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Why We Are Condemned To A Lost Economic Decade

Now that actual effective economic policy for our current economic conditions (fiscal stimulus) is off the table, a lot of Center Leftists are focusing on the Fed. But as Paul Krugman explains, while more Fed action can't hurt, it simply won't do the job of steering the economy back to health:

I wanted and still want fiscal expansion because itís relatively certain in its effect: if the government goes and buys a trillion dollarsí worth of stuff, that will create a lot of jobs. [. . .] The truth is that itís very hard for central banks to get traction in a zero-rate world. This doesnít mean that [the Fed] shouldnít try. [. . .] I didnít and donít think that we can count on monetary policy to do the job; blithely declaring that the Fed should target nominal GDP misses the difficulties. And that means we need fiscal policy.

Of course, at this point, with the loss of political will, it looks as if weíre going to see an attempt to do the trick with quantitative easing alone. I hope it works, but I wouldnít bet on it.

Two points - actually there is no information I know of that in fact the Fed is going to expand quantitative easing. So I think Krugman is optimistic that there will even be an attempt. More importantly, it simply will not work. The policy that WILL work, fiscal stimulus, will not happen. So we're doomed to a Lost Decade. At least my children are young and may see better days when they reach employment age. We sure won't.

Speaking for me only

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    There is one other alternative (5.00 / 1) (#4)
    by CST on Wed Oct 06, 2010 at 09:31:40 AM EST
    that I think we're overlooking.

    Innovation could still drive us out of this.  The optimist in me has to think this is a real possibility.

    Almost a duty if you will.

    What innovation? (none / 0) (#6)
    by Militarytracy on Wed Oct 06, 2010 at 09:32:58 AM EST
    And how?

    Parent
    If I knew (5.00 / 2) (#7)
    by CST on Wed Oct 06, 2010 at 09:36:17 AM EST
    I'd be rich by now.

    Frankly, throwing up my hands in despair is not an option for me.

    Off the top of my head, alternative energy, green technology, something that can be exported.  That's the obvious stuff.  Then there are the things that I haven't thought of because they aren't here yet.

    But we have all this unemployed brain power out there.  Something's got to give.

    Parent

    I have a plan (5.00 / 3) (#14)
    by Big Tent Democrat on Wed Oct 06, 2010 at 09:50:36 AM EST
    Send me a million dollars and I'll tell you what it is.

    Parent
    What's your bank account and ssn for tax purposes, (5.00 / 1) (#18)
    by steviez314 on Wed Oct 06, 2010 at 10:12:29 AM EST
    and maybe my Nigerian cousin will send you the money.

    Parent
    Your cousin would be (none / 0) (#20)
    by Big Tent Democrat on Wed Oct 06, 2010 at 10:27:19 AM EST
    disappointed.

    Parent
    Only a million? (none / 0) (#15)
    by Militarytracy on Wed Oct 06, 2010 at 09:56:59 AM EST
    What a deal!

    Parent
    From what I've read we have been (none / 0) (#11)
    by MO Blue on Wed Oct 06, 2010 at 09:44:56 AM EST
    using stimulus money to purchase (i.e. import) green technology from other countries.

    Parent
    This is what I see (none / 0) (#12)
    by Militarytracy on Wed Oct 06, 2010 at 09:45:14 AM EST
    about anything new and cool coming on the scene and saving us all.  Everyone is too broke to buy one in meaningful numbers, and the existing market that it threatens (and "the markets" have all the money right now and are being supplemented heftily by our government) will fight it to the ground to protect themselves.  The means to create and manufacture are seizing up, money for such kinds of risk taking has already seized up but there is still plenty of loot out there to gamble on hedgefunds.  Because of all the decisions made and who was empowered by them and continues to be empowered, we are looking at a lost decade no matter how creative the peasants are.

    Parent
    I want to say one word to you. Just one word. (5.00 / 1) (#8)
    by steviez314 on Wed Oct 06, 2010 at 09:37:03 AM EST
    "Plastics".

    :)

    Parent

    How about two words: (none / 0) (#22)
    by Xclusionary Rule 4ever on Wed Oct 06, 2010 at 10:44:59 AM EST
    My idea (none / 0) (#9)
    by Ga6thDem on Wed Oct 06, 2010 at 09:38:20 AM EST
    would be for the government to build green energy plants but the special interests aren't going to allow for that and since there will be no stimulus, it's a moot point.

    Parent
    it doesn't have to be (none / 0) (#10)
    by CST on Wed Oct 06, 2010 at 09:43:21 AM EST
    the government.  And it looks like they aren't doing it.

    Private wealth has to step up here.  If Warren Buffett's optimistic I will be too.

    Parent

    Warren Buffet is the smart money though (none / 0) (#13)
    by Militarytracy on Wed Oct 06, 2010 at 09:46:52 AM EST
    and an insider to the super cool rich club.  He can afford his optimism.  I'm the dumb money on that scene.

    Parent
    Private wealth is flowing to countries (none / 0) (#23)
    by vicndabx on Wed Oct 06, 2010 at 10:45:37 AM EST
    like China that have bought up the land and given it away to their own green business interests.  They've also got that cheap labor thing going.

    Parent
    Obama is not an optimist (none / 0) (#33)
    by norris morris on Wed Oct 06, 2010 at 04:46:54 PM EST
    Nothing will drive us "out of this" without strong,creative, and gusty leadership.

    This is not Obama. He has been unable to create a program and is still stuck in the "I inherited this--what can I do?"

    Obama is actually too tepid a person when we need bold and masterful leadership to get us out of this financial miasma.

    Along with an obvious lack of experience,  Obama has surrounded himself with dorks. They may be well educated, but they are still dorks.

    This is not optimism.

    Parent

    It is important to understand (5.00 / 5) (#21)
    by BDB on Wed Oct 06, 2010 at 10:44:52 AM EST
    IMO, that the economic outcome we're going to suffer isn't just bad luck or a "changing world" or however else it's going to be sold.  It's the result of deliberate policy choices that have been made by the elites.  They have decided to permanently lower the standard of living in this country to protect the rich.  That's a bipartisan choice.  One that they've made knowingly.

    Yes... (none / 0) (#26)
    by kdog on Wed Oct 06, 2010 at 11:51:07 AM EST
    the seeds were being planted in 1980...now we're starting to harvest the fruit.  The credit card worked for awhile to hide it, but it's maxing out.

    The industrialization in places like China, India and Brazil, and the rising standard of living in those countries, is certainly playing a role...but for the most part the decreased standard of living and disappearing middle class in the US is by design...only so many dollars to go around and the top 1% want most of them.

    Parent

    It did not fail (5.00 / 1) (#24)
    by DancingOpossum on Wed Oct 06, 2010 at 11:38:25 AM EST
    It did not fail when FDR tried it. That's a wingnut talking point.

    And "impact" is not a verb. I know it gets used more and more that way every day, and change is inevitable in language, but still, I stand athwart grammar shouting "Stop!"

    -- Sincerely,
       Pedantic editor

    When the spending stopped the economy (none / 0) (#25)
    by BTAL on Wed Oct 06, 2010 at 11:42:26 AM EST
    reverted back into recession.  Like it or not, that's what happened.

    Parent
    "Reverted back." Redundant. (none / 0) (#28)
    by oculus on Wed Oct 06, 2010 at 12:36:26 PM EST
    Let me repeat again ;-) (none / 0) (#30)
    by BTAL on Wed Oct 06, 2010 at 01:13:27 PM EST
    I am so with you (none / 0) (#31)
    by Cream City on Wed Oct 06, 2010 at 02:02:44 PM EST
    in deploring "impact" as a verb.  It's a noun.  And "impacted" is an adjective, not a verb, past tense.  

    Widespread misused of that word if right up there  with "read" as a noun -- or, even worse, "feel" as a noun.  I tell my students that the only time that "feel" is a noun is when used by teenage boys, as in "to cop a feel" -- and then, it still is inadmissible as slang.  

    We fight a losing fight against misuse of the language everywhere.  But I'm glad to see that I do not fight alone!

    Parent

    Impact is not a verb? (none / 0) (#32)
    by BTAL on Wed Oct 06, 2010 at 02:49:16 PM EST
    Guess you know more about the language than this mere mortal and the writers/editors of dictionaries.

    Impact (used without object)

    and

    Mr. Webster

    Tends to discount the economic point being offered.

    Parent

    Sure, it has become accepted (none / 0) (#37)
    by Cream City on Wed Oct 06, 2010 at 07:55:17 PM EST
    by some.  But really, anyone who writes -- from your link's examples -- "a vast crowd impacted St. Peter's Square" or "the ball impacted against the bat with a loud noise" simply deserves disdain.

    Parent
    It Didn't Fail When (none / 0) (#34)
    by norris morris on Wed Oct 06, 2010 at 04:55:37 PM EST
    FDR handled things because he was FDR and knew what to do and was not afraid to try. He was creative and unafraid and real programs emerged which kept us going.

    FDR was an optimist, an experienced and fearless politician with a practical intellect who knew how to execute his plans and  how to surround himself with talented advisors.

    He also could execute his ideas and reach people on a gut level. Great communicator, and he felt our pain.

    Parent

    I know (none / 0) (#1)
    by Ga6thDem on Wed Oct 06, 2010 at 09:28:23 AM EST
    BTD and it is so depressing to even think about it. I'm glad your children are young enough but I have a 17 year old almost 18 year old who is going to have to live through this and try to find work.

    I remember a column Krugman wrote years back about how monetary policy will never solve the crisis that we are having right now and he was just as correct then and he is now. He used Japan as an example and the fact that they had lowered their lending rate to 0% and it spurred nothing. There is a real demand problem in this country and no one is doing a darn thing about it.

    Our 21 year old daughter (none / 0) (#3)
    by Militarytracy on Wed Oct 06, 2010 at 09:30:48 AM EST
    Is stuck in it too.  I told her that a roof over your head and healthy fed kids....that's the new rich and if she has that going on she is doing about as well as she can do right now.

    Parent
    My just-graduated-from-college son (none / 0) (#16)
    by Cream City on Wed Oct 06, 2010 at 10:03:55 AM EST
    worked so hard for that degree, against such obstacles, and is grateful just to still have the sort of job that he had in college.  It is so sad.

    And my soon-to-be-graduated-from-college daughter also has worked so hard for a teaching degree -- so is facing that job market full of laid-off teachers.

    I wish that they were a decade older or a decade younger; this Lost Decade is the one when they ought to be getting started.  Instead, I worry that by the time the economy comes back, there will be the usual memory loss among employers who will hold against this group the first jobs that they could get now.

    Parent

    They will probably be the (none / 0) (#17)
    by Militarytracy on Wed Oct 06, 2010 at 10:07:19 AM EST
    next greatest generation after having to overcome their origins, and the fact that we were in essence such a bunch of self centered self important losers :)

    Parent
    I know (none / 0) (#2)
    by Militarytracy on Wed Oct 06, 2010 at 09:29:09 AM EST
    I just looked at the jobs numbers.  I've been a bit depressed about it but there isn't much to be done other than figure out how to survive it.

    And some people still don't get it yet (none / 0) (#5)
    by Militarytracy on Wed Oct 06, 2010 at 09:32:30 AM EST
    Get It Yet? (none / 0) (#35)
    by norris morris on Wed Oct 06, 2010 at 04:57:01 PM EST
    Obama definitely doesn't get it.

    Parent
    Am with CST as to the best course along with (none / 0) (#19)
    by BTAL on Wed Oct 06, 2010 at 10:20:05 AM EST
    manufacturing.

    Two factors are in effect that impact both options.

    Innovation - why did the administration choose to hammer NASA?  NASA and DARPA have been the sources of so many technologies that lead to commercialization and jobs.  

    Manufacturing - the massive special interest road blocks that are put in front of companies that want to build and operate factories make it a non-starter from the get go.  Capital (and jobs) then goes where those obstacles are smaller or non-existent.

    As for the "govt buying a gazillion" widgets, that is not a sustainable model.  It failed with FDR tried it.  When the govt teat drys up, we revert back to the beginning, or very darn close.

    NASA is big government :) (none / 0) (#27)
    by Militarytracy on Wed Oct 06, 2010 at 12:21:24 PM EST
    NASA is less than 1% of the federal budget (none / 0) (#29)
    by BTAL on Wed Oct 06, 2010 at 01:12:55 PM EST
    The technologies it has advanced - which move into the private sector - make it one of the best expenditures ever.

    It also has a dovetail effect and impact on national defense making it perfectly legit under the enumerated powers.

    Parent

    NASA? (none / 0) (#36)
    by norris morris on Wed Oct 06, 2010 at 04:59:30 PM EST
    Big Government you say?

    How do you expect America to excell in Science,Exploration,Education, and remain prominent?

    We are being passed by and you seem blind.

    Parent