EC A Vaccine And The “New New Normal”

The Fed’s New Mandate

The last paragraph is the most important. As we discussed previously in “The Fed Will Monetize All The Debt:”

“in 1998, the Federal Reserve “crossed the ‘Rubicon,’ whereby lowering interest rates failed to stimulate economic growth or inflation as the ‘debt burden’ detracted from it. When compared to the total debt of the economy, monetary velocity shows the problem facing the Fed.”

Vaccine New Normal, #MacroView: A Vaccine And The “New New Normal”

Following the “Financial Crisis,” the massive expansion of debt, deficits, and continues Federal Reserve interventions led to collapsing monetary velocity rates and retardation of economic growth. Before 2008, the long-term growth trend of the real economy was 3.2%. That collapsed to 2.2% as debt exploded.

Vaccine New Normal, #MacroView: A Vaccine And The “New New Normal”

Bloomberg noted that the “New-New Normal” would consist of even more massive debts, deficits, and Federal Reserve monetizations, with sustained interest rates near zero. Such will see the trend of economic growth step down again to below 2%.

Vaccine New Normal, #MacroView: A Vaccine And The “New New Normal”

Even with a “vaccine,” an even slower economic growth rate has substantial consequences on employment and the wealth gap.

 

Employment Will Recover Only On Paper

Companies’ fast adoption of technology, along with increased productivity and change in demand, will further retard employment in the “New-New Normal.”

To generate economic growth and prosperity, “full-time” employment is critical. After the “Financial Crisis,” the number of “full-time” jobs relative to the population collapsed and only recovered about half of what was lost. We witnessed the same following the “dot.com” crash. It is highly likely that “full-time” employment will take another stop down as weaker demand requires fewer full-time staff.

Vaccine New Normal, #MacroView: A Vaccine And The “New New Normal”

Furthermore, participation in the labor force has dropped to levels not seen since 1973 and is a crucial measure to watch. Since the “Financial Crisis,” the participation in the “Labor Force” never significantly rose despite “record low unemployment rates.”  Such is because the labor force was shrinking sharply over the last decade as more and more participants were “no longer counted.” 

Vaccine New Normal, #MacroView: A Vaccine And The “New New Normal”

Those “Not In Labor Force” are individuals that are considered out of the labor force and no longer seeking employment. Do you believe that nearly 50% of the working-age population are no longer looking for work?

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William K. 1 month ago Member's comment

Quite an interesting arTIcle, but rather depressing, given that our federal bank has demonstrated a lack of making correct decisions. The fact is that the inflation primarily benefits that to 1%, or at best the top 5% And the fed certainly looks after it's own.