Why is the economy so weak? It's simple: Inequality. Income gains for the 95% have been meager for a long time, but up until the crisis, households could take on debt to compensate. Now credit has been harder to come by, and so household buying power is limited....
Mediocre income gains for the 95% and no easy access to credit to compensate for that. Depressingly simple.
8 comments:
I'm not sure aout Joe Weisenthal. Did you see his ridiculous piece a few days ago about the left and the Fed? It was bonkers.
Here it is: http://www.businessinsider.com/labor-market-tightness-2014-3
Where does he come up with that nonsense? Doesn't he know better?
It seems to me that he was just reporting current news without taking a position. The conventional wisdom is that the natural rate of unemployment is rising due to "structural issues." While structural is often contrasted with cyclical, much of the time it just means stuff that economists can't explain so they adjust the parameters.
If this is true, shouldn't we double the federal minimum wage?
Tom I didn't mean the part about structural unemployment. I meant the part about the 'the left' believing aggressive Fed policy is appropriate.
If he means that the left would be against tightening, i.e., maintaining a loose monetary policy, I think that is accurate. I think that people like Krugman and Stiglitz would be against tightening as premature with historically high UE and the Fed's mandate to address it. They would argue that this is the most serious issue still, not inflation expectations. Of course, many Post Keynesians would dismiss the "structural" argument to raise the natural rate used in NAIRU.
By "the left", he just means mainstream Democrats.
I thought he was saying that it's a tight job market because the (long term) unemployed need not apply.
I agree with JK. Weisenthal disseminates a lot of bad information.
Tom presents a particularly satisfying Weisenthal story in the post. For an opposing view see Andrew Kliman's Clarifying ‘Secular Stagnation’ and the Great Recession at New Left Project: "Since something like this account has become conventional wisdom among much of the Left, it is important to review the facts in detail."
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