MOST ECONOMISTS HAVE BEEN DECIDEDLY UPBEAT ABOUT THE U.S ECONOMY THIS YEAR
I JUST CAN’T AGREE. MY CONTENTION IS THAT THE AMERICAN BUSINESS MODEL IS STRUCTURALLY FLAWED—AND THIS SITUATION IS LEADING THE U.S INTO DIFFICULT TIMES.
Let me add than any economy, whose workers are not better off, in real terms, after over 40 years—when costs are rising—is flawed by definition. What has been going on in the U.S.—just that situation—is outrageous.
A recession in 2016 is now a decided possibility.
The above chart shows U.S. manufacturing jobs added by year. The figure for 2015 fails to impress.
It is one of a long list of worrying indicators.
I am reluctant to name a date, but I think we may well be heading into a quite unnecessary recession in 2016.
Why unnecessary? Because there is a great deal that we could have learned from the Great Recession, but haven’t (or have deliberately chosen to ignore). Fundamentally, the Fed has propped up the financial sector—as normal, and to the exclusion of all else, and steered towards business as usual.
What exactly is that—and did it ever exist?
We truly, madly, and deeply need a financial sector—but arguably not one that is operating the way the current one is.
Changing it selectively should not be an impossible task—yet it is not even being attempted, except on the margins.
That just won’t cut it.
Structural problems should not be confused with the business cycle.
Structural problems are like hidden cracks which don’t show up unless you either look closely or the house (or bridge or whatever) collapses (frequently without warning).
The business cycle tends to occur because too many people pile in at the same time and then pull out in a similar manner. The stock market is one example. The housing market is another. Scale up to the economy as a whole, and you have got the picture.
Humans are not lemmings, but we have a disconcerting tendency to behave like lemmings where the economy is concerned. We also have a tendency to think very short-term.
We are ignorant, needy, and greedy.
In a way, that is understandable because life is short—but short is a relative term. It truly doesn’t mean “stupidly short”—as in shortsighted.
I would say more—but I’m trying to keep this a relatively short blog.
But, let me stress “relatively.”