Some opinionated drivel :2razz:
1.) The potential federal government shutdown combined with S&P's downgrade of the U.S. credit rating formed an enormous wall to climb in order to maintain job creation (and the private sector continues to grow albeit at a slower than desired pace). Monetary policy continues to be up against the zero bound. For those who are interested; demand for money in a zero interest rate environment combined with a significant output gap signifies the U.S. economy is in a liquidity trap.
2.) Government
employment continues to decline at a moderate pace. More than 450,000 (@ a pace of -37,500 a month) government positions have been eliminated since August 2010. In the meantime, the private sector seems incapable of taking up the slack as only 175,000 (@ a pace of 14,333 per month) private sector jobs have been created since August 2010. Such data only strengthens the position of a liquidity trap being that gross domestic private investment persists @ 2004 levels.
3.) Despite massive “cash" infusions from the Federal Reserve Bank to the U.S. banking system, consumer access to credit has created the type of uncertainty that generates a glut of savings at the expense of gross domestic private investment. Take a look at the data sets for consumer credit during previous recessions.
This above is what creates business uncertainty; lack of credit to consumers creates a heap of trouble. Small businesses that operate based on a "variable-cost" business model will find little rational to expand given a credit strapped consumer. It could take years for the largest banks in this country to cleanse their balance sheets to the point where they are willing to lend to consumers in a fashion that creates business certainty; a certainty that begins with a return of investment.
With this in mind, how does anyone propose we take on a liquidity trap?
