? My thought is the Fed will be forced to do a UBI, a quantitative easing for the people. It will be forced to issue new money and simply give it to every American in the form of a direct deposit each month. The Fed will have nowhere else to go. There is no room for interest rate cuts. The banks are already flush with cash, as are the corporations. So it is not lack of cash that is hurting the economy. There is no room for quantitative easing for the banks. The only option left is a quantitative easing for the people.
But that can only go for a few years. A real UBI will have to be designed and implemented as a conscious choice made by elected leaders. The crisis might force the introduction. But there will be a need for a conscious second act.
The US Economy Is In Trouble https://t.co/bIfSWvf66m @paulkrugman
— Paramendra Kumar Bhagat (@paramendra) June 17, 2019
