Posted on 03/22/2014 10:47:27 AM PDT by blam
EL-ERIAN: The State Of 'The New Normal' (Devastating)
Mohamed El-Erian
March 22, 2014
Editor’s Note: Business Insider reached out to Mohamed for an update on the New Normal. Here is what he sent us in response.
The context: When first rolled out in a May 2009 PIMCO publication, the concept of the “new normal” attracted only limited support in economic, market and policy circles. But after five years of frustratingly-low economic growth and alarmingly-high unemployment, the concept has caught on. It also relates to the more-detailed analytical work done by Carmen Reinhard, Ken Rogoff, Larry Summers, Paul Krugman, Richard Koo, Tom Friedman, and others.
What is the new normal: Developed over several rounds of discussions among PIMCO colleagues in the run-up and the immediate aftermath of the 2008 global financial crisis, the concept signaled the likelihood that western economies would not reset in a typical cyclical manner – or, adapting an old Monty Python sketch, the crisis would prove much more than a “flesh wound.” Rather than a quick bounce back in growth (the rubber band “V” shaped recovery), economic activity would remain persistently sluggish and unemployment unusually high.
(snip)
It has been devastating, harming both current and future generations.
(snip)
(Excerpt) Read more at businessinsider.com ...
so now they’re trying to sell the Great Obama Depression as our “new normal” ....
in other words, Let Them Eat Cake (or dogs?)
Sorry, but I’m not buying this “new normal” as anything but a deliberately-created-and-maintained depression imposed on the American people to weaken our country (and render as many good Americans dependent on the regime as humanly possible)
This depressed economy can still recover if we can only recover our politics sufficiently to elect good, decent, loyal Americans (of either party) in 2016.
(They will have to root out the enemy agents that have been brought into our federal government to infiltrate and sabotage it from within, then repeal Obamacare which is depressing the economy terribly, then restore a reasonable level of support for, confidence in the ability of the American people to rebuild our economy without so much interference and definitely without all the new obstacles placed in our way these last 4 or 5 years from WashDC...but I firmly believe all this is DOABLE, ....? )
The truth the elites will not share is the decision to export our industrial capacity to Asia has moved jobs overseas and eliminated “pump priming” impact of government deficit spending. Prior to the globalists taking over economic policy and opening the US market to competition from every slave labor factory in the world, when the economy dipped government would lower taxes or push money into the hands of consumers. When consumers received the money, they’d spend it on consumer goods made in the USA thereby increasing demand for US manufactured products. The stimulated increased demand would result in increased production and hiring allowing the economy to recover more quickly.
George W. Bush was able to get Congress to pass a stimulative tax cut early in his administration. It did not have the economic impact of the Reagan era tax cuts because a significant part of US consumer products manufacturing capacity had been exported to Asia by the time he became President. Unfortunate, he and his economic advisors ignored the weakened impact of this tax cut stimulus (versus prior tax cuts) and continued to work with Congress to pass more free trade agreements resulting in more factories and jobs being exported.
In 2008/2009 government responded to economic collapse with a massive stimulus program putting billions of dollars into the hands of the public with zero impact on US production. Some of the borrowed stimulus money was spent by US citizens on consumer goods but by 2008 almost all of the consumer goods they were purchasing (clothing, appliance, household products) were being produced outside the US. The stimulus helped Asian factories to weather the effects of the economic crisis but did virtually nothing to help the US economy. Essentially we printed money, thereby devaluing the dollar, in order to stimulate demand for Chinese products.
The new normal will not change until we return to a productive economy. This means returning to self sufficiency in manufacturing, agriculture and industry. Unfortunately our politicians are controlled by the Wall Street banks and multinational corporations that benefited from offshoring so we can expect our government to continue worshiping at the alter of free trade. Expect chronic unemployment, declining real wages, deficit spending, Federal Reserve Board created economic bubbles, and the death of the middle class.
The 25 year experiment with converting the USA from an industrial powerhouse to a service economy has failed to bring economic prosperity. One way free trade may work in textbooks but its application to the US economy has been a disaster. This is no different from the failure of the welfare state. Raise tariffs, bring production back to our shores, and put people to work instead of making them wards of the state.
There are millions of American families that once lived very comfortable middle class lifestyles that have lost it all. When you are unemployed and you can't find a decent job, it can crush your soul. Every day you can see the disappointment or the disapproval in the eyes of your family and friends, and it can be really easy to want to give up completely.
Mohamed El-Erian is a savvy investor and spokesman. I listen to what he says carefully because he knows more than he tells.
Your comment (#3) and your home page pretty much nails it, even better than the original post.
I would also add that we are at a point where we are reliant on our youth to pick up the torch and lead us on.
Unfortunately they lack the knowledge and fire in their belly to do so.
-——This depressed economy can still recover if we can only recover our politics sufficiently to elect good, decent, loyal Americans (of either party) in 2016.——
I used to believe that fantasy ( no disrespect intended ) as well...
The fact is our republic is broken...humpty dumpty isn’t getting put back together...
Obama has transformed this country....no going back until it crashes and burns
That may well be. I steadfastly and perhaps irrationally cling to the hope we can recover from all this damage We do live for hope. - - and USA has successfully risen to several extreme challenges before. (That’s the best I can do ).
Since all Democrats are pro-abortion, and all pro-abortionists are anti-Constitution psychopaths, I do not understand your use of the phrase "of either party."
I was thinking about economics not right to life. But Not all democrats are pro- abortion.
Many oppose abortions on demand.
The current little group that’s taken control of the D party apparatus Is abortionist yes. But they didn’t always have such control and so perhaps they won’t always have it. We will see. My personal thought is that they’re far too extreme to hang onto power forever. Just my guess. We will see what happens.
The problem is, the party which could rescue America is in bed with China. Coincidentally so it the other party.
It’s an all-out sale of American factories and jobs, to Chinese workers.
Except China isn’t in bed with anyone.
China doesn’t allow foreigners to own Chinese companies. So a bunch of formerly American companies have now gone to China, laid off massive amounts of their American staffs, accepted majority ownership by China, and now import stuff into America.
This continues to grow, every year.
Go in any store in America. In any state. Any city, or town, go in any store and look at anything.
Anything.
Odds are very good, it was made in China.
China.
A massive communist nation which doesn’t allow Americans to immigrate or to buy Chinese real estate.
A nation with 5 times America’s population, and which now out-exports us.
Yet we see nothing wrong with this?
Both parties, are completely sold out to China.
Who is looking out for America???
Who?
“Unfortunately they lack the knowledge and fire in the belly to do so.”
We may be surprised. When people feel real pain, and their lives are on the line or their loved ones are threatened, they can sometimes do amazing things. It took our founding fathers several years before they realized they could not reason with the King and Parliament. Once the blinders were off an army of enraged colonials in rags took on the most powerful army in the world and won.
Today’s youth have been brainwashed to believe that freedom is all about unrestricted sex and oppressed minorities. As the economic pie continues to shrink, and their standard of living declines no matter how hard they work, the ever increasing tax burden required to support social and corporate welfare will become onerous. The class warfare game of the Democrats will backfire when young and middle aged adults on the treadmill start to resent Al Gore’s private jet, Obama’s luxury vacations, the tax special exemptions for the Hollywood millionaires, and Pelosi’s Armani suits. When the youth of today begin to resent the sweat of their brow being taken from them to support non producers and provide subsidies for the politically connected super wealthy liberal elitists, they will see the chains that really bind them and seek relief. At that time they will understand that individual liberty is more than a roll in the hay, gay marriage, or government granted special advantages for some groups.
I never got any stimulus....never.....I just pay, and pay more.....the stimulus went to the friends of the communist, not me...
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