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Fed Admits Policies Benefit Rich, Fears For "Nation's Democratic Heritage"

Tyler Durden's picture




 

Having warned just 6 weeks ago that high-yield credit and small high-tech firms may be in a bubble, Fed Governor Tarullo, ironically speaking at the Hyman Minsky Financial Instability Conference, suggested that the recuction in share of national income for "workers" (i.e. income inequality) is troubling. Furthermore, he added, "changes reflect serious challenges not only to the functioning of the American economy over the coming decades, but also to some of the ideals that undergird the nation's democratic heritage." His speech, below, adds that since there has been only slow growth so far, expectations for a growth spurt are misplaced and that the Fed-policy-driven recovery has "benefited high-earners disproportionately."

 

From feb 25th, Tarullo made his concerns clear...

  • *TARULLO SEES RISK OF LARGE LOSSES IN LEVERAGED LOAN FUNDS
  • *TARULLO SEES RISK OF LARGE LOSSES IN HIGH-YIELD CORPORATE BONDS
  • *TARULLO: FARMLAND, SMALL TECH FIRM VALUATIONS SEEM 'STRETCHED'

But

  • *TARULLO SAYS QE PURCHASES 'HAVE HAD POSITIVE' IMPACT

And then today, he is a little less exuberant about that "positive" impact...

  • *TARULLO: FED POLICY NOT PRINCIPAL FIX FOR ECONOMIC CHALLENGES
  • *TARULLO SAYS UNCONVENTIONAL POLICY `CRITICAL' TO RECOVERY
  • *TARULLO SAYS QE HAS HAS HELPED FUEL `ECONOMIC ACTIVITY'
  • *TARULLO SAYS POLICY HASN'T CREATED `PREFERRED' RECOVERY
  • *TARULLO: REDUCED NATIONAL INCOME SHARE FOR WORKERS `TROUBLING'
  • *TARULLO: RECOVERY BENEFITING HIGH EARNERS DISPROPORTIONATELY
  • *TARULLO CALLS FOR `PROMOTING INVESTMENT IN HUMAN CAPITAL'

Full Tarullo speech available here

Here are the highlights...

Longer-Term Challenges for the American Economy

Longer-Term Challenges for the American Economy

In the more than five years that I have been a member of the Board of Governors of the Federal Reserve System, it has been hard not to concentrate on near-term economic prospects. The severe decline in the economy precipitated by the financial crisis and the magnitude of job and production loss in the Great Recession that followed have made a focus on recovery both understandable and imperative. But as I have prepared for Federal Open Market Committee (FOMC) meetings every six to seven weeks by examining incoming data and the analyses of our own staff and of outside economists, I have been struck by the evidence of longer-term challenges to the American economy that poke through shorter-term discussions.

There is considerable ongoing debate about whether the financial crisis and recession amplified changes already afoot in the economy, accelerated them, or simply revealed them more clearly. Whatever one's view on that question, the confluence of some apparently secular trends raises important questions about our nation's future growth potential and our ability to provide opportunity for all of our people. Indeed, these changes reflect serious challenges not only to the functioning of the American economy over the coming decades, but also to some of the ideals that undergird the nation's democratic heritage. This evening I will address in some detail four particularly important developments:

  1. Productivity growth has slowed. As a result, the overall economic pie is expanding more slowly than before.
  2. Some indicators further suggest that workers have been claiming a smaller share of the overall economic pie during the past decade.
  3. Inequality has continued to increase, meaning that a larger portion of overall economic resources is commanded by a smaller segment of the population.
  4. Economic mobility across generations is not particularly high in the United States, and it has not been increasing over time.

After detailing these trends, I will turn briefly to both the role and the limits of monetary policy in countering them.1 

Structural Challenges for the American Economy

Lagging productivity growth
Over the long term, the pace at which our standards of living increase depends on the growth of labor productivity--that is, the increase in the amount of economic value that a worker can generate during each hour on the job. Unfortunately, the data on productivity growth in recent years have been disappointing. Although output per hour in the nonfarm business sector rose about 2-3/4 percent per year from the end of World War II through 1971, productivity has risen just 1-1/2 percent per year since then, excluding a brief burst of rapid growth that occurred roughly between 1996 and 2004.

Just as it took economists a long time to identify the sources of the surge in productivity that began nearly two decades ago, they are only now beginning to grapple with the more recent slowdown. Some have argued that the burst of productivity growth that began in the mid-1990s was the anomaly, and that the more pedestrian pace of growth over the past decade represents a return to the norm.2 In this view, the long period of rapid productivity growth that ended in the 1970s grew out of the technological innovations of the first and second Industrial Revolutions. But now, despite continued technological advances, a return to that pace of performance is thought unlikely. In particular, these authors argue that the information technology revolution of the past several decades--including the diffusion of computers, the development of the Internet, and improvements in telecommunications--is unlikely to generate the productivity gains prompted by earlier innovations such as electrification and mass production.

This somewhat pessimistic perspective is far from being conventional wisdom. While productivity has increased less rapidly in recent years than during the first three-fourths of the 20th century, per capita income (a statistic available over a longer time span) is still rising more quickly than it was even during the second Industrial Revolution. Indeed, some have argued that the problem with new technology is not with productivity growth but with our ability to capture the productivity in our statistics. Moreover, many economists and technophiles remain optimistic that we have yet to fully realize the potential of the information revolution, and that technological change will continue to bring inventions and productivity enhancements that we cannot imagine today.3 This view holds that there is no reason productivity could not continue to rise in line with its long-term historical average.4 

It must be noted that, even among the productivity optimists, there are differences over how the expected progress will affect job creation and income distribution. In particular, some in this camp believe that we are likely to see a continuation of the pattern by which recent productivity growth seems to have mostly benefited relatively skilled workers. It may also have favored returns to capital investment, as opposed to labor, in greater proportion than past productivity gains.

While there is some reason for optimism about the prospects for technological progress, there are grounds for concern over the decline in the dynamism of the U.S. labor market, an attribute that has contributed to productivity growth in the past and has traditionally distinguished the United States from many other advanced economies. Historically, the U.S. labor market has been characterized by substantial geographic mobility. Our high rates of geographic mobility are one facet of the overall dynamism of our labor market, which is also manifest in the continual churning of jobs through hirings and separations, as well as firm expansions and contractions--a process that the economist Joseph Schumpeter called "creative destruction."5 To give a sense of the magnitude of this process, while net job gains and losses are typically measured in the hundreds of thousands each calendar quarter, gross job creation and destruction commonly run at a pace of roughly 7 million jobs each quarter. Creative destruction has been shown to improve productivity as jobs that have low productivity are replaced with jobs that yield greater productivity.6 

However, a variety of data indicate that this feature of labor market dynamism has diminished. Since the 1980s, internal migration in the United States over both long and short distances has declined. To give an example, the rate of cross-state migration was less than half as large in 2011 as its average over the period from 1948 to 1971.7 And, while we still see the level of employment rising and falling over the business cycle, the gross flows of people between jobs and of jobs across firms that underlie the observed aggregate changes have fallen over the past 15 years.

At this point, we do not have a full understanding of the factors contributing to the decline in labor market dynamism. As a number of economists who have studied the issue have pointed out, some of the explanations may be benign or even positive.8 For instance, the aging of the population accounts for some of the decline in migration and job churning, as older individuals are less likely to move and change jobs; such demographic factors probably do not represent an adverse reduction in dynamism. Moreover, some of the decline in turnover could be the result of individuals and firms finding productive job matches more quickly than before. For many employers and workers, the Internet has reduced the cost of posting job openings and the cost of searching for jobs. This more efficient process could result in better matches between firms and workers and thus fewer separations. Similarly, a reduction in firm uncertainty about the costs and benefits of investing could reduce firm-level churning in jobs. In both cases, workers and firms are able to achieve a good outcome with less turnover and presumably no loss of productivity.

While it seems possible that improved information could be a force behind the reduction in geographic mobility and labor turnover, there are less benign possibilities as well. For instance, an increase in the costs to firms of hiring and firing individuals or an increase in the costs to individuals of changing jobs could lead to fewer productivity-enhancing job changes. Alternatively, the reduction in churning could itself be a function of slower productivity growth, as slower productivity growth implies lower benefits to forming new matches.

One recent trend that is particularly disturbing is stagnation in the formation of new firms. Statistics from the Bureau of Labor Statistics (BLS) show that the number of establishments in operation for less than one year rose between the mid-1990s, when the data start, and the early 2000s. But, smoothing through the ups and downs of the business cycle, new firm formation has been roughly flat since then. Moreover, the number of individuals working at such firms stands almost 2 million below its peak in 1999. Given the role of innovation by entrepreneurs and the well-documented importance of successful young firms in creating jobs, these trends are disheartening.

The lagging share of national income accruing to workers
A second adverse development in recent years has been the apparent reduction in the share of overall national income that accrues to workers. Here I will be brief and suggestive because the scholarship is far from settled. But the basic trends in the data are troubling. Labor's share of total income generated in the nonfarm business sector has been on a downtrend since the 1980s and has fallen sharply since the turn of the millennium. It stood at 56 percent at the end of 2013, the lowest level since the BLS began collecting data on the measure in 1948.

To be sure, various conceptual and measurement challenges make it difficult to compute labor's share of income with any degree of precision. However, taken at face value, these data have significant implications for the distribution of income in our society, given how skewed the holdings of capital are. Economists have focused less attention on the factors underlying the apparent decline in labor's share of income than they have on the rise in income inequality in general, but among the candidates are technological change, which has allowed for the substitution of capital for labor in the handling of routine tasks, an increase in firm bargaining power, and perhaps a decline in competition in product markets.

The increase in inequality
Of the trends I have identified, the one that has received the largest amount of press attention recently is the rise in income inequality. While income inequality has been increasing since the 1970s, over the past two decades the process has been characterized by what some have called polarization, with those at the top of the distribution accumulating a significantly larger share of income, those at the bottom of the distribution experiencing modest relative gains, and those in the middle of the income distribution falling further behind in relative terms.

Gauging by one fairly comprehensive measure of income used by the Congressional Budget Office, the share of income garnered by those in the top 1 percent of the distribution more than doubled between 1979 and 2007 to about 17 percent, while the share accruing to those in the 1st through 80th percentiles fell 9 percentage points.9 And while it is true that those at the upper end of the income distribution were disproportionately affected during the financial crisis, with the result that inequality actually fell a bit in the wake of the recession, high earners also appear to be benefiting disproportionately from the recovery. Thus, the crisis does not seem really to have changed the trajectory of inequality.

As interesting as these statistics on inequality are, they obscure a key part of the story--one that has been an important part of our identity as Americans: whether a family has the ability, through hard work, to attain a better standard of living. And on that point, we find that households in the middle and lower parts of the earnings distribution have experienced, at best, only modest improvements in inflation-adjusted income.10 Between 1979 and 2007, households in the middle quintile of the income distribution--a functional definition of the middle class--saw their real labor income (adjusted for household size) rise only about 3 percent. Meanwhile, households in the bottom one-fifth of the distribution did a bit better, experiencing about a 24 percent rise, although this figure reflects an improvement of just 1 percent per year, and that from a very low base. In contrast, income rose more than 70 percent among households in the top one-fifth of the earnings distribution.

The polarization of the labor income distribution has been mirrored in the types of jobs we are creating. Since the 1990s, job gains have been concentrated at the upper and lower ends of the earnings distribution. There have been healthy gains in employment in highly paid occupations, such as computer and information systems managers, and a rise in low-paid jobs, such as home health-care workers, but growth has been much slower in occupations with earnings in the middle of the distribution, such as machinists. This trend accelerated during the Great Recession and the ensuing recovery. For example, food services, retail, and employment services, all low-wage industries, accounted for nearly 45 percent of net employment growth from the start of the recovery through early 2012, while employment in a number of industries that offer good jobs for mid-wage workers--including construction, manufacturing, and finance, insurance, and real estate--did not grow in those years or grew too slowly to make up for their job losses during the recession.11 

There is no single explanation for the rise in inequality and the decline in the share of jobs that provide a middle-class standard of living. Economists generally agree that technological change and globalization have played a role.12 Both of these forces have reduced the demand for workers whose jobs had involved routine work that can easily be mechanized or offshored while, at the same time, increasing the productivity of higher-skilled workers. However, it is less clear whether technology and globalization are sufficient explanations for the increased share of income going to those at the very top of the income distribution. It may be that by increasing the effective size of the markets for their skills, technological change and globalization can also explain some of the large increase in earnings of top athletes, musicians, and even chief executive officers. In the popular press, the phenomenon of the very few reaping enormous windfalls has become known as the winner-take-all economy. However, other researchers have noted that a large share of the top earners is found in industries such as finance and law, suggesting that deregulation, corporate governance, and tax policy may have also played a role in the trend toward rising inequality.

Economic mobility has not increased to mitigate higher inequality
Despite the fact that rising inequality has compounded the stakes associated with one's position in the income distribution, mobility up and down the economic ladder from one generation to the next in the United States has been stagnant. Work by Raj Chetty and his coauthors using income tax data has shown that a child who was born in the early 1990s had about the same chance of moving up in the income distribution as a child born in the 1970s.13 Combining these results with previous research suggests that mobility has not increased in the postwar era. And, despite the long-held view of the United States as the land of opportunity, we actually fall short of other advanced economies in terms of intergenerational mobility. In the United Kingdom, for example, about 30 percent of sons with low-income parents end up being low-income themselves, while in the United States the comparable figure is over 40 percent.14 

The Role of Monetary Policy
As must be apparent, the challenges I have discussed are not susceptible to easy or rapid solution. It is equally apparent that monetary policy cannot be the only, or even the principal, tool in addressing these challenges. But that is not to say it is irrelevant. There is not as sharp a demarcation between cyclical and structural problems as is sometimes suggested. Monetary policies directed toward achieving the statutory dual mandate of maximum employment and price stability can help reduce underemployment associated with low aggregate demand. And, to the degree that monetary policy can prevent cyclical phenomena such as high unemployment and low investment from becoming entrenched, it might be able to improve somewhat the potential growth rate of the economy over the medium term.15 

More generally, reducing labor market slack can help lay the foundation for a more sustained, self-reinforcing cycle of stronger aggregate demand, increased production, renewed investment, and productivity gains. Similarly, a stronger labor market can provide a modest countervailing factor to income inequality trends by leading to higher wages at the bottom rungs of the wage scale.

The very accommodative monetary policy of the past five years has contributed significantly to the extended, moderate recoveries of gross domestic product (GDP) and employment. To this point, however, there has not been a corresponding upturn in wages. To be sure, there have been notable wage increases in specific areas of the country enjoying economic growth much higher than the national average. And, as is nearly always the case, labor shortages in discrete skilled job categories may be placing some upward pressures on wages for those jobs (though, judging by such aggregate data as we have, not by as much as one might have thought based on the widespread anecdotal reports of skilled labor shortages).

But one sees only the earliest signs of a much-needed, broader wage recovery. Compensation increases have been running at the historically low level of just over 2 percent annual rates since the onset of the Great Recession, with concomitantly lower real wage gains. The reasons for the lag in wage gains in the context of continuing moderate growth are not totally clear. Nominal wage rigidity on the downside may have played a role to the extent that employers were reluctant to cut nominal wages even in the period from late 2008 to early 2009, when they were eliminating jobs in staggering numbers. The secular labor market factors mentioned earlier are also likely relevant.

There is, of course, also a debate around the question of how much of current unemployment--particularly long-term unemployment--is structural and thus how much slack still exists in labor markets. Last week Chair Yellen explained why substantial slack very likely remains. I would add to her explanation only the observation that, in the face of some uncertainty as to how best to measure slack, we are well advised to proceed pragmatically. We should remain attentive to evidence that labor markets have actually tightened to the point that there is demonstrable inflationary pressure that would place at risk maintenance of the FOMC's stated inflation target (which, of course, we are currently not meeting on the downside). But we should not rush to act preemptively in anticipation of such pressures based on arguments about the potential increase in structural unemployment in recent years.

In this regard, the issue of how much structural damage has been suffered by the labor market is of less immediate concern today in shaping monetary policy than it might have been had we experienced a period of rapid growth during the recovery. Remember that, just a few years ago, many forecasters--in and out of the Federal Reserve--were projecting growth rates at an annualized rate of 4 percent or greater for at least a year. That expectation raised the question of whether a reasonably rapid tightening in monetary policy might at some point be needed. But now, in part because we did not have such a spike in the early stages of recovery and instead have had modest growth in place for several years, it seems less likely that we will experience a growth spurt in the next couple of years that would engender concerns about rapid wage pressures and changes in inflation expectations.

The Importance of a National Investment Agenda
In short, by promoting maximum employment in a stable inflation environment around the FOMC target rate, monetary policy can help set the stage for a vibrant and dynamic economy. But there are limits to what monetary policy can do in counteracting the longer-term trends I have discussed. In economic research and in policy debates, we need more focus on these issues and more attention to concrete proposals to address them. I would suggest that one element, though by no means the only one, in such a program is a well-formulated government investment agenda.

A pro-investment policy agenda by the government could help address some of our nation's long-term challenges by promoting investment in human capital, particularly for those who have seen their share of the economic pie shrink, and by encouraging research and development and other capital investments that increase the productive capacity of the nation.

There is already a well-known list of investments that have been shown to be successful. For instance, early childhood education can increase the educational attainment of children from low-income families as well as improve other outcomes.16 In addition, recent innovations in job training programs, which more tightly link the training to the needs of employers in sectors of the economy with a demand for workers, have been shown to increase both the employment and wages of participants.17 

Investment in basic research by the federal government is another area in which greater investments could yield significant returns and in which a public policy role is warranted because of externalities. Econometric studies suggest that the rates of return to this type of investment can be very high.18 And a range of policy commentators agree that there is a continuing role for government investment in infrastructure, including various forms of transportation, as a way to enhance productivity. Not too long ago, the American Society of Civil Engineers gave the United States a rating of D on its roads and bridges. Improving that system, both by doing necessary maintenance to maintain safety and functionality and by reducing congestion could yield substantial benefits.19 

This agenda might sound ambitious. In fact, spending in these areas is currently not a very large proportion of federal outlays. For example, the entire federal budget for nondefense research programs--including expenditures on health research, the National Aeronautics and Space Administration, and the National Science Foundation--is only 2 percent of federal spending (or less than 0.4 percent of GDP), well below the share in the 1960s, when we last made a significant effort to advance our capacities in math and science during the era of space exploration. Moreover, spending in these areas has been the target of much of the budget restraint in recent years. Even in the area of physical infrastructure, we have fallen behind past efforts. After a surge associated with fiscal stimulus during the recent recession, public spending on infrastructure has tumbled, resulting in the slowest growth (1 percent) in the state and local capital stock since WWII.

I certainly am not intending here to join the broader debate on fiscal policy, either short or longer term. But I do note that fiscal policymakers could promote the longer-term prospects of the nation by increased spending in areas that are likely to yield increases in living standards. The amount of increased investment spending that could reasonably be absorbed would be quite modest in comparison with the very large amounts associated with major fiscal issues such as health-care expenses. And even a strong investment agenda would not be a complete response to the economic challenges I have discussed. But, like monetary policy, it could play a useful role.

Conclusion
The longer-term challenges to the American economy that I have identified this evening are real. But I certainly do not regard a continuation of these trends as inevitable. On the contrary, the American economy is still possessed of great advantages and potential that, while always and necessarily evolving, have served us well over the years.20 My principal aims this evening have been, first, to echo those who have been drawing attention to these challenges in recent years and, second, to encourage more discussion and debate of the specific policies that can best help us meet these challenges. As should be apparent in my remarks on monetary policy and an investment agenda, I believe that there are policies already developed and available to us that can contribute to this effort. My hope is that such policies will be pursued and that others, perhaps yet to be developed, will follow.

 

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Wed, 04/09/2014 - 20:17 | 4641404 FieldingMellish
FieldingMellish's picture

NSS

Wed, 04/09/2014 - 20:40 | 4641489 holmes
holmes's picture

i'm insulted.

Wed, 04/09/2014 - 21:24 | 4641635 Stoploss
Stoploss's picture

     .     .

      0

 

 

Wed, 04/09/2014 - 21:36 | 4641676 mickeyman
mickeyman's picture

Well, carry on then

Wed, 04/09/2014 - 22:17 | 4641820 ArkansasAngie
ArkansasAngie's picture

What they are really stealing from us is TIME.

They don't want to get it over with.

They like the way it is.

Screw'em

Leave no incumbent in office

Wed, 04/09/2014 - 20:58 | 4641557 Serfs Up
Serfs Up's picture

Note to self:  be sure to look into the entirely new concept of 'seignorage.'

Then: relay any findings to Fed.

Wed, 04/09/2014 - 20:19 | 4641407 DirkDiggler11
DirkDiggler11's picture

Yea, but despite the monster that is the US economy that Dr Frankemstein here helped create, he still thinks Fed policy can address the issues and correct the flaws ?

Take a fucking flamethrower to the Fed already.

Wed, 04/09/2014 - 20:30 | 4641453 Major Major Major
Major Major Major's picture

Fuck the Fed!

Wed, 04/09/2014 - 20:23 | 4641421 pragmatic hobo
pragmatic hobo's picture

just how do these fuck-bags get to control out monetary policy anyway?

Wed, 04/09/2014 - 20:25 | 4641432 Son of Captain Nemo
Son of Captain Nemo's picture

And now the good news!...

Wed, 04/09/2014 - 20:26 | 4641433 i_call_you_my_base
i_call_you_my_base's picture

Because it's trickle down and it's never worked. You just make a bunch of rich assholes, and coincidentally, they are all your friends and family members.

Wed, 04/09/2014 - 20:26 | 4641436 logicalman
logicalman's picture

Fed-policy-driven recovery has "benefited high-earners disproportionately."

THAT WAS, AND STILL IS, THE PLAN.

Wake up people, FFS.

Wed, 04/09/2014 - 21:03 | 4641570 JR
JR's picture

He supports QE. So why doesn't he just shut up.

Wed, 04/09/2014 - 20:26 | 4641437 TrustWho
TrustWho's picture

Idiot, America should forget Hitler II and find Pol Pot II. The Fed policies are contributing to the injustice that keeps the phoenix buried. 

Thu, 04/10/2014 - 07:11 | 4642470 mc225
mc225's picture

the thing with saloth sar (pol pot) was that he was a dejected electronics major. if he'd have been great at electronics school instead of flunking out, maybe there never would have been a khmer rouge?

speaking of which, if hitler's paintings had really 'taken off' commercially, maybe there would have never been nazis?

people frustrated with life sometimes go on to do the most 'far out' things.

 

Thu, 04/10/2014 - 09:04 | 4642738 dizzyfingers
dizzyfingers's picture

mc225  It's hard for young sociopaths to fit in.

Wed, 04/09/2014 - 20:27 | 4641438 nmewn
nmewn's picture

If I read "democracy" one more time, I'm going to form my own mob and rule as I wish ;-)

Wed, 04/09/2014 - 20:34 | 4641463 krispkritter
krispkritter's picture

Send me an invite.  FED=Fucking Evil Doers; they 'know' not what they do, but they do know it's not working and don't care, the rich are getting richer and they hope to be among them. 

Wed, 04/09/2014 - 21:04 | 4641577 nmewn
nmewn's picture

The generals are the Fed, the line officers are executives & pols, the cannon fodder is the Free Shit Army.

Its gonna require real resolve and a lot of defections ;-)

Thu, 04/10/2014 - 00:30 | 4642171 BolanosGhost
BolanosGhost's picture

I'm with you nmewn. What a blood boiling, existential depression inducing piece to read.

Yet so many here at ZH are yelling end the fucking FED, yelling at the mountain to move. Grab a fucking pic axe, find a way to survive under the mountain soviet style, or move away. Venting on a forum is just masturbation and saps the drive for concrete action. 

Wed, 04/09/2014 - 20:29 | 4641447 ratpack1968
ratpack1968's picture

Notice how all of the players are speaking up to acknowlege fuckstorm they helped create?  They all know the shit's about to hit the fan.

Wed, 04/09/2014 - 20:36 | 4641474 seek
seek's picture

Yup, between this and the Squid moving everything to a HFT-free exchange, change is in the air. I don't think it's necessarily SHTF, because this is all planned and coordinated ahead of time (seriously, we have a anti-HFT book announced on 60 minutes with anti-HFT quotes from Goldman staffers made months ago, an SEC announcement of an investigation, the launch of a HFT-free exchange, and Goldman shutting down its NYSE floor trades and HFT company in one week's time.)

Shit is coming... but this current set of events and proclamations about danger is a manufacturered crisis to allow TPTB to reshuffle the deck somehow. We'll know soon enough how they're going to fuck over the public this time.

Wed, 04/09/2014 - 20:30 | 4641452 ratpack1968
ratpack1968's picture

Oh, and fuck the BLM for harrassing 3rd and 4th generation ranchers to save a few turtles.

Wed, 04/09/2014 - 20:35 | 4641473 brown_hornet
brown_hornet's picture

Growth spurt 1996-2004...Internet and boomers in peak productive years

Now,  Facebook and junior in Mom's basement.

Wed, 04/09/2014 - 20:37 | 4641478 AccreditedEYE
AccreditedEYE's picture

Jefferson's nightmare has come true... Even the Fed itself can no longer deny it!

Wed, 04/09/2014 - 20:38 | 4641482 Stuck on Zero
Stuck on Zero's picture

Maybe the answer is that our government has become corrupt. 

 

Wed, 04/09/2014 - 20:48 | 4641526 Doubleguns
Doubleguns's picture

About 100 years ago. 1913 time frame. 

Wed, 04/09/2014 - 20:39 | 4641487 caShOnlY
caShOnlY's picture

you can tell by the lack of comments (even negative ones) how irrelavent the FED has become.

Wed, 04/09/2014 - 20:42 | 4641497 Major Major Major
Major Major Major's picture

“Monetary policies directed toward achieving the statutory dual mandate of maximum employment and price stability can help reduce underemployment associated with low aggregate demand.”

Why not just let supply and demand set employment and price?  If all you are doing can help reduce then you are not necessarily creating a benefit while giving the opportunity to damage.

 

“And, to the degree that monetary policy can prevent cyclical phenomena such as high unemployment and low investment from becoming entrenched, it might be able to improve somewhat the potential growth rate of the economy over the medium term.”

Again, might provide a benefit (and only in the medium term).

 

Just pack up your fucking desks, leave and never come back.

Wed, 04/09/2014 - 20:48 | 4641525 Duude
Duude's picture

You want to change the growth slope of the economy upward long term? First thing is to adopt a nationwide voucher system empowering parents to send their children to the schools of their choice. Its that type of change that will change the face of primary and secondary education in the US in a most positive way through the resulting competition that would follow. 

Wed, 04/09/2014 - 20:52 | 4641538 thetruthseeker
thetruthseeker's picture

This is akin to a drug dealer wondering why his clients have a drug problem.

Wed, 04/09/2014 - 20:56 | 4641547 logicalman
logicalman's picture

Differnce is that the client can't just print the money he needs

Wed, 04/09/2014 - 20:55 | 4641545 Tulpa
Tulpa's picture

THIS IS MY SHOCKED FACE

Wed, 04/09/2014 - 20:57 | 4641553 TeraByte
TeraByte's picture

Thanks a lot for ruining my faith on a blissful wealth effect that had blessed even the humblest grass roots.

Wed, 04/09/2014 - 20:58 | 4641556 Colonel Klink
Colonel Klink's picture

The Fed is a curse upon America.  It's done nothing to benefit the people, only the rich and powerful bank, corporations, and politicans.  Many not of this country.

Wed, 04/09/2014 - 21:10 | 4641587 Mercury
Mercury's picture

This has been quite a week or so for ZH.

I mean, when the Fed starts agreeing with Tyler about the pernicious effects of Fed policy...

Wed, 04/09/2014 - 21:08 | 4641588 Jack Burton
Jack Burton's picture

Corporate profits have been smoking hot, incomes for the 1% on fire, all this while it is claimed Obama is a socialist. The communist in the White House presides over an ever shrinking income for the lower 75%. Wages sink, benefits are killed, part time work grows. Communism and Socialism are supposed to take from the rich and hand it out to the rest. it is a stretch of immense imagination to proscribe these qualites to Obama. The fucker has done more to boost upper income earners than all the Republicans since Reagan.

War, well, Obama out of his fucking mind. The coward socialist is bombing so many countries we can't count them, pouring trillions into military costs. Funding and arming Nazis, Al-Qaeda, Fascists, organ eaters and, for all I know ,the crazed Washington Whore House is funding world wide child molesters!

Washington, can we live with out it finally?

Wed, 04/09/2014 - 21:23 | 4641634 Oldwood
Oldwood's picture

A socialist or communist can't just walk in and take over. He must burn the fucker to the ground first so as to be able to get enough desperate populist support to push this shit down our throats. This also includes stealing from the middle class to bribe those at the top of the food chain because not only does he need popular support but the social elites as well. I see nothing that negates that perspective in our current situation. Everyone who has pinned their hopes on the socialist/communist dream of wealth equality and economic justice inspired redistribution as been sorely disappointed.

Thu, 04/10/2014 - 00:40 | 4642188 Tulpa
Tulpa's picture

The USSR had a privileged 1% too, though its economy was so dilapidated that they weren't really that well off in an absolute sense.  Statistm by any name ultimately has the same effect.

Wed, 04/09/2014 - 21:45 | 4641711 Omen IV
Omen IV's picture

Obama has been the Trojan Horse for the 1% - completely fooled the Progressives on all issues - now caps it off with new war with Russia

there is ever decreasing discretionary income with no floor given the removal of tariffs - middle management is being decimated as manufacturing  is killed off and then service economy unafordable as well so there will be no consumer economy for white or blue collar compared to 20 years ago

the destruction is in its final stage

 

Thu, 04/10/2014 - 00:37 | 4642182 Tulpa
Tulpa's picture

In practice, the only differences between fascism and socialism are rhetoric and a bit of bookkeeping.  Stalin and Hitler got along just fine for a few years.

Thu, 04/10/2014 - 08:51 | 4642690 dizzyfingers
dizzyfingers's picture

Jack Burton

Limousine-socialist: do as I say not as I do.

He's NOT poor kid from a poor family.

http://wtpotus.wordpress.com/2011/10/12/barack-hussein-obama-ii-child-of-privilege/

Wed, 04/09/2014 - 22:04 | 4641758 Downtoolong
Downtoolong's picture

I ran this through my new Fed-Speak Translation App I just got for my iPhone. Here are the results: 

"changes reflect serious challenges” 

If you’re not one of the 1% today, you likely never will be, nor will your children, nor will your grandchildren, nor will your great grandchildren….  

“not only to the functioning of the American economy over the coming decades",

We’re going to be like China and Russian in a few years

"but also to some of the ideals that undergird the nation's democratic heritage."

Go ahead and vote if you don’t mind wasting your time. What the hell, you don’t have a job to go to anyway.

"Fed-policy-driven recovery has benefited high-earners disproportionately."

Start thinking about what it will be like cleaning Lloyd Blankfein’s or Warren Buffett’s toilets for a living (if you're lucky enough to get that job).

Wed, 04/09/2014 - 23:42 | 4642068 Central Ohio
Central Ohio's picture

He just reported the obvious and offered no solutions.  Hey, he's got a job for life...

Thu, 04/10/2014 - 00:24 | 4642161 zstard
zstard's picture

This endless foreplay is getting frustrating.

Thu, 04/10/2014 - 00:27 | 4642165 royal
royal's picture

Tarrillo: "Fed policy creates massive inequality....but, fuck it, were gonna keep doin' it anyway."

Thu, 04/10/2014 - 01:20 | 4642222 robnume
robnume's picture

Did somebody grow a conscience? At the Feral Reserve? WTF?

Thu, 04/10/2014 - 07:03 | 4642459 kenezen
kenezen's picture

Fascinating! Middle Class workers getting hurt since the 70's. Thanks for telling us that and not couching it in subjective terms. This is finally for those who read a real descriptive article about Blue Collar conditions. The only thing he did not say bluntly is:

This condition is caused by Federal Government since the 70's restricting States and driving out heavy industry! At first it was the Industries repositioning for distribution and wage. Wages have evened since the 80's and is no longer why industry won't come back with the wages and benefits they exported.

It is the Federal Government and its Agencies! EPA, NLRB, Class action law suites! A very large Business and Industrial leader in the "Far East" told me that he would never place Industry in America because of the above! NOT WAGES! Services jobs for our high school kids are not as good as we had it coming from high school and going to a factory making good wages while we studied. We weren't rich enough just to get into college. We had to earn enough to save for night school. 

Now heavy industry is gone and Government Federal Workers not effected by this makes reasonable wages  and pension while private sector doesn't. "Federal Wages" and pensions are where they should be for today's economy! They double the wages and pensions of the "Private Sector."  DOUBLE!

Thu, 04/10/2014 - 09:15 | 4642770 dizzyfingers
dizzyfingers's picture

kenezen

Bravo! Truth! Obvious to all who lived in the US from WW2 through the 60s.

Heavy industries and US oil made the USA what it was at its best, when one person (dad) could support a family on a "living wage" by working in manufacturing. After US government pushed out heavy industry to Asia, good-bye wealthy USA and here we are.

Thu, 04/10/2014 - 13:04 | 4643935 Chewybunny
Chewybunny's picture

But those jobs will never come back in the ways we think. Even if they did there is a huge probability that they will not have the wages that they did before. Already they are coming back to the states because they have an entirely new means of production: complex robotics, that are even cheaper than the Chinese worker, who's average wages have increased 14% a year!

The fact of the matter is the economy is advancing with technology, technological and engineering jobs are going to be the essential ones in the future, yet schools are graduating designers, photographers, journalists, social science majors, etc, in droves! Steve Jobs said it best to Obama, and I am paraphrasing: this country is producing artists when it should be producing engineers.

I doubt that the average blue-collar worker at this day and age (late Boomers, early Gen Xers) would have the luxury of time and money to go to a trade school to gain these kinds of skills. We may very well see a permament class dependent wholly on the "generosity" of the state, sure would guarantee those votes coming to maintain the benefits. 

Thu, 04/10/2014 - 07:41 | 4642517 dizzyfingers
dizzyfingers's picture

Too bad that in the lag time between when the Fed's policies collapsed the economy and when/if there's ever an actual recovery, a generation or two or five or more of kids will have been born and will have grown up in the ruined American economy while the Fed tinkers with its you know what.

It may not be possible to predict how this gap may affect our economy but I'm betting its effects are going to be big, bad, and long-lasting.

I have no solutions, and even if anyone out here in Realityland did have relevant ideas that might work or actual solutions, the Fed isn't seeing, understanding, or listening to anyone who isn't them. PLANETARILY out of touch.

Meantime I think the best self-protective policy is not to go along with their plan which only figures more debt is best. Zip your pockets, in other words.

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