The Secular Stag is Gone, Lawrence Summers Call Your Office
This blog has tackled the cynicism animating most financial economists desire or need to evade intellectual, even moral responsibility for the collapse of confidence the American Republic has for the Federal Reserve and Congress to extract the Republic from the mires of statism that began in 2008. Anyone worth reading has evidenced that soaring confidence trick a new election has wrought. This is significant, but not for the usual reasons, for central banks around the globe are exhausted, inept and moored to an archaic Keynesian field manual. Then again professionals get paid to work, not think. If anything, the election of a Republican in November has slayed the secular stagnation thesis of Lawrence Summers.
The evasion was only noted by those not alloyed to Keynesian thought. Any working professional knew that public confidence in team Obama is the source for chronically weak growth. We’re living in an age of self-induced hysteria; the source of American growth is the American people, not technocrats ensconced away in field offices throughout D.C.
What we need to remember is that good times don’t indicate sound health. This is lost in the current round of animal spirits running through Dow Jones & Company.
Since 2008, we’ve had a jobless recovery, funneling more credit to American households will not suffice. We need tax and regulatory reform or the Republic is going over a cliff.
We don’t need credit expansion. We don’t need new capital projects, nor large debt ridden public investment schemes. If the U.S. don’t want to be identified as an emerging economy, we need to do something about taxes, regulations and permit working citizens to get to equity-capital formation. What every emerging economy is witnessing now is surging capital outflows racked to raising interest rates. Capital flight is coming home, but that will not provide the stimulus needed for Congressional leadership to reform the policy architecture providing growth. Every other struggling nation is hoping to quietly install capital controls, wait for F.D.I. and build up their foreign exchange reserves.
The next several months will be difficult for nation states who tied their own monetary policy to the Fed.
Remember Nixon’s Treasury Secretary John Connally’s fiscal epithet “its our money, but its your problem”.
Originally published on William Holland’s blog.
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