"Sponsored by the Kansas City Fed." So why don't they meet in Kansas City?
The article focuses on short term issues and not the fundamental structural problem - too little demand.
The slow growth in the US economy is maintained only by extremely expansionary monetary policy (extremely low interest rates) and extremely expansionary fiscal policy ($1 trillion annual deficits).
This level of expansionary activities should be used to prevent recessions when the economy is in trouble. Using the tools now as we have means we have little left to combat a recession if one does occur now. The system requires restoring the tools when times are good - raising interest rates and creating budget surpluses - so they are ready to fire when needed.
But we have not been able to restore the tools due to extremely low business and consumer demand. It is imperative that we quickly more to fixing the structural problems and restoring the tools before the next shock to the economy.
The primary structural problem needing a fix is the shocking levels of income inequality. The rich save a much larger share of their income than the poor. As an increasing percentage of national income goes to the rich, personal consumption goes down - or at a minimum grows very slowly. Weak consumer demand causes weak demand for business investment. With consumer and business purchases down, the economy suffers.
If you think this is not true, explain why the economy is so weak with expansionary fiscal and monetary policy? Why is Trump demanding interest rate cuts when so low?
1
In many ways, "politics" largely control the fed. The fed should do its work and stay out of the daily spotlight. Sometimes, it is better not to be seen, but only heard when necessary.
One issue I haven't seen discussed is the impact of rising inequality causing a decline in the quality of the populations in major countries - I'm thinking especially of the US and the UK. You hear so much about the grinding poverty which is being ever more persistently experienced at the lower economic ends of society. This is a long term effect having an accumulating impact over the decades. When I was a child in the 1950's having somebody like a Boris Johnson or a Donald Trump elected would be inconceivable. They cause their countries to be looked at much less seriously than before. It isn't all Facebook and Rupert Murdoch to be blamed. There has been a marked deterioration over the decades in support for public education. And people rightly have increasing concerns about overall fairness. I think there is a missing dimension in the economic analysis that hasn't put enough attention of the impact of long term deterioration in the investments being made in people.
5
I'm beginning to think Infrastructure Week isn't going to happen. Perhaps the Fed should start buying municipal bonds to incentivise infrastructure investment.
1
President Trump must realize that China will not back down. China did not hesitate to take on the United States and the UN when it sent in half a million troops in the Korean war, even when it did not have nuclear weapons and we did. Again in the Vietnam war, China sent 350,000 troops to North Vietnam to relieve the North Vietnamese troops to go down south to fight.
3
Memo to Fed: do not count on political leaders to act responsibly when it comes to their economies.They are mired in trying to please their constituencies and will always choose wild spending and debt over prudent measures.They have come to depend on the central banks to bail them out-now would be a good time for the Fed, particularly, to declare that their job is not to compensate for financial mismanagement.Trump borrowed and borrowed and then declared bankruptcy-does he know that the Fed is not going to support that economic idiocy by lowering interest rates to zero? The Fed is independent and should demonstrate that-Powell’s warning that trade wars and tariffs are bad fell on deaf ears-he needs to speak more loudly-Volcker, Greenspan, Bernanke and Yellen all made themselves perfectly clear!
5
Economic wizards meet in pristine picturesque environments while they plot how to profit off the destruction of it
3
In 2008 the US experienced the largest financial collapse since the Great depression. Since that time, the US FED, ECB and BOJ have injected $ trillions into their respective economies to stabilize/inflate equity markets, prop up insolvent banks (some of which are still insolvent), and prevent defaults on corporate debt. As a result, global debt levels have exploded to circa $250 trillion. In the US, Government debt now exceeds $22 trillion and growing $1 trillion/year and does not include municipal, corporate or consumer debt, while mortgage debt now exceeds its 2008 peak. Thus, despite a decade of Central Bank largess, the global economy is faced with slack demand and excess industrial capacity. CEO compensation is typically tied to share price, thus, CEO is going to invest large amounts of capital in new plants and equipment, which have payback periods of years-decades, when they can barrow cheap money supplied by Central Banks for share buybacks, which boost stock prices in days-weeks? Lower interest rates, effectively money printing is not going to solve the problems of tepid economic growth. All this is doing is increasing debt levels and increasing the severity of the next global economic implosion. See- The Fed can’t rescue us from the coming supply-shock recession. By Nouriel Roubini Market Watch Aug 22, 2019; Link: www.marketwatch.com/story/the-fed-cant-rescue-us-from-the-coming-supply-shock-recession-2019-08-22?mod=mw_theo_homepage
1
@Mark Singleton: The ‘50% that don’t pay tax’ of whom you speak are largely people whose labor is transmuted into the dollars in the 1% coffers. The notion the wealthy are somehow granted wealth by dint of superior genes, or superior intelligence, or hard work is simply bunk. Tell me what Donald Trump did to become wealthy before he was out of high school? Tell me why Ivanka is rich, or Jared, or hedge fund traders who make a living pushing numbers around on electronic ledgers?
We had a roaring, prosperous economy and a middle class that was the envy of the world for a few decades post WW II, with personal tax rates close to 90% at the margins. Because of the high tax rates, CEOs and others had no reason to lust after billions... yet somehow they satisfied themselves with modest wealth and were sufficiently motivated to innovate and act as ‘job creators’ nonetheless. They were perfectly content making 10 times what their workers did, not 10,000 times.
And we built things, invented things — all without running massive deficits. We don’t need a world war to do that again, we just need to devote resources to the challenges at hand, instead we get billionaires with wealth sufficient to buy $80 million splatter paintings.
We living The Big Lie: ‘tax cuts will pay for themselves.’ We’ve lived that lie since Saint Ronnie was in office. Time and time again, it has been proven false. Still The Big Lie is repeated over and over again; and still some people refuse to learn.
12
@chambolle
Amen! This needs to be posted every day. I do not understand how “conservatives” do not see the failure of their fallacies. They seem to continue with the approach of “We know it does not work in practice but let’s see if we can make it work in theory.”
4
Collective hope? For whom? When you say,"that the world’s political leaders will work to help safeguard economic growth."
Don't you really mean, "print more money for the wealthy?"
3
Since economists are not scientists, it is perhaps only natural that they continue to make suggestions on how to drag uncontrolled capitalism through its next set of problems, instead of investigating the fundamental nature of the system and its insane dependence on growth.
4
Prosperity for who? Maybe they should talk about sharing the wealth and distributing the pie more equitably. That would be economics, it's finite how much you can squeeze from the little guy and implode the higher skew. Let's get real about the future of this world and our economies, the growth dynamic is not sustainable, efficient, nor can it endure.
7
Instead of trying to jump start economic activity with low interest rates, tax cuts and similar sugar highs, how about this novel idea: innovate and grow the economy by developing new industries and skills to respond to the challenges of climate change and to meet the basic needs of the masses of real people for food, health care, education, housing, transportation, child care, care for the elderly?
An economy built on artifice, that rewards speculative, passive investment above all else, will always move in fits and starts, and will bog down and freeze up when ‘the psychology’ changes in the wrong direction, or as happened in our “Great Recession” just a decade ago, when someone finally realizes the Emperor has no clothes on, and what looked like wealth was actually a house of cards built on a foundation of fraud.
In our ‘Great Depression,” millions wanted to work, and there was only one way to put them to work: bypass the broken ‘market system’ and just start devoting resources to getting things done. (I don’t want to suggest global warfare, but let’s face it, that was how the Depression really drew to a close).
It’s not as though we lack for things to do; it’s that our market system isn’t getting them done. Instead, it’s helping a handful of people to become jillionaires, limit their tax exposure, and gain a stranglehold on ostensibly ‘representative, democratic’ government.
Call it left-wing, call it ‘socialism,’ but it’s time for a radical change in direction.
25
@chambolle
Call it Warren's patriotic economic plan.
2 cents on every dollar of wealth over $50 M is a big number ($2.8 trillion over 10 years) when there is so much wealth above that threshold.
As though anticipating comments below on climate change, Warren would put the ultra millionaires' tax to use in research centers for climate change, industries producing renewable energy and boosting other industries that can't be outsourced.
As for this article, what's missing is a discussion of the role of central bankers in contributing, possibly alleviating, the growth of extreme economic inequality in recent decades.
The problem with extreme economic inequality, in addition to its inhumanity, is that it destabilizes democracies and lowers the threshold for infiltration of Russian style kleptocracy. I keep wondering just where we are in this slide towards making America great in Putin's/Trump's image.
9
What actions would be effective now? How about the repeal of the Trump tax cut? Then let’s tax the one percenters, bigly. Then let’s initiate a ‘uge public works project or projects, like wi-fi everywhere, and green energy for all. We can continue to grow, if we want to. Who’s going to stop us? Or is it, guess who’s going to stop us?
11
@Sam Song why not tax the 50% that don't pay anything by adding a Federal sales tax? Or better yet tax all income with no deductions 10%. The problem with the 1% argument is that it burdens producers with most of the costs of government, which disincentives the takers from being frugal or championing good governance. BTW a 10% tax on all income as a baseline may solve most of the deficit issues. It certainly removes the argument that the muni bond crowd gets a free ride or for that matter that the philanthropists who donate stock get a free ride. If all philanthropic gifts carried a 10% tax that would be helpful. The separation of Church and State was not intended to mean that religious institutions did not have to pay their fair share.
2
EVERYTHING in your comment, except for the very last sentence, is totally wrong and the exact opposite of methods proven to work.
2
@TDD everything in my comment is totally wrong. Did I hit a progressive nerve? LOL. When over 50% of the electorate does not pay income tax, it is easy for these freeloaders to focus on the 1% that pay a wildly disproportionate share of the tax burden based on income. If you believe non-profits should pay their fair share, why not municipal bond investors? Why not slap a 10% additional tax on everyone until the national debt is paid off. At least the people who don't other pay tax contribute at least something instead of getting a trophy for not helping or playing. BTW I love it when someone is bright that they cannot site a single reason why I am so wrong.
Trump should be a purveyor of optimism and working to unite instead of his incessant diatribe on the federal reserve, federal agencies and congress which creates pessimism and continues to erode confidence in the US. First Trump needs to think like a globalist and do a 180 on his tariff strategy instead of a tax cut, second Trump needs to forget about arguing for Putin's return to the G7 and instead focus on how to optimistically engage with other world leaders on the global economy, and third Trump needs to listen to advice and proceed with a clear and consistent strategy - Trump's inconsistency is hurting everyone.
@donnyjames - Trump needs to think period and that is never going to happen.
@donnyjames
Trump wants lower interest rates so his and his extended family's real estate businesses can borrow cheaply. That's all he knows and cares about.
https://www.nytimes.com/2019/08/22/business/economy/trump-immigration-employers.html?action=click&module=Top%20Stories&pgtype=Homepage
The economy needs more immigrants!
3
Trump at the helm of America's economy portends chaos ahead as that is Trump's M.O.. Trump who lost a billion $ in 10 years in biz, filed numerous bankruptcies and settled fraud charges for 25 million $. Trump has pushed our deficit into the trillion$ range by giving tax cuts to the rich and powerful instead of fixing our crumbling infrastructure for a better pay off and lasting result. Trump's over inflated ego and narcissistic nature keeps him out of touch with financial reality and is recent display of erratic talks with reporters is a disturbing reality that our captain of ship thinks he is godlike.
8
Very telling indeed : nowhere in this piece can one read « climate change ». Does it mean no one mentionned the issue to the reporters? Or that reporters did not raise it with interlocutors ? Or both ?
3
Trump demonstrates his ignorance and idiocy in thinking the global economy is a zero sum competition among all countries.
7
First. Nobody should listen to the Trump administration for anything, especially economics, global or otherwise. Second, when the people/institutions that make money by having money talk economy and economic growth they have among them those with predatory practices and interests. What is relevant toward greed-based-criterion yields boom-bust cycles from which they are prepared to withstand, and benefit. However, the effects on the wage-earner, the people who make money through their labor is insufferable. In fact, in the United States, the Great Recession demonstrated how profit from predatory banking practices was privatized, but risk and failure was socialized on the backs of the wage-earning taxpayers. A win-win for the Banks. Third, there is no such thing as a "free market" running with perfection only when left unregulated. That is a myth from the "Club for Growth" and their Libertarian ilk. Markets are always regulated. The question is who is the regulator? Does regulation default to the transnational corporate business rules of the financial elite? Is the measure rooted in a one-dimensional algorithm of greed-for-profit; value to the shareholders? Or does regulation include multi-faceted factors of human concern including the concerns for the environment, safe working conditions, fair trade, and government that actually delivers services and a safety net to those unable, or no longer able to be a cog in the machine?
12
You win the Internets today.
It’s a fiction to define prosperity as keeping growth going, if we aren’t also seriously addressing climate change and inequality. But we seem to live in times when our great leaders—including these economists—prefer fiction to the truth. After the financial crisis, Paul Krugman wrote a piece in this newspaper in which he accused economists of preferring beauty (elegant equations) to truth (the complex, messy drivers of economic behavior). I fear these economists are still stuck in the same mindset.
11
@Kay
A focus solely on growth is clearly misguided, but so is any metric or formula that does not insist on positive economic growth over the medium and long terms. Growth creates the wealth to address serious risks like climate change and lawlessness. More importantly, growth is the only thing that can sustain hope. Without hope, efforts to address our other challenges will fizzle. It is a symbiotic relationship.
1
@Alan I believe we have to unpack what we mean by growth. Growth, through most of modern capitalism, is the rich amassing ever more money through investment of inherited wealth, at rates that greatly surpass returns on productive work. See Piketty's Capital in the 21st Century--widely considered to be most important economics book of our time (though sadly he ignored the environment.) He argues, in effect, that increasing inequality is baked into growth, and this has been true for the entire history of modern capitalism in western economies, with only two short exceptions. Second, growth effectively means consuming/buying more "stuff" which is utterly unsustainable. We are not just talking climate change, we're talking mining for metals, rapid deforestation, and toxic pollution of land, water and air and human being's bodies (mainly in China and elsewhere) to support America's "growth." Finally, "growth" today can be actually immoral and perverse: If a child gets sick from pollution, and their parent spends money at the doctor, that's an uptick in GDP! We have to be agnostic about growth and focus on the stuff that really matters to having a liveable, kind, and just world. Sure, we may well see growth from large investments in clean energy, and new environmental technologies and closed-loop manufacturing, and from poorer people having more money to spend. But by no means should growth, in and of itself, be any country's goal.
1
The recent past has seen budget deficits in both the private and public sectors, buoyed by the notion that we can keep borrowing from the future as we have for the past 200 years.
Sunshine is the world's energy source, it grows plants and animals, they rot and make carbon fuels. Prior to the past 200 years, we used the sunshine as it fell onto us and economies were limited but sustainable. More recently, we dug up and drilled for that sunshine and spent all that fuel living way beyond our means, externalizing the costs onto future generations in the form of natural resource depletion, pollution waste of all kinds and huge population growth placing overwhelming demands on the earth's ecosystem.
More concretely, if that's even possible, we have gone into monetary debt that never seems to lessen, it only grows, and it is this monetary value we use to tabulate our current expenses, not the future costs put onto our forthcoming generations. If we cannot keep up with our currents debts, how do we think future generations will pay for the debt we racked up ecologically?
The long-term future debt is weighing on our current accounts payable, the former must be unknown orders of magnitude larger than the latter, and while fumbling with his coffee in the picture, surely this is what's on the minds of those bankers in the bucolic picture of the world they run.
6
People and countries that believe capitalism is only about competition are only partially correct. The smooth flow of goods around the world depends upon cooperation between countries and working together to make it happen. When we close off borders, create tariffs that foster strife and step all over your trading partners as Trump has done it spells disaster for everyone involved. But Trump who has made lifetime career myopically doing just this sort of of bullying thinks that hurting your suppliers, besting your workers and suing everyone in sight can never see this. We do not need another rerun of 'The Apprentice'. We need a world leader who will bring us together.
21
While the Amazon is burning, and Arctic is melting, the banisters still want economic growth. They just don’t get it. I hope they don’t have children.
17
Underlying all this grousing from technocrats is the assumption that infinite growth is the north star by which all economic policy must be based on.
The result is cyclical recessions, a continuous erosion of labor protections and environmental destruction.
While politicians are certainly to blame for this state of affairs, more fundamentally, it is the primacy of the global banking apparatus.
Perhaps it's time we push our lawmakers to abandon the assumption of continuous growth, and defang the international financial apparati that has directly depressed the global south and indirectly handed control of ever larger swaths of the world to fascists and violent nationalists.
22
Anyone who has ever designed and built a complex system, be it a machine or software, well-knows that post-production meddling, including 'improvements' and upgrades, has a high probability of also producing regression.
The world system is infinitely more complex and yet our government allowed an abject simpleton to meddle. They allowed him to meddle without first putting any safeguards in place for the protection of those who would, not might, be affected.
The world is not a sandbox. Although there are plenty of clever people who could have built a sandbox for this simpleton to play in. He might not have even noticed the difference.
38
Growth at all costs is what is destroying the planet.
Living like there is no tomorrow will guarantee that at some point.
50
Notice the haze in the photo of the Tetons?
Haze from wildfires made worse by climate change.
The Grand Teton National Park is not lovely shrouded in haze.
3
The US needs to repeal the "upward wealth redistribution" (aka tax cut) bill of December 2017. The restored tax revenue that was lost starting January 1 2018 should then be targeted for an infrastructure program. It is pretty obvious to any sentient being who was paying attention in December 2017 that the infrastructure is what should have begun in January 2018.
42
Surely the time has come to abandon the mantra of per capita growth, with the planet already in crisis. Instead economists should focus on quality of life, reducing pollution, congestion, ignorance and noise.
64
Showing them where they can make money,lots of money, with those goals is the only hope.