The reason is that every recovery since 1945 has begun with a higher, and higher level of debt. The debt is so high now, that since 2008 we’ve been in what I call, debt deflation.
If you look at payments to labor as a proportion of national income or gross domestic product, you find profits going way up, investment and savings going up.
Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it’s a pro-Wall Street financial engineering gimmick.
Seventy-eight percent of millennials are worried about not having enough good paying job opportunity to pay off their student loans. Seventy-four percent can’t pay the health care if they get sick.
The essence of the global financial bubble is that savings are diverted to inflate the stock market, bond market and real estate prices rather than to build new factories and employ more labor.
Europe is sort of like the Soviet Union in the ’30s and ’40s. There was an argument, is it reformable or not? There is a feeling, and I think it’s correct, that the European Union, the eurozone, and the euro, is not reformable, as a result of the Lisbon treaties and the other treaties that have created the euro.
The problems of 2008 were never cured. The Federal Reserve’s solution to the crisis was to lend the economy enough money to borrow its way out of debt.
People are putting their money into treasuries because they worry that the risk of putting their money into the bond market, the stock market or even the money markets is very high.
While escalating war in Afghanistan and maintaining over 850 military bases around the world, the administration has run up the national debt that Smith decried.
