Wages are sticky. Prices aren't. Labor makes the same wage they did 10 years ago, yet prices are dramatically higher, across the board. Paychecks don't go as far, production declines, which explains the terrible employment and GDP numbers. The other side to that coin is deleveraging. Pre '08 saw a massive consumption binge driven via credit expansion. Americans racked up their credit cards and borrowed against their home equity to buy useless shit. Now, consumers must pay off their credit cards and HELOC's. Paying back huge debt forces austerity on personal income. And higher prices means current incomes don't go as far as they used too! That double-whammy goes a long way to explain why growth and jobs are nowhere to be found. Demand is dead.
In order to get out of this recession, the economy must restructure. Public sector wages, pensions, entitlements and Corporate Welfare (read: Defense) are a huge deadweight on the economy and are simply unaffordable. 40% of every program and departmental budget is funded through debt. Every public sector worker, benefit plan, entitlement program and department needs to take a 40% haircut, immediately. Done. Then Government must stand aside, and allow the ocean of cheap money that's arresting growth, drain from the marketplace. In the process, most Democratic states will go bankrupt, as well as pensioneers, bankers, insurers and everyone indexed and leveraged in the market at todays prices. The bright side to all this: only then will prices recalibrate and find their natural bottom. It's at that point, the purchasing power of the gainfully employed will skyrocket, asset accumulation will return in force, as will investment (as all bankrupts and question marks have been cleared out), which radically spurs employment and job creation. That's the only way out of this. We are modeling Japans failure. They too, refused to let prices return to mean to shield politically-connected bankers from insolvency. The result was a crushing 20 years of deflation in a healthy global economy that essentially propped them up. America will not enjoy the same success. Nor will Europe. We're >50% of global GDP. No one Country, or group of Countries, can absorb anywhere near the imports necessary to "prop" our economies. Exporting our way out of this is a pipe-dream. It's propaganda sold by Keynesians and Central Bankers to rationalize endless quantitative easing. AS IF that will solve our employment and demand problems.... No, but it goes a long way to bailing out and shoring up insolvent Bankers, who, just by happenstance, own the Federal Reserve System and whose alumni run the Treasury Department and Federal Reserve. Same with Japan. It's all Nepotism. Corporations bought off Government and now pull the strings. That's why we haven't seen any real growth or innovation in 10 years, or more. The Government is run for the benefit of a handful of industries who bought off Congress: Defense, Bankers and Fortune 100 outsourcers. And here we are. Bubble economics. DC is incredibly corrupt. And the voting American public are, for the most part, incredibly ignorant. And incredibly naive. A nation run by idiots and thieves. Is it any wonder we find ourselves where we are?
