Where's the growth?!!!

Decades ago an old lady yelled, “Where’s the beef?” when handed a burger in a fast food commercial. It became a catch phrase for occasions when people wanted to advertise that an idea lacked substance. So while the media proclaims the virtues of the current economy, many economists are asking, “Where’s the growth?”

The Bureau for International Settlements (BIS), the central bankers’ bank, recently issued a report card on the efforts of their client central banks to boost growth since the last recession and given them a failing grade. In the report “Unconventional monetary policies: a re-appraisal,” the BIS economists wrote:

We reach three main conclusions: there is ample evidence that, to varying degrees, these measures have succeeded in influencing financial conditions even though their ultimate impact on output and inflation is harder to pin down;

Bank for central bankers confirms ABCT

The popular press blames Wall Street shenanigans and banker greed for the most recent recession as the movie The Big Short demonstrates. Politicians digest the economics of the mainstream media and that is the reason Congress passed the Frank-Dodd Act increasing regulation of banks. It was punishment for what politicians perceived as banker sins.

Congress passed the act in spite of the fact that no mainstream economist I know of has blamed Wall Street or banks for the crisis. In the minds of mainstream economists, recessions are random events. The economy naturally spins in equilibrium like a top until an unforeseen “shock” slams into it, makes it wobble and sling thousands of people out of work. I like to call it the “crap happens” theory of business cycles.

A much better explanation of recessions come from the Austrian school of economics in which credit expansion causes misallocations of capital that accumulate during an expansion. The weight of those misallocations eventually crushes the expansion and a recession follows. The most robust explanation of the mechanism is Hayek’s Ricardo Effect [link] in which nominal profits guide the allocation of capital.

Central bankers made bull riding necessary for survival

Bull riding has become a lucrative sport for those with the talent to ride, earning the top riders hundreds of thousands of dollars per year in spite of a few broken bones. Central bankers have made learning to ride the leaps and spins of the stock market a necessity since the early 1980’s. Why has the market been so volatile since 1980? Two factors have caused it:

1. End of Bretton Woods and rise of floating FX.

2. End of fiscal policy and rise of monetary policy.

The existing international system of floating rates doesn’t have a cool name like Bretton Woods, but it came about after the death of the former fixed rate system. The Bank for International Settlements (BIS), the central bankers’ bank, doesn’t like what its member banks are doing under the current system. While the media and politicians, especially Bernie Sanders, preach fire and brimstone damnation of Wall Street and condemn it for the Great Recession, the BIS body slams the world’s central bankers: