What’s good for the country is good for General Motors, and vice versa

[Inquartata]

You thought maybe that Mr. Obama had repealed the Law of Unintended Consequences?

[lindajdunn]

You thought maybe that Mr. Obama had repealed the Law of Unintended Consequences?

No, I'm just surprised to learn that GM is earning nice profits overseas and it's the American market that is sending them into bankruptcy.

They don't have a branding problem overseas.

[Cerian]

Brenner - The Economics of Global Turbulence
Ibid - The Boom and The Bubble

A simple look at long term interest rates illustrates the decline in the return on investments rather effectively, but here are some more relevant numbers

Edit: some of the more current data comes from a working paper I'm not at liberty to distribute. If I have time I can pull out some of its citations.

Since books are probably too much to expect anyone to look at, here's a more digestible corroboration of my pessimism...

http://www.ft.com/cms/s/0/303ab4a8-4...44feabdc0.html

[Inquartata]

That all sounds plausible enough, frankly.

But...was that really your original thesis? I thought that it was something much narrower, having to do with long-term investment returns or currency translations or something?

Have we really been arguing about different things?

[Cerian]

Well, there are a number of different arguments that make up my viewpoint. These would probably be the main ones:

1. Trending towards economic stagnation is a historical, and not a recent phenomena. For the sake of the present argument, that it is a 30+ year phenomena is really all that's important - the reason for it is, for the issue at hand here, secondary.
2. Relative currency strengths reflect particular ways of dealing with this problem and entail particular roles for countries with strong/weak currencies (roles which exert their own inertial force regarding the policies countries are likely to adopt).
3. The possibility of a housing/credit bubble was conditioned by a confluence of policies, both on the part of the US and the globe, regarding short term and long term interest rates. (with the trend in long term rates being tied to the secular decline)

Given that, a number of assertions ultimately develop and come out, largely related to the standard gloss on 'why things are bad.'

1. While financial innovation certainly played an important role in the economic ordeal as such, it is not a root cause of declining economic vitality.
2. Derivative from that, restructuring finance will not restore economic vitality, which is not to say it won't have positive effects.
3. Given the secular decline in economic vitality, the overall possibilities for economic growth in the US are constrained, and, accordingly, the effects of any policy choice are similarly constrained, relegating the economy to, at best, stagnation (like Japan for the past 20 years).

Of course, that prognosis derives from the insolubility of whatever has in fact been causing the secular decline for the past 30 years. Given exploration and resolution of that issue, things could certainly get better. But, crucially, the resolution of the financial/housing crisis is NOT a resolution of the 30+ year secular decline.

Then from that developed some entirely tangential conjectures about what such a situation implies re: income inequality and social/global justice.

[Inquartata]

All right, then, apparently I did not really understand what you were saying before. I cannot disagree with much of this, although I am not as pessimistic about long-term prospects as you are. I don't foresee a Japan-style extended economic downturn, for instance.

A couple of questions:

2. Derivative from that, restructuring finance will not restore economic vitality, which is not to say it won't have positive effects.

Aren't past restructurings in fact a factor in the declining economic vitality you mention? For example, do you think that the trends in interest rates you cited before might have had something with the US Treasury's tinkering with yield curves---we're not going to issue 30-year bonds any more, now we're going to issue them again, we're selling 30-year TIPS, now we're stopping, we're no longer particularly interested in the savings bond program, etc.? And if one restructuring exacerbated a problem, why couldn't a subsequent one ameliorate it?

[Cerian]

Certainly some accounts of the long downturn focus on finance (Peter Gowan, for ex), but there are problems with the explanatory power of these descriptions. Brenner's is still the best account I've seen so far. My understanding of post-war economic history is not as good as my understanding of the current crisis, so I can't really reproduce the arguments about the secular decline satisfactorily.