US Economy added no jobs in August

[Integral]

Small businesses don't. I agree that QE3 is likely to have little effect (especially if it's as small as QE2). But the Fed could and should also change the interest rate it pays banks on their excess reserves from +0.25% to something negative. That would help a little. Admittedly, not enough, but Congress is too insane to provide any fiscal stimulus, and Obama isn't the guy that could rally the public to change Congressional minds. Like Cutlass said, the Fed is all we have left.

Mah boy!

Things the Fed could do:
1. Negative IOR. Increase the interest paid on required reserves to compensate; the important effects are at the (non-required) margin.
2. Large-scale asset purchases (QE3). Not a number, like "$2 trillion", but a goal, like "we'll continue expansion until incomes are back to where they would have been pre-crisis." Or use a price target if an income target makes you squeamish.
3. Communicate its strategy in a coherent fashion. Other countries use inflation targets. That'd be a good start. A path for income or a path for prices would be better.

Is the problem not enough spending? Increased incomes should boost spending.
Is the problem debt overhang? Debts are denominated in nominal dollars, so increased incomes ease the debt burden.

Yes, banks and nonfinancial corporations are already awash with cash. That just tells me that there is unsatiated excess demand for money. Fill that demand and people/firms will start spending on newly-produced goods again.

Recessions are always and everywhere a monetary phenomenon.

Back to basics. Aggregate Supply and Aggregate Demand.

AS is an upward-sloping curve in (P,Y) space. AD is downward-sloping.



AD is below the level where equilibrium would support full output/full employment.

So boost AD.

But what is AD? MV=PY defines a hyperbola in (P,Y) space. MV=PQ is AD. So increase M until AD is at a level consistent with full employment/full output.

Pretty soon I'm going to start sounding like a crank...

 

[GamezRule]

Small businesses don't. I agree that QE3 is likely to have little effect (especially if it's as small as QE2). But the Fed could and should also change the interest rate it pays banks on their excess reserves from +0.25% to something negative. That would help a little. Admittedly, not enough, but Congress is too insane to provide any fiscal stimulus, and Obama isn't the guy that could rally the public to change Congressional minds. Like Cutlass said, the Fed is all we have left.

Obama is the perfect guy to rally the public, he just won't.

Source: 2008

 

[Archbob]

We're so pwned guys. Going deeper into recession. Buy your gold and rifles now.

 

[Monsterzuma]

you can't effectively charge a fee on excess reserves. banks don't need the help of the Fed to sit on their money. they won't pay for that "service".

 

[GenMarshall]

We're so pwned guys. Going deeper into recession. Buy your gold and rifles now.

Gee, I wonder who's fault is that? *Glares at the greedy fatcats who refuse to hire Americans*

 

[Artifis]

Obama is the perfect guy to rally the public, he just won't.

Source: 2008

This is an outdated source. All current evidence points to the contrary.

 

[Tani Coyote]

Guess gold is due for a rebound then?

We really should start shorting...

--

Less self-absorbed, this is saddening. How long is this recession going to last? It seems to be a never ending static. Seems more like it isn't a recession so much as growth levels have flattened. Is the era of stocks being the recipe for success over?

Ironic that even though Republicans were blaming Obama for the weak economy since January 21, 2009, now they have some power and things are getting even worse.

The GOP has the best propaganda machine. They'll peddle the continued economic issues as Obama's fault so as to sweep the Presidency and both houses. Eventually, the American people will realise this sucks and vote back in the Democrats. And then the Democrats will be depicted as sucking so the voters will vote in the GOP. And so on.

It's a never ending cycle of minimal change. The Framers would be proud and/or horrified.

 

[JohnRM]

I am so tired of this.

The fact of the matter is that the inputs that the economy needs are not there.

Consumers are not spending, opting, instead, to pay down their debts.

Businesses and financial institutiobs are doing essentually the same thing.
They're holding their cash to see what the government does.

Cheap energy is now a thing of the past. $33 a barrel for oil was the cheapest we've seen in 5 years and that is still 300 percent of the 2000 price. Gas and coal are getting more expensive too.

The standard of consumption in America will have to take a hit or we're going to have to kill 500,000,000 Asians. I don't think we're prepared to do that so get ready to live on less and find contentment in that, for frak sake.

 

[JohnRM]

Dbl post

 

[Agent Cooper]

The US is trapped in a low growth/rising unemployment cycle because there is no political will to make tough choices.

 

[downtown]

Boy, I'm sure glad we're about to fire a bunch of people then. That should help the economy grow.

 

[Cheetah]

So... Is the consensus that with the current political climate in the US, the economy is fubar?

 

[Cutlass]

Politics is the biggest problem with the economy now. Because politics is all about is all about either sucking up to the rich or deliberately hurting everyone who isn't rich.

 

[GoodGame]

Hmmmm...I'd wait a quarter before jumping to conclusion. July was strong growth, June was weak growth, August is holding steady. Overall doesn't sound too bad to me. Wait for September and October before you start claiming stagnation.


+1 to JohnRM also! But Consumer spending did rise quite a bit in July. I wonder what time delay there is between spending resulting in corporate profit resulting in corporate expansion resulting in job creation.

 

[Whomp]

Integral--Curious whether you've read this report? It shows some history behind recessions vs. financially synchronized global recessions.

http://www.imf.org/external/pubs/ft/wp/2011/wp1176.pdf

 

[Princeps]

Zero growth is largely because the US is bleeding a lot of local government jobs. Of course, these "not real jobs" won't be mentioned when the conservatives attack Obama for adding no jobs.

 

[Bestbank Tiger]

One simple thing the Fed can do: Put a limit on interest rates that its borrowers charge to their customers. If you want to borrow from the Fed at comically low rates, you can't turn around and charge Mafia interest. (If you do want to charge 20 or 24 or 29 percent, then you can go to the market for your own loans.)

Set a limit of 16% for unsecured credit if you borrow from the Fed. Still quite generous for the banks but consumers will be able to pay down debt faster and resume spending. And it doesn't have any damaging side effects like running up excessive debt.

 

[Tarquelne]

The US is trapped in a low growth/rising unemployment cycle because there is no political will to make tough choices.

IMO you need to curb your wild optimism. I think the problem is there's no political will to make even easy choices.

 

[JohnRM]

We need a national effort in this country like that of world war two. I think that one of the big things that government needs to do is commit some big spending to a high-speed rail system and other projects that will create jobs. What they're doing right now is eliminating jobs. That won't help. We need people working and feeling like they are a part of something. But, to be sure, Republicans will crush any chance of resolution to our troubles and the Democrat not have the backbone to stand up to them.

 

[amadeus]

Boondoggles are not our way out of this.