Money and the “Prolonged Depression”

The depression may not be “Great”, but it has certainly been “Prolonged”. And like many things, good or bad, that persist, people “get used” to it!

And there are those, like the BIS, who think that deepening the depression is worth it if it means reducing the risk of another financial crisis! The world´s major central banks have certainly caused a lot of damage by tightening money in the face of imaginary inflation dangers, but at least they are shrugging off the BIS “recommendations”.

The charts illustrate how “tight money” has shaped the “Prolonged Depression”, and there´s no indication that that state of affairs is about to change (just read some of the “excited” comments on the latest jobs report). It´s human nature: over time it will just become the “normal state of affairs”, or the “new normal”, which some spoilers insist in calling the “Great Stagnation”! [Note: the trends start in 1992]

Prolonged Depression

 

Update: Couldn´t resist this one:

Two of the world’s most powerful women of finance sat down for a lengthy discussion Wednesday on the future of monetary policy in a post-crisis world: U.S. Federal Reserve Chairwoman Janet Yellen and International Monetary Fund Managing Director Christine Lagarde. Before a veritable who’s-who in international economics packing the IMF’s largest conference hall, the two covered all the hottest topics in debate among the world’s central bankers, financiers and economists.

Prolonged Depression_1

The full unedited transcript of the Q&A, courtesy of Federal News Service.

2 thoughts on “Money and the “Prolonged Depression”

  1. The is so true.

    People adjust to almost anything. There was a time, in the 1950s, when one could commonly stroll through NYC’s Central Park at night.

    Crime worsened for several decades, and soon no one even expected to walk through Central Park at night anymore. No one was indignant or demanded their rights to use a city park without being mugged or worse.

    What was an outrage become a norm.

    Crime has radically lessened in recent decades, but I think no one yet strolls through Central Park at midnight like my father did.

    So it is with the US economy. Now, no one expects 3 percent real GDP growth, and they fabricate reasons why it can never happen again. Structural impediments popped up in 2008, and never left the scene—so claim right-wingers. Left-wingers just call for more deficits.

    How the US economy grew so rapidly in the 1960s with much worse structural impediments is never explained—and with balanced federal budgets.

    Indeed, the 1982–2007 period was one of good growth. Really, then suddenly structural impediments ruined everything?

    If it is structural impediments, why is the $1 trillion a year defense industry, or the massive USDA intrusion, or the ridiculous ethanol program never mentioned by right-wingers? Only Obamacare is a structural impediment.

    Macroeconomics, as practiced in the USA, has devolved into rank politics.

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