Finally the Moment of Clarity

[t_host1]

Too wonkish1, his theory,
You have a good ability to convey your premise, it’s just that I’m having a hard time getting pass your first scenario. I understand that you do not want to go here; however, for me, it’s a futile exercise to find anything rational - outside of its use as the leverage necessary for a certain political position* to exist - about a devised economic system around non-productive humans.  Any future of an accomplished civilization will have a non-productive population near null, and, again, many do not want to hear it, that non-productiveness’**, is, what this current election, 2012, is all about.
 The “why, what for, how come” for the results of low velocity is from what I’ve heard and understood, said by others, is simply been deemed as a “capital strike”. Against what, who? …well, the current system that penalizes success, rewards non-productivity, the takers.

*The Obama Inheritance
**The Dollar Dilution “Bernanke Put” hardship for the mass’s and indentured servitude of generations to come.

[t_host1]

Too wonkish1, his theory,
You have a good ability to convey your premise, it’s just that I’m having a hard time getting pass your first scenario. I understand that you do not want to go here; however, for me, it’s a futile exercise to find anything rational - outside of its use as the leverage necessary for a certain political position* to exist - about a devised economic system around non-productive humans.  Any future of an accomplished civilization will have a non-productive population near null, and, again, many do not want to hear it, that non-productiveness’**, is, what this current election, 2012, is all about.
 The “why, what for, how come” for the results of low velocity is from what I’ve heard and understood, said by others, is simply been deemed as a “capital strike”. Against what, who? …well, the current system that penalizes success, rewards non-productivity, the takers.

*The Obama Inheritance
**The Dollar Dilution “Bernanke Put” hardship for the mass’s and indentured servitude of generations to come.

Well a notion of a 'capital strike' I'll acknowledge is at least a possibility, but from first glance it appears to have some holes in the theory:
1) Not all of those with capital see the US and the world as you described it. So even if we were to accept the premise that those that agree with you are refusing to deploy capital it would still mean that there would be many that don't agree with you who would instead be deploying capital.
2) Furthermore, we also know that if even a small percentage of people make a right call and a much larger percentage of people make a wrong call those that made the right one would still earn a return on their investment. So if we were to assume that capital was being held back from otherwise profitable investment than those would take that investment would see returns and see more capital move to them after positive results.
3) Since this isn't happening than there is likely some better reason as to why capital isn't being deployed.


Now I'll also add that over time corporations and peoples balance sheets should naturally improve when left to their own devices. Extra savings should improve their liquidity situation, improve their net worth, allow them to pay down debt, allow people to default and move on without the same debt burden, etc. They are also delaying purchases for things that are only discretionary in terms of timing. For example:
1) While people may always be consuming food, gas, housing, utilities, etc. they only eventually need to deal with the following:
2) Replace a car that is on its last leg
3) Buy new tires
4) Replace a roof to a house
5) Replace a oven that its on its last leg
6) Replace a piece of a machinery that is either close to salvage or substantially less efficient than something new
7) The list goes on and on.

So eventually someone that has been accumulating savings and improving their own balance sheet will be almost forced to engage in various forms of delayed expenditure.

All of the reasons above is why you normally see growth return and continue to improve as time elapses after the end of a recession. Why is it that this isn't happening this time?

One must conclude that some other force is acting on it which may include:
1) External pressure coming from outside of the US. Here is where the relatively reasonable premise that problems in Europe or China or elsewhere is causing problems in the US.
2) Some negative government policy is acting upon the economy making it worse.

Now there is a limit to how much I think 1 can effect the US economy especially considering our trade balance situation. A country that imports more than it exports and yet consumes more of its own production(primarily services) than anything else should have a limit as to how much they're impacted by stagnant or declining growth elsewhere especially when there are other developed nations of the world that are doing better such as: Canada, the Baltic states, certain portions of the Middle East, South Korea, etc.

Now in regards to #2 there is really only a few pieces that are actually changing today relative to a year or 2 ago.
1) The continued implementation of ObamaCare
2) 'The Fiscal Cliff'
3) Continued growth of the national debt
4) Fed monetary policy
5) Some additional regulatory implementation over the last year or 2

-Food stamps, unemployment insurance, etc. all were in use when growth was 2%+ so we can narrow these things down to only a few items that have changed and are continuing to change since growth was higher and somewhere in there you have your answer.

Somewhere in the above has to be causing capital investment to be a net loser or offer a lower return vs. the risk taken. And personally I think a good explanation could be that the perceived 'risk free rate' on investment is less than zero so it isn't worth it.

Essentially I believe that in certain places the pricing function has broken down. The price of money vs. the price of capital is way out of wack and is very far from equilibrium and until they arrive at some equilibrium again capital remains more valuable than money. Essentially with capital way more valuable than cash investors(particularly banks) would rather protect capital and accumulate cash.

OK, it is a given that capital will chase and profit from fear, they are a minority and in the present state of commerce are the winners’. The best examples are the American auto and renewable (green) energy sectors being artificially induced/saved has only strengthen the old, legacy deep monies’. The financial service sector has commissioned and bonus out the real equity, the things of tangible use. The greed of needs capital will trump I believe 3:1 the capitulation of fears when liability of labor is at least paired down.
 My suggestion for the best place for you to find your unknown will be the increase in deteriorating destruction of motivation, the “Why do anything” factor, this of coarse beings us back to policies and perceptions.