The demand for money and money-like assets remains elevated as indicated in the figure below. This means nominal spending remains depressed. Until this changes we shouldn't be surprised by employment reports like the one we got today.
Update: Here is the household sector's money and money-like assets as a percent of total household assets plotted against the same civilian-employment population ratio. The money and money-like assets include the following: cash, checking account funds, time and saving account funds, money market funds, and treasury securities.
And tight MP implies "cruel and undeserving" punishment on everyone, in particular workers:
ReplyDeletehttp://thefaintofheart.wordpress.com/2011/07/08/where-have-all-the-%E2%80%9Cworkers%E2%80%9D-gone-long-time-passing%E2%80%A6/
There is no tight monetary policy, Senor Marcus. What there is, is a corrupted, insolvent and dysfunctional banking system, clogged up with failed loans and a loss of informational capital. There may or may not be also a decline in the rate of innovation (ie MEC has declined as in Keynes GT), a function of education system failure and political system failure. In any case, the problems are "real" not nominal, severe and not amenable to monetary policy. If we are lucky, we will be Japan. If we are unlucky, we could be the new Argentina within a couple of decades. I am shocked at how fast America is failing.
ReplyDelete"And tight MP implies "cruel and undeserving" punishment on everyone, in particular workers:"
ReplyDeletetotally agree Marcus!
ecb -
ReplyDeleteYou make a lot of good points, but there is indeed tight monetary policy -- on top of everything else. And America has been failing since around 1980 - give or take a few years, and depending on what measure you care to use.
http://jazzbumpa.blogspot.com/2011/02/change-notice.html
The disastrous Bush Jr. regime* took us to a tipping point, and beyond. Now the Rethugs have foreclosed both monetary and fiscal options, and B. Hoover Obama has either capitulated, simply agrees with them, or doesn't know how to fight - I really can't tell what's up with him.
I don't see us devolving into either Japan or Argentina . . . Something more along the lines of France -- in the 12th Century.
* (Nobody else in all of human history was ever self-destructive enough to simultaneously cut taxes and go to war. It's very hard or me to believe the ruin of this country was not deliberate.)
Sadly,
JzB