Arnold Kling is saying exactly what I have been saying for some time; okay, okay, maybe he is saying it in a more normal, rational (understandable?) manner. There has been a definite shift from enterprise strategy to investment strategy as the effective mechanism for wealth creation. It is not so much the theft of investment funds, as it is the capture of talent, and interjection of profound Middleman Costs. The innovation slump is real, and the creation of Consumer desire has been corrupted to fulfill inferior, rather undesirable Product; leading to a corruption of Consumer will to purchase, as previous purchases prove to lack value. Arnold fails to mention the Consumer Credit crunch, which affects more than the Oil crisis this time; especially Consumer resentment that Card Interest rates rose in the face of cheap money for financial institutions which lowered the value of their Savings. It has never been the lack of liquidity within the economy, but corruption of the flow of funds which defeated all attempts to restart the economy; We cannot survive in paying actual exterior Players a very high Rent in middleman Costs, when they present only intrusive blockage of Profits from enterprise.
It is time to review this Post from Tim Duy. I hesitated because of the information presented is such a mix of Good and Bad. The return of long-term Savings is a good thing, but will be defeated if the Fed maintains it’s ‘No Interest’ position, and provisions no Return for that Savings. The reduction of Credit Spending is also a good thing, especially to the ‘Out-of-Pocket’ Spending; again, something threatened by the ‘No Interest’ policy; the Trend would eventually only present a lag to a Return to normal growth, except for the engineered high prices generated by banks in pursuit of ‘No Risk’ investments to maximize their profit ability to cheaply borrow funds; not unintelligent, remember that without cheap Cash, they would lack a Return from either Investment mortgages or Consumer Credit at previous levels; Stockholders not known for easy recognition of recessionary loss of Profits. There is the fact that outside this analysis, there is not rationale for the Fed policy of ‘No Interest’, as commercial demands for loan capital will not be higher without an increase in Consumer consumption. It is sad when the only investment demand for Cash comes in desire to purchase Treasuries profitably without Risk.
The Reader may have noticed that I did not review the discussion of Trade within the Duy Post. I must regrettably state that the only way the domestic economy will recover will come from an increase in the cost of Trade. It is only when the cost of buying Overseas becomes equivalent to producing our own Product, that We will see a real Return to economic growth. This is not an All or Nothing thing, any increase in the cost of Imports better the advantage of domestic production. Part of the real problem has been a half-Century of convincing our Children that Production line Jobs remain the venue to Poverty. The real poverty within this Country are unsustainable mid-level, Middleman slots which do not present the Profits potential to maintain a living Wage. This erosion of Respect for Production labor should be discontinued, while actual Wage level comparisons should be clearly outlined. It should also should be taught that Job Security among Middleman Jobs is no better than Production labor anymore, while the Skill levels developed in Production labor often bring much higher ReHire capacity. lgl