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Old 05-02-2017, 11:39 AM   #18
sebastian_dangerfield
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Re: Fighting for our meals, out here in the fields.

Quote:
Originally Posted by Tyrone Slothrop View Post
Perhaps there's an ebb and flow. The economy runs unrestricted for a time, goes too far and is adjusted (for good or ill) by policy initiatives.

Or maybe we're defining economics and policy too narrowly, and viewing them too much as discrete rather than inextricably intertwined things. Policy is of course an element of economics. And economic considerations inform policy (above almost everything else).

This is excellent, by the way:

"If the previous era was a debtor’s paradise, where inflation made it cheaper to pay back debts, Blyth and Matthjis identify the current order as a creditor’s paradise where the real value of debt is maintained (on the struggle between creditors and debtors, see also James Buchan’s wonderful and neglected book on money, Frozen Desire). Thus, the current regime is pursuing a “policy of price stability in an environment of wage stagnation and rising debt levels driven by the [regime] itself” (p. 22). Stagnant wages and low job security led people to borrow money to retain their ability to consume, helping lead to the financial crisis. The policy responses to this crisis – which have boosted returns to asset holders, while imposing austerity on others – have not eased the systemic problems of the new regime, but rather worsened them."
This is status quo preservation defined. It's also a neat little explanation of why it won't work. I mean, sure -- it'll work for now. It may work for the next decade. But those forces cited above, moving in exactly the fashion described, are fixing nothing.

This selective asset reflation, a Potemkin recovery, is like watching the housing run-up in the early 2000s. You knew it couldn't hold. You knew the economy could not replace lost wages with dollars mined from HELOCs on rapidly appreciating residential properties. In that instance, we saw a financial collapse. Now, this time, perhaps we see the political collapse.
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