It's Rutting Season

This endeavor began with a simple proposition: history demonstrates, without equivocation, that economic growth and prosperity occur when consumers have enough wherewithal to clear all output at prices which support a return on capital (which is not usurious). It is, in the short term, a zero-sum game. Over the long term as well, since imbalance in the short-term leads to distortion, which is a positive feedback mechanism.

This notion is embodied in the subtitle: "It's the Distribution, Stupid". Props to Bubba for the template.

For most of this existence, it's been kind of lonely. Save for few rational left wingnuts, the lemmings in Kansas (that's a metaphor, see: Rich, Frank) have held sway over the nation's mindset.

Then, along comes Daniel from the lion's den. Who'd a thunk an investment banker would get religion? Well, one has. It sounds as if he's been reading my musings. If only.

Herewith some quotes:

We are in an age of global oversupply: an oversupply of global labor (hence high underemployment); an oversupply of global productive capacity (hence ultra-low inflation); and an oversupply of global capital (hence low interest rates).

We are not, however, in an age of global energy surplus. Far from it. One might argue that the malaise in the West began with the OPEC/Arab oil embargo of 1973. Prior to that, America squandered petrol like a drunken sailor, as My Pappy used to say. Suburban sprawl. Reliance on gasoline. Removal, much less creation, of public transport.

We are no longer faced with a world in which supply-side economic remedies -- easy money, reduced taxation, fiscal belt-tightening and deregulation -- can spur new capacity and the creation of well-paying private sector jobs.

It's worth noting that the financialization of Western economies, with physical production being banished, has much to do with the failure of supply-side mantras. If it were the case that the USofA (or the EU) was a closed economy, there is a grain of truth to had in supply-side. But it isn't, nor was it when Laffer made it famous. Keep in mind that Laffer didn't invent anything, merely popularized it. Much as LA gurus popularized and debased Eastern mystic religions.

Beginning in the late 1990s, a wave of capital, much of it the result of trade surpluses and big piles of savings in Asia, flooded the world's capital markets.

True, but the impact of 9/11, and the scurrying of said capital to financial, rather than physical, investment played the largest part. Real estate investment, heretofore, had been a backwater; save for insurance companies and commercial real estate (that's another episode). But with Greenspan cratering Treasuries, in a paroxysm of supply-side zeal, that Giant Pool of Money sought the nearest neighbor (a quant reference!). Houses. Bah.

Cheaper credit through monetary easing, for example, doesn't yield much in an era when cheap capital already exists in abundance.

Amen. As noted here, even recently, real return on real physical investment, particularly in the au courant sectors of high tech, has been falling due to the rapid technological obsolescence in the sector. A fab just doesn't have the productive lifespan of a blast furnance had in 1950.