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View Diary: Jobless benefits climb to 357,000. GDP growth for 4th quarter tiny bit better than first report (23 comments)

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  •  You know what scares me about that chart (0+ / 0-)

    You don't have a milestone on when stimulus ends. Now it's generally accepted that it comes in the form of QE with the Fed buying 85 Billion a month in MBS of dubious quality strengthening banks balance sheets in the hopes I assume that they will sometime stop gambling with depositors money and  do something like make loans.

    But that's a tiny part of the pie. People don't want loans - in general- if they have a unreliable income stream to pay down the debt. They also don't want   loans even they are lucky enough to own stocks and are seeing their wealth rise as people who are looking for yield are pushed into risky assets.

    In the past , when housing was pushing up to a huge multiple of people's annual income and their stock portfolio looked good, caring a large amount of unsecured and secured debt may have caused a few sleepless nights but as long as the jobs were there for those with the skills to get them and the income stream was reliable, we had a debt stimulated GDP.

    Now there is still high debt but the amount of new debt that would have stimulated the economy is nowhere to be seen. So we have even more artificial stimulus that the Govt and the Fed is interjecting that we are seen in a rising stock market that's going up on very thin volume. It may be that people want to regain losses and won't sell mixed with a steady push by the Fed that is cuasing it to trickle up. But the hoped for "wealth Effect" that was defined by taking on more debt for consumption and using disposable income to service it, isn't there.  

    What has to scare the policy makers is the utter lack of organic growth. After all the engine that drove the GDP for the since 1980-2008 has been debt. Nothing is showing up to replace it no matter how hard the Fed tries.

    We also have let the stock markets rise and charts like this cover up the fact that most of the damage that blew this economy in 2008 is still there. It just isn't mentioned anymore. The Price of mentioning the notion that the Fed's Playbook is no longer relevant has been judged as having too high of a political price.

    There is much more to this than a snap shot of employment in time.

    The real question is what happens when the QE has stopped.

    “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

    by Dburn on Thu Mar 28, 2013 at 08:20:38 PM PDT

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