Tuesday, March 29, 2016

Bill Mitchell — US economy – slowing down – fiscal stimulus needed

Last week (March 25, 2016), the US Bureau of Economic Analysis released their ‘Third Estimate’ of – Gross Domestic Product, 4th quarter 2015 – which showed that the US economy slowed rather appreciably in the last three months of 2015. The BEA said that real GDP growth was “increased at an annual rate of 1.4 percent” after having increased by 2 per cent in the third-quarter of 2015. Two things stand out from the data: (a) Private consumption expenditure, while still relatively strong continues to slow. The main drivers of consumption expenditure are recreation and health care services and durable goods; (b) Capital formation (investment) declined for the second consecutive quarter, signalling a lack of confidence in the medium-term outlook by business firms. However, residential investment was relatively strong as was federal government spending. The BEA also reported that corporate “profits decreased by 7.8 per cent at a quarterly rate”. The data release provides no succour to those who think the Federal Reserve Bank should continue to hike interest rates. Inflation is still well below the implicit central bank target rate (2 per cent) and growth is faltering.…
Bill Mitchell – billy blog
US economy – slowing down – fiscal stimulus needed
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

10 comments:

Footsoldier said...

Mike the second part of Mike Hudsons video is out

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=16000

You posted the first one.

Michael Norman said...

Stimulus is happening. Maybe not by huge amount, but we're up $50b vs last year and last year was biggest increase in 5 years. We'll be okay.

Matt Franko said...

Foot,

Hudson says: "Trump wants to 'bail out' Wall Street..." "Fed is a helicopter dropping money on Wall Street..." "its a Ponzi scheme..."

(btw Trump hates 'Wall Street' .... he recently referred to them as "blood suckers"...)

Hayes says: 'its a parasite that is cannibalizing the economy... blah blah..." "the bubbles have been re-inflated".... "its going to be a car wreck..."

All these people have are metaphors they dont know what they are talking about and get nowhere for decades they are losers and fiction booksellers...

Footsoldier said...

I thought you liked Hudson ?

Sometimes he promotes the MMT line and other times he veers away from it like a drunk driver.

Bob said...

Hudson said that fascism occurs when the left is unable to articulate an alternative to a crisis. Here we go again.

Tom Hickey said...

Hudson said that fascism occurs when the left is unable to articulate an alternative to a crisis.

Economic liberalism ("capitalism") and political liberalism ("democracy," popular sovereignty) are antithetical. As a result, economic liberalism is biased toward fascism as corporate statism, the merging of business and government.

Matt Franko said...

"Sometimes he promotes the MMT line and other times he veers away from it like a drunk driver."

And then they wonder why they get nowhere....

At one point I think I heard him say we are borrowing from foreigners....

intajake said...

Matt Franko,

Whats wrong with Hudson analysis?

Private sector debt has distributed purchasing power from the productive economy to the financial sector.

The Government did support private banks balance sheets,these financial institution then fell short of stimulating the real economy.The Government then did not wipe off debts of the indebted consumer and failed to fully invest(fiscal) in the real economy to support employment and maintain GDP trends.

The economy would be supported if the Debt overhead was reduced if not wiped out.
The polarisation of purchasing power from the 1% creditors (owners of bank shares,those in receipt of bonuses,salaries) from the productive economy(through interest charges),diminishes distributed purchasing power,entrenches the imbalance and stifle demand which in turn kills off the real economy(and it's ability to service debt to financial sector)

Matt Franko said...

",these financial institution then fell short of stimulating the real economy."

That's not the way it works... the FIRE sector supports the productive sectors... its not up to the FIRE sector to stimulate anything... this is monetarist moron thinking...

Back then GDP was about 14T in 2007 now it is over 18T so we have grown as far as NIA GDP is concerned as leading govt USD flows are up from 3.1T to over 4.3T annual over the same time period... Bank debt is up proportionately from 7T to 9T IN SUPPORT of this increase in productive activity...

Hudson/Black are monetarist in their thinking... ie they think "its about quantity not price" .... I dont think they really understand what is going on systemically...

The tip-off is the metaphor... when you see people resorting to metaphor as much as they do, then you know they dont really know what they are talking about...

Tom Hickey said...

Most of the munnie created in the economy is created by private credit extension. At that time of the crisis, that dried up, tanking the real economy.

The stim provided some help through munnie creation by government, but it was too little to do the job right.

Conventional economists were convinced that monetary policy could do most of the heavy lifting. One benefit of the GFC was to show how wrong that assumption was.