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Because economics is a social “science,” it contains more bulls**t than a rodeo chute.

The latest example is called “secular stagnation,” and wouldn’t you know it, right in the middle is the amazing Larry Summers, about whom you can read by clicking the link.

Never heard of “secular stagnation”? Here is a description by Jacob Davidson, a news editor at Time Magazine:

As a diagnosis, secular stagnation is simple: It’s the idea that the economic problems the U.S. continues to face aren’t a product of the “business cycle,” the ebb and flow of boom times and recession (hence the “secular” part), but may well be permanent drags on the modern economy.

“It’s a kind of long term and sustained slow-down in economic growth,” says Larry Summers, who served as Bill Clinton’s treasury secretary and is widely credited with dusting off the concept of secular stagnation and bringing it into the mainstream.

Yes, secular stagnation is simple: Slow growth.

But why say, “slow growth,” when you can give it the name, “secular stagnation,” and sound like you know what you’re talking about?

The phrase was originally coined in a 1938 address by economist Alvin Hansen to the American Economic Association.

Grappling with the sluggish recovery that followed the Great Depression, Hansen predicted that slower population growth and a lower speed of technological progress would combine to thwart full employment, wage increases, and general economic expansion.

In both cases, Hansen’s reasoning was the same: without new people entering the work force and new inventions coming onto the market, there would be less investment in new goods, employees and services.

Without investment, fewer businesses would open or expand, growth would slow, and more workers would be unable to find jobs.

And why is that appropriate to today’s situation? Do we have slow population growth? No, especially if we don’t deport 11 million immigrants, who constitute 11 million consumers of goods and services.

Do we have lower speed of technological progress? Are you kidding? Technology has exploded in the last two decades.

The article continues:

Hansen painted an eerily familiar picture: “This is the essence of secular stagnation,” he explained, “sick recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment.”

He could have been describing 1938 or 2016.

The comparison between 1938 and 2016 is nuts, but suddenly, unexpectedly, it gets right to the heart of the matter:

World War II effectively solved at least one of Hansen’s concerns. The U.S. population exploded, thanks to a post-war baby boom.

Meanwhile, high government spending during the conflict boosted the economy, and new inventions jet airplanes, interstate highways, and eventually computers kept productivity and growth churning.

And there it is: “High government spending during the conflict boosted the economy.”

Could it be clearer or simpler? HIGH FEDERAL SPENDING —–> GROWING ECONOMY

Unfortunately, despite the obvious and undeniable experience of federal spending during WWII bringing us into prosperity, today’s economists, politicians and media writers either don’t get it or don’t want to admit it.

No, it wasn’t the bloodshed that stimulated the economy. It wasn’t the destruction of entire nations. It was:

HIGH FEDERAL SPENDING —–> GROWING ECONOMY

There were jobs because the federal government paid for jobs. It wasn’t even population growth. Millions of people left to serve overseas. It was, very simply: HIGH FEDERAL SPENDING —–> GROWING ECONOMY

And notice that the federal “debt” (i.e. deposits in T-security accounts) rose dramatically during WWII, and yet, miracle of miracles, the u>Monetarily Sovereign U.S. didn’t default, and in fact, never missed a single payment on any financial obligation.

We learned all that. It happened right there in front of us. Federal spending grew a previously moribund economy and federal “debt” was no problem whatsoever.

So how the heck could we, today, be talking about reducing the deficit, reducing the debt and still not understand what is happening to us?

One factor almost everyone agrees on is the lack of population growth that concerned Hansen has re-emerged as a problem.

Population growth means people need more stuff—especially capital-intensive things like housing that require especially large expenditures—and businesses invest in new workers and equipment to provide that stuff.

The reverse is also true: as U.S. population growth has fallen and the baby boom generation approaches retirement age, the number of new consumers and workers who can produce and buy things has dropped off.

“Slow or negative growth in the working-age population means low demand for new investments,” Nobel prize winner Paul Krugman explained in a 2014 article.

I’m not sure that “almost everyone agrees” or that low growth in “working-age” population is the problem. Aren’t older people consumers? Tell that to the medical and vacation industries. Aren’t children and teenagers consumers? Tell that to the clothing and entertainment industries.

But clearly a growing population does provide more consumers for economic growth.

And, as has become depressingly common, we again fail to learn from experience. Lying fearmongers stoke our xenophobia. We have made the immigration process more and more difficult, and the rabble rousers even wish to build a wall, embargo one whole religion and to deport 11 million consumers.

How then will we achieve population growth? Force everyone to take Viagra and ban all contraceptives?

Changing technological trends have also been blamed for discouraging investment. Summers notes that this has happened in two ways: first, the internet revolution has allowed companies like WhatsApp—which had just 55 employees when it was acquired for $19 billion by Facebook in 2014—to reach a higher market valuation than Sony.

Growing a multi-billion dollar company used to require hiring lots of workers, constructing offices and factories and so on. Nowadays, all you need is a loft and a couple of Macbooks.

Right. Humans have figured out how to grow an economy with so much human labor. All this proves is that lack of jobs is not a problem; lack of money is the problem.

Isn’t the whole idea of progress supposed to include our having to work less and to spend more of our lives doing what pleases us?

What if the 40-hour-week became the 20-hour-week, and the federal government paid for many things you now personally must afford: Healthcare, education, transportation, etc? Isn’t that where humanity should be heading?

Summers also identifies a related problem: the types of capital companies actually do need to invest in—computers and software—have gotten drastically cheaper. The result is that as businesses open or expand, they no longer need to spread their wealth around by purchasing costly machinery.

According to Summers, our economy was better off without labor saving devices for business. For him, business was much better with hundreds of people sitting in a huge production line, hand screwing widgets.

Berkeley professor Barry Eichengreen adds that all types of capital goods, not just computers, have fallen in price over time as manufacturing has gotten increasingly efficient.

“The one factor I’m most convinced by is the relative price of capital goods has being going down for 30 to 40 years,” the professor says. “Firms can do the same things spending less.”

Get it? Efficiency supposedly is a bad thing for economic growth.

Ah, witness the total departure of common sense from the “science of economics.

Beyond demographics and technological change, there are a myriad of other explanations for lack of investment. Growing inequality means those most likely to spend their money, the middle class and people with lower incomes, have seen their wages grow the least.

Thank you right wing politicians, who do everything possible to cut the incomes of the non-rich. Cut Social Security, cut Medicare, cut Medicaid, cut all poverty aids, cut aids to education: That how to stimulate the economy in the world of the right-wing.

That means less spending and less demand, which ultimately means less production and hiring.

Another proposed factor is high levels of consumer debt, which depresses spending as consumers divert money they would have used at the mall, say, toward paying their credit card interest.

When consumers pay credit card interest, where does that interest go? It goes to credit card companies, which employ people, and which use those interest payment to pay salaries.

If interest payment stay in the economy, they are not a drag on the economy. The only drag on the economy is dollars leaving the economy.

Harvard Professor Kenneth Rogoff agrees with some of the stagnation theory, such as lower population growth hurting output, but attributes most of the slowdown to a passing “debt supercycle” where post-recession economies are dragged down by high levels of debt that hold back growth until deleveraging is complete.

Not sure to what debt he refers — personal or federal. Federal debt is, as we have explained, beneficial to the economy.

Personal debt is the result of borrowing, which creates dollars. And, one man’s debt is another man’s assets. So, “high levels of debt” can be rephrased, “high levels of assets.”

Former Federal Reserve Chair Ben Bernanke chalks up slow post-recession growth to a global savings glut where investment is held back by various trade and economic policies, such as the decision by some countries to build large hoards of foreign currency reserves.

So there is too much debt and also too much savings? Could it get any sillier?

What makes secular stagnation so disconcerting for economists who do believe in the theory is that it defies traditional remedies for poor growth. In the past, if the economy had too little investment and growth stalled, the Federal Reserve could simply lower interest rates, which reduces returns on savings and makes borrowing and investing cheaper.

No, no, no, no, no. In the past, if the economy had too little investment and growth stalled, the federal government could simply increase deficit spending. Remember WWII.

But wait, is a light dawning?

One possible fix: instead of lowering interest rates, have the government fill in the investment gap with its own spending.

“I think there’s an overwhelming case for increased public investment, which I think is likely to raise economic growth,” Summers says.

He recommends a massive, 10-year infrastructure renewal program that would upgrade existing infrastructure like roads, bridges, and airports and build new capacity in areas like broadband, green technology and health care.

One downside to that plan is it’s unclear exactly when the economy would stop having to use government spending as a crutch for growth.

Summers is right (!) about federal spending.

Calling Federal deficit spending a “crutch” for economic growth is like saying “food is a crutch for a child’s growth.”

Federal deficit spending is absolutely necessary for economic growth. It’s a good and natural thing, not something to be avoided.

The good news is high government investment may improve at least some of the dismal economic fundamentals that power stagnation. For example, better infrastructure and more spending on education could increase productivity and stimulate growth.

Investments in green technology and health innovations could likewise produce new inventions and new industries.

Moreover, some of the factors dragging at the economy could actually power a government spending-based recovery. Low interest rates make borrowing money historically cheap, meaning the U.S. would be able to upgrade its infrastructure for relatively bargain prices.

If Summers’ plan works and growth rebounds, tax revenues would also increase, lowering America’s overall debt-to-GDP ratio.

We have made the transition from silliness to madness. Now, increasing tax revenues, which takes dollars out of the economy, supposedly is good for the economy.

And this is the state of economics, today, where lies beget illogic, and the poor public pays the price.

You now may shower and try to wash away the massive BS you have experienced. My apologies.

Rodger Malcolm Mitchell
Monetary Sovereignty

 

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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually Click here
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
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10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

THE RECESSION CLOCK

Recessions begin an average of 2 years after the blue line first dips below zero. A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero. There was a brief dip below zero in 2015, followed by another dip – the familiar pre-recession pattern.
Recessions are cured by a rising red line.

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

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Mitchell’s laws:
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•The more federal budgets are cut and taxes increased, the weaker an economy becomes..
•No nation can tax itself into prosperity, nor grow without money growth.
•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)
•Deficit spending grows the supply of money
•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
•The limit to non-federal deficit spending is the ability to borrow.

•Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between rich and the rest..
•Austerity is the government’s method for widening the Gap between rich and poor.
•Until the 99% understand the need for federal deficits, the upper 1% will rule.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY