expat_panama
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from: The Recovery Fantasy Has Officially Been Put Out of Mind | RealClearMarkets
Jeffrey Snider March 24, 2017
The original piece is good, but it's v e r y long and it's rancid in a detritus of obfuscation (it uses way too many big words). The above excerpt is a little easier to read but what it all boils down to it is that politics aside, the 'summer of recover' back in 2009 was a crock and more and more folks are quietly learning to deal w/ this reality. Any argument to the contrary has to exlain why the Fed was unable to raise rates until now.
Jeffrey Snider March 24, 2017
During the middle 2000’s when Alan Greenspan’s Fed endeavored to change the outward monetary policy stance to “tightening”, it was not unusual for some divergences to have emerged. One of those was between the federal funds rates, either target or effective, and Treasury bill equivalent yields. Under a hierarchical system, this was not unexpected or alarming except as when the distance between them became unusually large (2006). Federal funds are unsecured interbank transactions whereas Treasury bills are near equivalent to them except secured by lending cash to the federal government. One would expect bill rates to be some degree less than federal funds.
And so they are again in 2017 as the Fed embarks on another so-called tightening regime...
...What made the Great Depression was both its catastrophic downturn while also the lack of recovery following it; the 1920-21 Depression, by contrast, was nearly as severe in its contraction but left no lingering impression beyond the downturn.
Before the 1930’s, the name Great Depression was given to the later 19thcentury in the US but more so Europe. It remains to this day a controversial and argued subject, largely because it has become embroiled in political considerations as much as economic ones. As Milton Friedman and Anna Schwartz wrote in A Monetary History:
“Though declining prices did not prevent a rapid rise in real income over the period as a whole, they gave rise to serious economic and social problems. The price declines affected different groups unevenly and introduced additional elements of uncertainty into the economic scene to which adjustment was necessary.”
The Long Depression, as it is sometimes called, is often filtered through the lens of gold...
...Using 1896 as the ending date is also ironic in that it was the election of William McKinley that ultimately settled the monetary debate of the era – the US would be committed fully to the gold standard...
...a few months into what would become the Panic of 1893, bringing with it the second great contraction in the US of the Long Depression, President Grover Cleveland said:
“At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values; but the wage earner - the first to be injured by a depreciated currency and the last to receive the benefit of its correction - is practically defenseless.”
Indeed, some estimates put the unemployment rate at 3% in 1892 but 18.5% by 1984. But what Cleveland said was not merely applicable to that one cycle, or even how that single cycle might situate in the Long Depression. It is a timeless stamp of monetary instability. The symptoms of that are easily identifiable, as are its burdens. And in his address on the repeal of the Sherman Silver Act that year, President Cleveland, a Democrat but not a populist one like Bryan (in those days populism at least in the US meant for government intervention in money through silver, the agitation), further said:
“The people of the United States are entitled to a sound and stable currency and to money recognized as such on every exchange and in every market of the world. Their government has no right to injure them by financial experiments opposed to the policy and practice of other civilized states, nor is it justified in permitting an exaggerated and unreasonable reliance on our national strength and ability to jeopardize the soundness of the people’s money.”
It would be, again, left to McKinley, a Republican, to act out what Cleveland proposed against Bryan’s silver platform of 1896. Only then did the Long Depression end in the US, though it may have continued until, and contributed toward, World War I elsewhere...
...The global economy had in 2015 and early 2016 taken another big step back (or two), leaving no longer any doubt that the Great “Recession” was a full rupture rather than a recession.
The race among central bankers is on to figure out why, though in reality it had already started ten years ago with no special powers required to figure out...
...it is the sudden lack of labor utilization, a deficiency from which so-called safety nets have only been partially successful in mitigating. Unlike the latter 19th century, the periods in between these monetary disruptions feature no rapid growth at all, leaving the global economy to languish with unstable slow growth, where each reinforces over time the other. The T-bill rate matters today in a way it didn’t ten years ago.
It may be now that officially the recovery fantasy has been put out of mind that in some years distance the current age will become the resurrected argument of the Long Depression. And why not? With things as they are now even after ten years there is no sign of stability anywhere on the horizon; no McKinley’s on the R side to put into action the commitment of the Cleveland’s on the D side. We are stuck only with WJ Bryan’s on all sides, experimenting with a system they don’t understand or recognize. History never does repeat, but boy does it sometimes rhyme, right down to the perfect pace and inflections.
And so they are again in 2017 as the Fed embarks on another so-called tightening regime...
...What made the Great Depression was both its catastrophic downturn while also the lack of recovery following it; the 1920-21 Depression, by contrast, was nearly as severe in its contraction but left no lingering impression beyond the downturn.
Before the 1930’s, the name Great Depression was given to the later 19thcentury in the US but more so Europe. It remains to this day a controversial and argued subject, largely because it has become embroiled in political considerations as much as economic ones. As Milton Friedman and Anna Schwartz wrote in A Monetary History:
“Though declining prices did not prevent a rapid rise in real income over the period as a whole, they gave rise to serious economic and social problems. The price declines affected different groups unevenly and introduced additional elements of uncertainty into the economic scene to which adjustment was necessary.”
The Long Depression, as it is sometimes called, is often filtered through the lens of gold...
...Using 1896 as the ending date is also ironic in that it was the election of William McKinley that ultimately settled the monetary debate of the era – the US would be committed fully to the gold standard...
...a few months into what would become the Panic of 1893, bringing with it the second great contraction in the US of the Long Depression, President Grover Cleveland said:
“At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values; but the wage earner - the first to be injured by a depreciated currency and the last to receive the benefit of its correction - is practically defenseless.”
Indeed, some estimates put the unemployment rate at 3% in 1892 but 18.5% by 1984. But what Cleveland said was not merely applicable to that one cycle, or even how that single cycle might situate in the Long Depression. It is a timeless stamp of monetary instability. The symptoms of that are easily identifiable, as are its burdens. And in his address on the repeal of the Sherman Silver Act that year, President Cleveland, a Democrat but not a populist one like Bryan (in those days populism at least in the US meant for government intervention in money through silver, the agitation), further said:
“The people of the United States are entitled to a sound and stable currency and to money recognized as such on every exchange and in every market of the world. Their government has no right to injure them by financial experiments opposed to the policy and practice of other civilized states, nor is it justified in permitting an exaggerated and unreasonable reliance on our national strength and ability to jeopardize the soundness of the people’s money.”
It would be, again, left to McKinley, a Republican, to act out what Cleveland proposed against Bryan’s silver platform of 1896. Only then did the Long Depression end in the US, though it may have continued until, and contributed toward, World War I elsewhere...
...The global economy had in 2015 and early 2016 taken another big step back (or two), leaving no longer any doubt that the Great “Recession” was a full rupture rather than a recession.
The race among central bankers is on to figure out why, though in reality it had already started ten years ago with no special powers required to figure out...
...it is the sudden lack of labor utilization, a deficiency from which so-called safety nets have only been partially successful in mitigating. Unlike the latter 19th century, the periods in between these monetary disruptions feature no rapid growth at all, leaving the global economy to languish with unstable slow growth, where each reinforces over time the other. The T-bill rate matters today in a way it didn’t ten years ago.
It may be now that officially the recovery fantasy has been put out of mind that in some years distance the current age will become the resurrected argument of the Long Depression. And why not? With things as they are now even after ten years there is no sign of stability anywhere on the horizon; no McKinley’s on the R side to put into action the commitment of the Cleveland’s on the D side. We are stuck only with WJ Bryan’s on all sides, experimenting with a system they don’t understand or recognize. History never does repeat, but boy does it sometimes rhyme, right down to the perfect pace and inflections.
* * * * * * * * * * * * * * * * * * * * * * * * *
The original piece is good, but it's v e r y long and it's rancid in a detritus of obfuscation (it uses way too many big words). The above excerpt is a little easier to read but what it all boils down to it is that politics aside, the 'summer of recover' back in 2009 was a crock and more and more folks are quietly learning to deal w/ this reality. Any argument to the contrary has to exlain why the Fed was unable to raise rates until now.