As we enter the full swing of another election cycle here in the USA, more attention than usual is being paid to recent census findings and the Federal Reserve Board's debate on when to raise interest rates. The big headlines that have come out of these news reports have been that real incomes in the USA have declined 6.5% since 2007, and that despite central banks globally pumping out nearly $8 trillion into the global economy, growth remains tepid at best. This has left global policy makers scratching their heads and wondering what else they can do to spur economic growth and the Fed waffling on rate hikes. Links to relevant articles discussing these findings: http://www.wsj.com/articles/central-banks-lesson-easy-money-alone-isnt-a-growth-salve-1442505860 , http://www.wsj.com/articles/the-white-house-and-the-census-1442532398 .
For those of you who have read my previous blog posts, the reason for both of these stats are fairly self evident. But for those who missed them, here are some (but not all) of my relevant posts on the subject: http://ogresophist.blogspot.com/2014/02/the-failure-of-stimulus-spending-in.html , http://ogresophist.blogspot.com/2014/09/high-taxes-have-consequences.html . If you want the "Cliff's Notes" version, global growth woes in the first world are caused by structural problems. These problems are created by high taxes used to fund first world entitlements and restrictive laws that place huge financial and time burdens on businesses at all stages of development, from formation to multinational conglomerate. Rather than doing anything about these mammoth issues at the heart of our current stagnation, politicians have relied on central banks to pump easy money into the global economy in the hopes of spurring growth. Shocking no one but the most unobservant and doctrinaire, instead of investing this money at home, the global investing class has used this money to chase higher yields in foreign markets. The end result has been volatility and little growth in the first world.
The moral of this story is timely for voters in the USA, or any country about to enter into an election cycle. Voters need to demand structural reforms from their leaders. They need to elect people with the power and political will to make the compromises needed to restore global growth. If we keep electing the same people who are wedded to the same failed economic policy ideas we are doomed to repeat our current low growth woes. In short, we need to demand better of our political leaders.
