The Keynesian Recovery Meme Is About To Get Mugged, Part 1
My point is not simply that our monetary politburo couldn’t forecast its way out of a paper bag; that much they have proved in spades during their last few years of madcap money printing.
Notwithstanding the most aggressive monetary stimulus in recorded history—-84 months of ZIRP and $3.5 trillion of bond purchases—–average real GDP growth has barely amounted to 50% of the Fed’s preceding year forecast; and even that shortfall is understated owing to the BEA’s systemic suppression of the GDP deflator.
What I am getting at is that it’s inherently impossible to forecast the economic future, but that is especially true when the forecasting model is an obsolete Keynesian relic which essentially assumes a closed US economy and that balance sheets don’t matter.
Actually, balance sheets now matter more than anything else. The $225 trillion of debt weighing on the world economy——up an astonishing 5.5X in the last two decades—– imposes a stiff barrier to growth that our Keynesian monetary suzerains ignore entirely.
Likewise, the economy is now seamlessly global, meaning that everything which counts such as labor supply and wage trends, capacity utilization and investment rates and the pace of business activity and inventory stocks is planetary in nature.
By contrast, due to the narrow range of activity they capture, the BLS’ deeply flawed domestic labor statistics are nearly useless. And they are a seriously lagging indicator to boot.
…click on the above link to read the rest of the article…
