Why such slow growth, after the federal government spent trillions to spark recovery?
Could it be that binges of throwing borrowed money around don’t matter? Spending money can’t be the solution if the problem is low or dark expectations of the future — and the spending of borrowed money feeds that dark view.
So what is the solution?
Well, take a step back. According to economic historian Robert Higgs, the key to economic growth is “private domestic business net investment.” And that’s down.
The peak occurred in 2007. The next two years saw the very opposite of growth, a precipitous fall in investments in private business. Last year, Higgs tells us, “net private investment increased smartly for three quarters, reaching an annual rate of $270 billion in the third quarter, then contracted sharply — by almost 47 percent — to $144 billion in the fourth quarter,” which is about a third of what it was at peak in 2007.
“Jobs,” which everybody’s thinking about, don’t come from spending as such. New jobs happen when people who save take their unspent money and invest it in production processes that they hope will yield goods that consumers in the future will spend money on.
So, private investment depends on positive expectations, a kind of rational hope.
What could government do?
Provide less reason for fear by putting a halt to doing things that elicit rational fear instead of rational hope.
Saner government, more productive economy.
This is Common Sense. I’m Paul Jacob.
5 replies on “Why Such Slow Growth”
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Sounds like we should invest in Chinese stocks.
I think the people that elected obama should hang their heads in shame, there is nothing anyone can do under a dictators rule
Not to sound cynical, but growth may not be the desired objective.
The actual goal may be debt, ever increasing, to force a collapse.
http://www.americanthinker.com/2011/02/meeting_young_obama.html
This article postulates that the tree that the Obama apple has not fallen far from is one that includes an intended weakening of the American republic.
Then power can be seized through martial law, (for our own good, of course). Then the intellectual socialist wouldn’t have to deal with the messy, unpredicatable reality of a free market. He could just issue edicts, (“ready to rule, on day one”) and remove those who impede his progress.
They politicians spend in economic hard times because it increase their power. The Keneysians provide a theoretical excuse that government spending primes the pump. The problem is the Keneysians have been proven wrong again and again. But that doesn’t stop politicians.
Reminds me of Al Gore. He invests in “green” energy companies, then gets government to subsidize them. He makes a profit, but we all are poorer as a result. And it’s no longer “global warming” it’s “climate change.” Many have said that man shows his hubris when he thinks he can change the weather. Gore is nothing more than a charlatan thief.