Via Marketwatch Jamie Galbraith states his thoughts on a how the current US economy functions. Here are a few snippets:
University of Texas economist Galbraith, the son of the famous Harvard economist John Kenneth Galbraith, believes mainstream economists and the Federal Reserve are too wedded to old ideas to see what is really going on in the economy. Specifically, Galbraith is worried that the consumer is the only game in town — and that can’t last.
Galbraith used his latest book “The End of Normal” to lay out his case that the 2007-08 financial crisis wasn’t just a brief interruption in the life of an otherwise healthy economy but instead the latest crisis for an economy that lost its footing back in the 1980s.
At the American Economic Association meeting in Philadelphia, MarketWatch asked Galbraith to share his views on the economic landscape.
(On inflation and labor) There is no Phillips Curve, and there hasn’t been for decades. The supply of labor is not a constraint. If you wish to pay people higher wages, you could lure people back out of retirement. Net immigration has basically stopped. If you needed more workers, it would start up again. So we don’t have a real labor-force constraint. We are not going to get inflationary pressure from the labor markets. It has been 40 years. Economists are slow learners, and central bankers are a slow-learning subset. They should recognize that things did change in the 1980s.
(Losing ground in global trade) I think that is clearly the case in the wider world. The Chinese have engaged in an extraordinary exercise in engineering in recent years domestically, building 12,000 miles of high-speed rail. They now have vast engineering capacity, and they are applying it to their periphery — a One Belt One Road network that will orient commerce across Eurasia and into Africa as well that is in the interest of furthering Chinese development. This is on a scale which dwarfs anything that is being conceived of in the United States. (Dan here…This statement is before the sh**hole storm)
(On infrastucture)Trump came in with the idea that we should be investing heavily in infrastructure. He got no traction from the Republican Congress. Why is that? Because the immediate beneficiaries of an infrastructure program are people who live in cities, people who live in the expensive coastal areas of the country — and these people don’t vote Republican. So a political obstacle that prevented the one sensible or necessary element of Trump’s political framework from getting any traction at all.
(Role of banks) You have to have a situation where banks, which are publicly chartered institutions, serve a public purpose with some common objectives. Some banks blew out the mortgage market, [and] they blew out technology investment two decades ago. What are they doing now? They are financing energy investments, and they are financing consumer debt. This is an almost brainless approach.