The current economic landscape is disheartening. With a lackluster job market, stagnant GDP growth, decreasing household incomes, and plummeting wages, it seems like the economy is struggling to move forward, much like an aged Cutlass Supreme weighing down the road.
Despite various attempted solutions, it appears the system is misfiring at every turn. Implementing one fix often leads to another unexpected problem. Five years after the collapse of Lehman Brothers and the ensuing Great Recession, recovery is painfully slow, resembling a lazy junkyard dog. Perhaps it needs a firm nudge to come alive, but the question is: where will that push come from? We have some thoughts.
From our perspective, excessive debt and artificial financial stimulus have weighted down the economy. Initially, the aim of these stimulus measures was to stimulate demand and propel GDP growth, leading to a swift job creation boom and ushering in a new era of prosperity.
Instead, this approach has created a significant burden for everyone involved.
Excessive Dependency
Did you know that a staggering 47.7 million people are currently receiving supplemental nutrition assistance? This means about 16 percent of Americans rely on government aid to meet their basic food needs.
In 2008, the year Lehman Brothers fell, only 28.2 million people utilized the Supplemental Nutrition Assistance Program (SNAP). Fast forward five years, and enrollment in SNAP has surged over 40 percent, while U.S. GDP has only risen by 8.9 percent during the same period.
Furthermore, taxpayers are funding a staggering $200 billion annually to pay individuals not to work. Sadly, this represents the consequence of offering a government paycheck for life to a significant number of able-bodied individuals.
On the monetary front, the influx of affordable credit has proven to be a failure. Since 2008, while the Federal Reserve has tripled its balance sheet, the economy continues to face a net loss of jobs. Through their tinkering, the Fed has demonstrated that creating vast amounts of currency does not inherently lead to job creation.
Here at the Economic Prism, we have reflected on these troubling trends and suggest it may be time for a paradigm shift. Instead of adding more fiscal and monetary stimulus, perhaps Congress and the Federal Reserve should consider withdrawing support.
End Stimulus Now!
Of course, removing stimulus could lead to significant challenges, especially for those who rely on government assistance. However, diminishing this excess may awaken individuals from their complacency. Here’s the rationale:
“Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system,” advised Treasury Secretary Andrew Mellon during the onset of the Great Depression. Unfortunately, his words were ignored as the government attempted to rescue the economy, ultimately transforming a minor downturn into a decade-long depression.
Modern politicians and central bankers, by continually propping up an over-leveraged economy, have failed to allow the necessary market corrections. Instead, they have created a massive class of dependents.
In essence, the nation can no longer borrow and spend its way to prosperity. The obligations are too great, and the number of dependents is too significant for the productive sector to sustain. So, why prolong the inevitable?
It’s time to scale back, cut the excess, halt quantitative easing, and end stimulus programs now. The sooner this is accomplished, the quicker individuals can begin to navigate their paths forward.
Sincerely,
MN Gordon
for Economic Prism
