Thursday, June 16, 2016

Supply Side Economics Running on Empty

As this latest report about the so called "neutral rate" of Federal funds policy indicates, at least to this non expert, the Federal Reserve bank is at a complete loss as to what to do next; other than not much of anything but watching in utter confusion.

To really appreciate this you have to keep in mind that, after years of pumping cash into the system with the "quantitative easing" policy, and keeping the Fed borrowing rate at zero, or lower, They are scratching their heads now wondering why inflation isn't advancing above the current Fed lending rate. An amazing situation after all when you've had corporations awash in both cash on hand, and profits, going on market concentration, or market diversity, buying sprees, and yet overall economic growth has been looking like the growth of intelligence in this country.

What could possibly be going on here? Could it be... Satan? ...No, not him, though I'm sure they'd be happy enough if that were the case. Perhaps all of these years of keeping wage growth so low might have something to do with it. Because, gee, what would people actually do with real amounts of disposable income? Besides pay off a huge amount of debt of course. Maybe they'd actually start buying things in significantly greater quantities? And all that one can say about that is... Gosh, what a concept!

The problem, of course, here, is that to rearrange how the gains made from production and commerce are distributed would require that the holders of capital, and production, would have to be satisfied with lower real profits in order to make it happen. That they might then gain in the long run with real growth just doesn't seem to occur to them, but that's greed for you. It certainly does tend to make taking the long view a good deal more difficult.

What's really crazy here, though, is that this lack of growth, hard for the average working person though it may be, has been quite good for the planet, relatively speaking of course; as less consumption usually means less pollution overall. And with carbon still rising pretty damn fast anyway, shouldn't we take some comfort there? ...Well ...Probably not. If for no other reason than this just illustrates why we're damned if we do and damned if we don't as far as options go in a cost based economic operating system.

At the end of the day, what you have here, is just another example of one of the contradictions inherent in Capitalism. And another reason why it is long past it's use by date.

Fed's Yellen Acknowledges Difficulty of Escaping World's Low Rate Grip