America’s Creeping New Normalcy: Sluggish growth and high unemployment are now just a

[Wehrwolfen]

America’s Creeping New Normalcy: Sluggish growth and high unemployment are now just accepted​

By James Pethokoukis
02/04/2013


The Japanese have said “Enough.” After a generation of stagnation, they’ve chosen an all-of-the-above policy to boost economic growth. The nation’s new prime minister, Shinzo Abe, is promising a “three arrows” strategy: bold monetary easing, increased public-works spending, and structural changes, such as regulatory reform. He’s throwing the ramen against the shoji and hoping something will stick. Some of those ideas are good ones, some probably aren’t. But it’s clear that Tokyo’s priority is growth, growth, growth. Time to get Nippon moving again.

Nations probably never choose decline, at least not consciously. More likely they become victims of a creeping normalcy. Things once objectionable can become passively acceptable if they happen slowly, incrementally: the boiling-frog syndrome. Decline just sort of happens, year by year, decade by decade, one “meh” economic report at a time.

Last Thursday the U.S. Commerce Department reported that fourth-quarter GDP fell at a 0.1 percent annual rate. For the year, the U.S. economy grew a meager 2.2 percent. That’s a bit better than 2011, but about a percentage point less than what most economists think is the economy’s current potential. Even worse, the first few recovery years after deep downturn typically exhibit abnormally strong catch-up growth. But that’s not happening post–Great Recession. White House spokesman Jay Carney conceded the obvious, that the negative quarterly report was “not good news,” and then blamed congressional Republicans for creating a “headwind” of political uncertainty.

The next day the Labor Department reported the unemployment rate ticking up to 7.9 percent in January as the economy added 157,000 net new jobs. At that rate of job creation, with all else equal, the economy wouldn’t return to 4.4 percent unemployment — the George W. Bush administration’s low point — for another eight years. Oh, and that’s assuming no recessions between now and 2021. White House economist Alan Krueger said the report provided “further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression.”

It must be terribly inconvenient for the Obama White House to be reminded every quarter and every month that the $800 billion stimulus — and subsequent mini-stimuli — failed to ignite the boom Obama economists repeatedly predicted through the first term. The president has so many higher priorities, after all: immigration reform, gun control, climate change, income inequality. Stuff with which to build a legacy.

[Excerpt]

Read more:
America?s Creeping New Normalcy - James Pethokoukis - National Review Online

 

[Freemason9]

The economy cannot be fixed so long as wages stagnate and wealth concentrates at the top. We are seeing the inevitable end stages of capitalism.

Protest all you'd like, but this IS inevitable. This will continue until systemic changes necessarily occur.

 

[NYcarbineer]

As you can see by the chart below, slow growth and persistent high unemployment can be attributed to ONE factor,

the public sector has been in recession for almost 3 years:

What does it mean? It means that all you people who said smaller government was the ticket to growth and jobs were wrong.

 

[waltky]

Granny says, "Dat's right - dey ain't enough jobs to go around...

Dropouts: Discouraged Americans leave labor force
6 Apr.`13 WASHINGTON (AP) — After a full year of fruitless job hunting, Natasha Baebler just gave up.

She'd already abandoned hope of getting work in her field, working with the disabled. But she couldn't land anything else, either — not even a job interview at a telephone call center. Until she feels confident enough to send out resumes again, she'll get by on food stamps and disability checks from Social Security and live with her parents in St. Louis. "I'm not proud of it," says Baebler, who is in her mid-30s and is blind. "The only way I'm able to sustain any semblance of self-preservation is to rely on government programs that I have no desire to be on." Baebler's frustrating experience has become all too common nearly four years after the Great Recession ended: Many Americans are still so discouraged that they've given up on the job market.

Older Americans have retired early. Younger ones have enrolled in school. Others have suspended their job hunt until the employment landscape brightens. Some, like Baebler, are collecting disability checks. It isn't supposed to be this way. After a recession, an improving economy is supposed to bring people back into the job market. Instead, the number of Americans in the labor force — those who have a job or are looking for one — fell by nearly half a million people from February to March, the government said Friday. And the percentage of working-age adults in the labor force — what's called the participation rate — fell to 63.3 percent last month. It's the lowest such figure since May 1979.

This Friday, March 29, 2013 file photo shows a help wanted sign at a barber shop in Richmond, Va. U.S. employers added just 88,000 jobs in March, the fewest in nine months and a sharp retreat after a period of strong hiring. Many discouraged Americans are giving up the job hunt for school, retirement and disability.

The falling participation rate tarnished the only apparent good news in the jobs report the Labor Department released Friday: The unemployment rate dropped to a four-year low of 7.6 percent in March from 7.7 in February. People without a job who stop looking for one are no longer counted as unemployed. That's why the U.S. unemployment rate dropped in March despite weak hiring. If the 496,000 who left the labor force last month had still been looking for jobs, the unemployment rate would have risen to 7.9 percent in March. "Unemployment dropped for all the wrong reasons," says Craig Alexander, chief economist with TD Bank Financial Group. "It dropped because more workers stopped looking for jobs. It signaled less confidence and optimism that there are jobs out there."

The participation rate peaked at 67.3 percent in 2000, reflecting an influx of women into the work force. It's been falling steadily ever since. Part of the drop reflects the baby boom generation's gradual move into retirement. But such demographics aren't the whole answer. Even Americans of prime working age — 25 to 54 years old — are dropping out of the workforce. Their participation rate fell to 81.1 percent last month, tied with November for the lowest since December 1984. "It's the lack of job opportunities — the lack of demand for workers — that is keeping these workers from working or seeking work," says Heidi Shierholz, an economist at the liberal Economic Policy Institute. The Labor Department says there are still more than three unemployed people for every job opening.

MORE

 

[JustSomeGuy]

The economy cannot be fixed so long as wages stagnate and wealth concentrates at the top. We are seeing the inevitable end stages of capitalism.

Protest all you'd like, but this IS inevitable. This will continue until systemic changes necessarily occur.

You're right, capitalism is the problem. Maybe we should look towards communism instead? Or how about mercantilism?

 

[Freemason9]

The economy cannot be fixed so long as wages stagnate and wealth concentrates at the top. We are seeing the inevitable end stages of capitalism.

Protest all you'd like, but this IS inevitable. This will continue until systemic changes necessarily occur.

You're right, capitalism is the problem. Maybe we should look towards communism instead? Or how about mercantilism?

I don't know what's on the other side of this, but maintaining personal freedoms and liberty should be a strong component.

 

[BlindBoo]

It is one of the results of the GOP's stated goal in 2009.

 

[The Rabbi]

It is one of the results of the GOP's stated goal in 2009.

Trhe GOP's stated goal in 2009 was high unemployment and sluggish growth? What are you smoking again?

No, this is the result of 6 years worth of Democratic policies that ape the Euro socialist state. So not surprising we are getting Euro style growth rates and unemployment with it.

 

[RoadVirus]

Obama's goal is achieved. Total economic ruin.

 

[iamwhatiseem]

You should expect nothing else under an oligarchical governance.
While we all cheer yay rah for our side and blame the other side - THEY ALL continue to pass legislation to benefit special interest and large corporations far-far-far more than us.
So...carry on everyone, keep blaming the other side...and things will continue as they are.

 

[KevinWestern]

I'm with Iamwhatiseem...

Every day the lot of you go back and forth on whether or not it was the Republicans or Democrats that destroyed the economy when in fact the answer is very simple... it was both.

Goldman Sachs - if you pay attention - donates to both sides of the political spectrum, and has close ties with both Democrats and Republicans. Heck, it was under Bill Clinton that the Glass-Steagall act was repealed (arguably one of the chief reasons our economy collapsed in 2006).

Instead of blaming parties, how about we start by singling out the politicians who are clearly working for the establishment, and who are backed by the deepest pockets - regardless of political affiliation - and go from there?

.

 

[The Rabbi]

I'm with Iamwhatiseem...

Every day the lot of you go back and forth on whether or not it was the Republicans or Democrats that destroyed the economy when in fact the answer is very simple... it was both.

Goldman Sachs - if you pay attention - donates to both sides of the political spectrum, and has close ties with both Democrats and Republicans. Heck, it was under Bill Clinton that the Glass-Steagall act was repealed (arguably one of the chief reasons our economy collapsed in 2006).

Instead of blaming parties, how about we start by singling out the politicians who are clearly working for the establishment, and who are backed by the deepest pockets - regardless of political affiliation - and go from there?

.

Glass Steagel was repealed about 10 years before th recession in 2008, not 2006. Hard to make the case it caused a collapse 10 years later.

 

[KevinWestern]

I'm with Iamwhatiseem...

Every day the lot of you go back and forth on whether or not it was the Republicans or Democrats that destroyed the economy when in fact the answer is very simple... it was both.

Goldman Sachs - if you pay attention - donates to both sides of the political spectrum, and has close ties with both Democrats and Republicans. Heck, it was under Bill Clinton that the Glass-Steagall act was repealed (arguably one of the chief reasons our economy collapsed in 2006).

Instead of blaming parties, how about we start by singling out the politicians who are clearly working for the establishment, and who are backed by the deepest pockets - regardless of political affiliation - and go from there?

.

Glass Steagel was repealed about 10 years before th recession in 2008, not 2006. Hard to make the case it caused a collapse 10 years later.

Did you misread my post?

I stated it was repealed "under Bill Clinton", who was President in the 1990's.

Too, the economic collapse technically began in 2006 when the housing market began to collapse.


.

 

[The Rabbi]

I'm with Iamwhatiseem...

Every day the lot of you go back and forth on whether or not it was the Republicans or Democrats that destroyed the economy when in fact the answer is very simple... it was both.

Goldman Sachs - if you pay attention - donates to both sides of the political spectrum, and has close ties with both Democrats and Republicans. Heck, it was under Bill Clinton that the Glass-Steagall act was repealed (arguably one of the chief reasons our economy collapsed in 2006).

Instead of blaming parties, how about we start by singling out the politicians who are clearly working for the establishment, and who are backed by the deepest pockets - regardless of political affiliation - and go from there?

.

Glass Steagel was repealed about 10 years before th recession in 2008, not 2006. Hard to make the case it caused a collapse 10 years later.

Did you misread my post?

I stated it was repealed "under Bill Clinton", who was President in the 1990's.

Too, the economic collapse technically began in 2006 when the housing market began to collapse.


.

It was repealed in 1999. Now please explain how an act repealed in 1999 caused a meltdown in 2008 (not 2006).

 

[Meister]

We just need to start taxing the hell out of people. Our government knows what's best for us anyways. Just give me my food stamps and HUD, I'll be a compliant little minion.

 

[KevinWestern]

It was repealed in 1999. Now please explain how an act repealed in 1999 caused a meltdown in 2008 (not 2006).

Well, as I understand it, Glass-Steagall prohibited commercial banks from teaming up with investment banks (as one company). When it was repealed, banks now had the ability to give someone a mortgage and then on the flipside securitize that risk and sell it off.

In short, this kind of twisted the bank's incentives, and it was now profitable for banks to give out as many mortgages as possible regardless of the quality (because they could sell off the risk). The incentive in the past was "make sure that loan is going to get paid back", but now unfortunately that was no longer the case.

So what we ended up with is a bunch of people who can't afford mortgages having mortgages (creating a bubble), and a bunch of bad securities being purchased (with toxic garbage) under the guise that they are "AAA investments". It was a house of cards that was made possible due to the Glass-steagall act.

That bubble began to implode in 2006 when the housing market started to take a turn for the worst (below). This is why I said this is the "starting point" of the recession. Obviously things really got bad in 2008 with the stock market collapse...

United States housing bubble - Wikipedia, the free encyclopedia





.

 

[The Rabbi]

It was repealed in 1999. Now please explain how an act repealed in 1999 caused a meltdown in 2008 (not 2006).

Well, as I understand it, Glass-Steagall prohibited commercial banks from teaming up with investment banks (as one company). When it was repealed, banks now had the ability to give someone a mortgage and then on the flipside securitize that risk and sell it off.

In short, this kind of twisted the bank's incentives, and it was now profitable for banks to give out as many mortgages as possible regardless of the quality (because they could sell off the risk). The incentive in the past was "make sure that loan is going to get paid back", but now unfortunately that was no longer the case.

So what we ended up with is a bunch of people who can't afford mortgages having mortgages (creating a bubble), and a bunch of bad securities being purchased (with toxic garbage) under the guise that they are "AAA investments". It was a house of cards that was made possible due to the Glass-steagall act.

That bubble began to implode in 2006 when the housing market started to take a turn for the worst (below). This is why I said this is the "starting point" of the recession. Obviously things really got bad in 2008 with the stock market collapse...

United States housing bubble - Wikipedia, the free encyclopedia





.

OK. That's completely wrong. But whatever.

 

[KevinWestern]

It was repealed in 1999. Now please explain how an act repealed in 1999 caused a meltdown in 2008 (not 2006).

Well, as I understand it, Glass-Steagall prohibited commercial banks from teaming up with investment banks (as one company). When it was repealed, banks now had the ability to give someone a mortgage and then on the flipside securitize that risk and sell it off.

In short, this kind of twisted the bank's incentives, and it was now profitable for banks to give out as many mortgages as possible regardless of the quality (because they could sell off the risk). The incentive in the past was "make sure that loan is going to get paid back", but now unfortunately that was no longer the case.

So what we ended up with is a bunch of people who can't afford mortgages having mortgages (creating a bubble), and a bunch of bad securities being purchased (with toxic garbage) under the guise that they are "AAA investments". It was a house of cards that was made possible due to the Glass-steagall act.

That bubble began to implode in 2006 when the housing market started to take a turn for the worst (below). This is why I said this is the "starting point" of the recession. Obviously things really got bad in 2008 with the stock market collapse...

United States housing bubble - Wikipedia, the free encyclopedia





.

OK. That's completely wrong. But whatever.

Thank you for your insightful analysis.

How about you explain why I'm "completely" wrong. Complete means everything I said was untrue.

And given that I took the time to respond to your question, I'd expect the same courtesy from you.

.

.

 

[Dugdale_Jukes]

I'm with Iamwhatiseem...

Every day the lot of you go back and forth on whether or not it was the Republicans or Democrats that destroyed the economy when in fact the answer is very simple... it was both.

Goldman Sachs - if you pay attention - donates to both sides of the political spectrum, and has close ties with both Democrats and Republicans. Heck, it was under Bill Clinton that the Glass-Steagall act was repealed (arguably one of the chief reasons our economy collapsed in 2006).

Instead of blaming parties, how about we start by singling out the politicians who are clearly working for the establishment, and who are backed by the deepest pockets - regardless of political affiliation - and go from there?

.

Glass Steagel was repealed about 10 years before th recession in 2008, not 2006. Hard to make the case it caused a collapse 10 years later.

Not at all.

I am laughing out loud at the BRUTAL lack of understanding of huge, complex systems. No wonder partisan-halfwit America still believes Reagan was a conservative and Clinton was a liberal.

 

[The Rabbi]

Well, as I understand it, Glass-Steagall prohibited commercial banks from teaming up with investment banks (as one company). When it was repealed, banks now had the ability to give someone a mortgage and then on the flipside securitize that risk and sell it off.

In short, this kind of twisted the bank's incentives, and it was now profitable for banks to give out as many mortgages as possible regardless of the quality (because they could sell off the risk). The incentive in the past was "make sure that loan is going to get paid back", but now unfortunately that was no longer the case.

So what we ended up with is a bunch of people who can't afford mortgages having mortgages (creating a bubble), and a bunch of bad securities being purchased (with toxic garbage) under the guise that they are "AAA investments". It was a house of cards that was made possible due to the Glass-steagall act.

That bubble began to implode in 2006 when the housing market started to take a turn for the worst (below). This is why I said this is the "starting point" of the recession. Obviously things really got bad in 2008 with the stock market collapse...

United States housing bubble - Wikipedia, the free encyclopedia





.

OK. That's completely wrong. But whatever.

Thank you for your insightful analysis.

How about you explain why I'm "completely" wrong. Complete means everything I said was untrue.

And given that I took the time to respond to your question, I'd expect the same courtesy from you.

.

.

G-S prohibited banks from conducting brokerage business and vice versa.
Securitizing loans started long before the repeal of G-S.
Banks could not and would not lend money on anything because they had to either keep the loan in portfolio, which many did, or sell off into the secondary market. The secondary market also had underwriting standards, aimed at making sure the loan was paid one way or another.
With cheap money from the Fed it became increasingly profitable to make loans, which have rates above many other investments, and lower risk because of collateral. This cheap money also served to inflate real estate values, giving greater confidence that the loan could be paid back by selling the appreciated property. This became a vicious cycle--higher real estate values>>lower criteria>>more loans>>higher real estate values.
Eventually loans in the sub prime market started to go bad, as they tend to do after 18 months. Thsi started a vicious cycle in reverse: more defaults>>fewer loans>>lower real estate values>>more defaults.

I worked in sub prime in the 1990s and made many really bad loans. bad real estate loans are as old as this country. No one regulation or law is to blame.