John Taylor's Must Read Op-Ed Calling For The Great Reset

Tyler Durden's picture

John Taylor, the "Fed Chairman who should have been", has penned a terrific op-ed in the WSJ. Must Read.

(emphasis ours)

The End of the Growth Consensus

America added 44 million jobs in the 1980s and '90s, when both parties showed they had learned from past mistakes. The lessons have been forgotten.

By John Taylor

This month marks the two-year anniversary of the official start of
the recovery from the 2007-09 recession. But it's a recovery in name
only: Real gross domestic product growth has averaged only 2.8% per year
compared with 7.1% after the most recent deep recession in 1981-82. The
growth slowdown this year—to about 1.5% in the second quarter—is not
only disappointing, it's a reminder that the recovery has been stalled
from the start. As shown in the nearby chart, the percentage of the
working-age population that is actually working has declined since the
start of the recovery in sharp contrast to 1983-84. With unemployment
still over 9%, there is an urgent need to change course.

Some blame the weak recovery on special factors such as high personal
saving rates as households repair their balance sheets. But people are
consuming a larger fraction of their income now than they were in the
1983-84 recovery: The personal savings rate is 5.6% now compared with
9.4% then. Others blame certain sectors such as weak housing. But the
weak housing sector is much less of a negative factor today than
declining net exports were in the 1983-84 recovery, and the problem
isn't confined to any particular sector. The broad categories of
investment and consumption are both contributing less to growth. Real
GDP growth is 60%-70% less than in the early-'80s recovery, as is growth
in consumption and investment.

my view, the best way to understand the problems confronting the
American economy is to go back to the basic principles upon which the
country was founded—economic freedom and political freedom
. With lessons
learned from the century's tougher decades, including the Great
Depression of the '30s and the Great Inflation of the '70s, America
entered a period of unprecedented economic stability and growth in the
'80s and '90s. Not only was job growth amazingly strong—44 million jobs
were created during those expansions—it was a more stable and sustained
growth period than ever before in American history.

Economic policy in the '80s and '90s was decidedly
noninterventionist, especially in comparison with the damaging wage and
price controls of the '70s. Attention was paid to the principles of
economic and political liberty: limited government, incentives, private
markets, and a predictable rule of law. Monetary policy focused on price
stability. Tax reform led to lower marginal tax rates. Regulatory
reform encouraged competition and innovation. Welfare reform devolved
decisions to the states. And with strong economic growth and spending
restraint, the federal budget moved into balance.

As the 21st century began, many hoped that applying these same
limited-government and market-based policy principles to Social
Security, education and health care would create greater opportunities
and better lives for all Americans.

But policy veered in a different direction. Public officials from
both parties apparently found the limited government approach to be a
disadvantage, some simply because they wanted to do more—whether to tame
the business cycle, increase homeownership, or provide the elderly with
better drug coverage.

And so policy swung back in a more interventionist direction, with
the federal government assuming greater powers. The result was not the
intended improvement, but rather an epidemic of unintended
consequences—a financial crisis, a great recession, ballooning debt and
today's nonexistent recovery.

The change in policy direction did not
occur overnight. We saw increased federal intervention in the housing
market beginning in the late 1990s. We saw the removal of Federal
Reserve reporting and accountability requirements for money growth from
the Federal Reserve Act in 2000. We saw the return of discretionary
countercyclical fiscal policy in the form of tax rebate checks in 2001.
We saw monetary policy moving in a more activist direction with
extraordinarily low interest rates for the economic conditions in
2003-05. And, of course, interventionism reached a new peak with the
massive government bailouts of Detroit and Wall Street in 2008.

2009, Washington has doubled down on its interventionist policy. The
Fed has engaged in a super-loose monetary policy—including two rounds of
quantitative easing, QE1 in 2009 and QE2 in 2010-11. These large-scale
purchases of mortgages and Treasury debt did not bring recovery but
instead created uncertainty about their impact on inflation, the dollar
and the economy. On the fiscal side, we've also seen extraordinary
interventions—from the large poorly-designed 2009 stimulus package to a
slew of targeted programs including "cash for clunkers" and tax credits
for first-time home buyers. Again, these interventions did not lead to
recovery but instead created uncertainty about the impact of high
deficits and an exploding national debt.

Big government has proved to be a
clumsy manager, and it did not stop with monetary and fiscal policy.
Since President Obama took office, we've added on complex regulatory
interventions in health care (the Patient Protection and Affordable Care
Act) and finance (the Dodd-Frank Wall Street Reform and Consumer
Protection Act). The unintended consequences of these laws are already
raising health-care costs and deterring new investment and risk-taking.

If these government interventions are the economic problem, then the
solution is to unwind them
. Some lament that with the high debt and
bloated Fed balance sheet, we have run out of monetary and fiscal
ammunition, but this may be a blessing in disguise. The way forward is
not more spending, greater debt and continued zero-interest rates, but
spending control and a return to free-market principles.

Unfortunately, as the recent debate over the debt limit indicates,
narrow political partisanship can get in the way of a solution. The
historical evidence on what works and what doesn't is not partisan. The
harmful interventionist policies of the 1970s were supported by
Democrats and Republicans alike. So were the less interventionist
polices in the 1980s and '90s. So was the recent interventionist
revival, and so can be the restoration of less interventionist policy
going forward.

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rajat_bhatia's picture

The Hope, Bitchez!!!

Clueless Economist's picture

Anyone see Bwaney Fwank on CNBS say with spittle shooting from his fat face that "In fact I have ALWAYS been in favor of poor people renting"

Wow that lisping creep can really lie!

augie's picture

more like seamen in mouth. 

eisley79's picture

Decent article, but full of false assumptions.

The 80s and 90s were an illusion of wealth creation and growth.  The 70s  was never fixed, it was hidden.  Through deregulation, futures, derivatives, and globalization/free trade, they managed to bury the problems, and move inflation from consumer goods into the markets.  What we now face is the final end game.  Everything from the 70s until now, all balled up into one mighty hammer, just waiting to come down.

Slave labour through free trade, pulling wealth from the future through financial "wizardry", and massive manipulations.  That is the real source of his so called 80s and 90s.

You can only game reality for so long, eventually the truth, and valid market forces will prevail.  The Great Depression 2 will come, regardless of how long they can keep the music going, eventually it will come.  2008 is nothing.  The first little tremor, the real earthquakes are yet to come.

So get out of debt, get into real assets, and make sure you have control of what you own.  When the SHTF, buy while everyone else is selling, and you will be well placed for the next century of true growth, and a return to an actual physical economy.

Animal Cracker's picture

I would add the assumption that this is a problem that TPTB want to fix rather than a changeover that they are trying to manage.

MacGruber's picture


Agreed, the elite have just spent the last several decades finding new ways to wring economic growth out of an ever increasingly dry sponge. There was an era back around the industrial revolution where the U.S. had real productive growth, but ever since it has been an act of robbing Peter to pay Paul. Unfortunately the hope would be that the elites would pay for their malfeasance alongside the other members of the global society but I have a growing suspicion that that will never happen; no reset. Just an endless period of “transient” high unemployment and general shittiness for the average person.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

You mean a seaman's semen?



BigJim's picture

Seaman's semen? This is Barney Frank we're talking about. Seamen's semen it is.

Clowns on Acid's picture

Barney "he made me bite the pillow" Frank is a delusional, left wing facsist, which is weird regarding how fascists in the past have dealt with bow ties like him, is strange.

He and his ilk regard truth and untruth as the same thing.

Barney will never be the man his mother was.

CAUSE_EFFECT's picture

"Just a little spittle in your eye before you die! 

The Barron Harkonen - Dune

curbyourrisk's picture

Hey C.E.:


To me it always sounds like he has something in his mouth when talking.....  His mother apparently never taught him to never talk with your moth full of banker cock. 

Marty Rothbard's picture

I've always found homosexuals of Barney's generation, to be predisposed towards lying, at every opportunity.  Thats probably one reason that there are so many that are politicians.  I suspect that covering up their homosexuality during their formative years, formed lasting habits.  I can remember, as a kid, in the sixties, reading about guys being arrested in "gay" stings, and imprisoned, sort of like you hear about child molesters now, so you really can't blame them for the cover up.  It seems like they would wise up to such easily provable lies as Barney's.  Those subcommitee hearings come back to haunt you.  On the other hand, maybe he advocates poor people renting, as well as signing mortgages they can't possibly pay off.

    I don't find it to be true of people born after social approbation ended, and condemners of homosexuality began to be prortrayed as bigots, rather than as being morally upright.  However, the self deception of believing that socialism works, comes very easy to them.  Even the ones who have seen it fail again, and again.

     Oddly enough, I've never knowingly met a homosexual, who belonged to the Austrian school of economics, or the libertarian party.  Met tons that are Democrats though.

Dr. Acula's picture

>I've never knowingly met a homosexual, who belonged to the Austrian school of economics, or the libertarian party.  Met tons that are Democrats though.

Gay Austrians (no I'm not talking about Bruno) exist, you just need to meet more people.

I was able to nudge a young gay man from the Bush/Palin camp over to Ron Paul and some Rothbardian views over a couple of years. Gave him a copy of Hazlitt too.

BigJim's picture

'Nudge', huh?

Wink wink, say no more... ;-)

Marty Rothbard's picture

Like I said, knowingly.  

Stoploss's picture

Load your shorts. Im showing 10 points.

bill1102inf's picture

There will be no reset. Only more enslavement. As the rich get richer and the poor get poorer.  

Quixote's picture

CPL might disagree with you.

Syrin's picture

What does CPL stand for?

Stoploss's picture

Futures at 1328.S&P 1337

qussl3's picture

So im not the only one that sees this.

Beginning to think im going nuts.

What kinda whacked out shit is this?

Stoploss's picture

A running risk spread.


And risk just backed off to 1333

Stoploss's picture

Look at the currencies on finviz or whereever you can see them all.


When you see this, green currencies and green gold and silver.

That spread will close to the downside, shorts win.


deez nutz's picture

is this guy for real? the late 80's saw the start of the "import nation" and the 90's began the period of credit expansion (see: Greenspan).  Stimulas were just "sugar pumps" to hide the damages already being done to the economy. 

kito's picture

agreed. this guy is delusional if he thinks reagan bush clinton were eras of non-intervention. what a crock of shit. this country's trajectory to implosion has been marked since the the end of the gold standard in the 70s. plain and simple.

Bicycle Repairman's picture

this country's regression to its natural economic level has been marked since the the end of WWII. plain and simple.

We need to get Europe and Asia to blow each other up, or we're going to have to work for a living.

Stoploss's picture

Thank you. Dead nuts spot on. kito

Dr. Richard Head's picture

Agreed.  From Nixon on, the Thrown of the President was nothing more than shifting chairs on the Titanic, while placating the public with subversive debt. Prior to 1971, was consumer credit even an option?  How about student loans that couldn’t be discharged?  Shit, 30-year mortgages back in the 60’s?  Are you kidding me?


The false perception of wealth with the onset of debt is what transitioned the populace into volunteering themselves for indentured servitude, because instant gratification was the aim of the American Dream.  George Carlin said it best, “The reason they call it the American Dream is because you have to be asleep to believe it.”


I am a 33-year-old male.  The last generation that understood the subversive nature of government monopoly control over money was my grandparent’s generation.  I remember the silver coins she would insist on us kids holding onto and never understood a damn word of it, until now.  Granted, that particular generation was placated by Social Security and Medicare.  These were the breads of the bread and circuses that were enough for that generation to shut their pie holes and let their children watch the idiot box.  The downhill slope seems to have moved toward the cliff over the past two generations, including mine.  Now it is time for my generation to not submit, fight the whole way, and subvert the financial system in order to force the reset. 


I am doing my part, are you?

cocoablini's picture

The 70s recession was caused by the winddown of the Vietnam war and the gold standard removal.
Reagan came in and recreated the war economy, but fought no wars. We just blew wad on Star Wars and running the USSR into the ground by outprinting them. The debt exploded under Reagan, but the money printing was handed over to private industry as opposed to social "good."
Whenever you are in an economic slump, the war economy was the best way out- something Carter couldn't do.
The Reagan- Bush- Clinton years were all about money printing and bubbles just like previous administrations. Bush1 just happened to suffer the unwind of the USSR and military industrial complex. Plus the SL implosion.
John Taylor is fucking dreaming if he thinks these years were free market. Its just a cycle.

BigJim's picture

Whenever you are in an economic slump, the war economy was the best way out

Yeah, right, because England, Germany and France during and post-war were always less wealthy before they started killing each other.

Ask yourself this - how do countries get richer by having thousands (millions?) of their most productive citizens downing tools in productive industry producing consumer goods, and going off killing each other for a few years while destroying countries' housing and factory stock, and blowing up expensive military hardware?

Answer: they don't get richer thus. I suggest you research 'The Broken Window' fallacy.

bill1102inf's picture

What? Half the country just got laid off?!?! +200 Dow, +20SP500 !!!! GO GO GO !!!!

hedgeless_horseman's picture

The harmful interventionist policies of the 1970s were supported by Democrats and Republicans can be the restoration of less interventionist policy going forward.


And thus, those very same politicians that have enslaved us in debt will become our saviors, never to face ANY retribution.

francis_sawyer's picture

don't you love it how, in monopoly (& real life too, I suppose)... The same "banker" is both the banker & the one getting out of jail free...

I Am The Unknown Comic's picture

Do those kneepads come with the card?

gmcniff's picture

did not see the word "gold" once in the editorial

papaswamp's picture

Can't say gold...that collapses any remaining confidence in the dollar. If Ben had said yes gold is money the dollar would have collapsed.

Bicycle Repairman's picture

John assumes that the people who run things see a healthy economy as the goal.

buzzsaw99's picture

+1 this whole thing was no accident.

Dr. Richard Head's picture

Indeed, but the population, including myself up till 2008, was complicit in the whole thing.  No one could say no to easy credit to get the luxury car, the big house, big screen tv, riding mowers, etc.  In our quest for "wealth" through material goods, we willingly accumulated debt that was freely legislated and granted, out of thin air, by the politicians and the banks respectively.  They made it so easy so that we would volunteer for the ovens. 

No more for me, no more for my family, and no more for many of us here.  The battle line is easily seen and we can collapse this travesty of a mockery of a sham.  If we no longer take part in the debt creation, do not play with the banks, and invest in PMs, the reset will be under our control and the guillotines will be well oiled. 

gdogus erectus's picture

Same timing for me.  Question:  Are you still married?

Mariposa de Oro's picture

They made it so easy so that we would volunteer for the ovens.

Very true.  The middle class was set up for failure.  We are not in this place by accident.  I hear many people say that the politicians are 'stupid'.  I always ask how the most stupid of people have managed to rise to the highest levels of governmental and financial power.  I have yet to get an intelligent answer.  Mostly I just get a blank stare. 

I've always enjoyed your posts.  I must admit I thought you were much older than 33.  You give me hope for the future.  Most people in your age group are clueless.

DeadFinks's picture

The middle class was set up to produce for its masters.  It's always about how manage those in the yoke.  The "stuff " is peanuts to keep the masses complacent.

Esso's picture

Pretty smart for a mechanic, BR.