So, Powell. I was working on some text while the '60 Minutes' interview was running, so I only heard it (not much to be seen in such interviews, by and large). What he said impressed me as stunningly stupid for a high-level economics pundit. The Fed has more responsibility than to make the 1% richer. A fact he doesn't admit. As to the lack of oomph in the economy, he offers up some contradictory factors.
First:
PELLEY: A record seven million Americans have fallen behind on their car payments. Never happened before. What do you make of that?
POWELL: But the number of people who are experiencing, you know, auto defaults has gone up because the number of borrowers has gone up. I think it also though shows that not everyone is experiencing this widespread prosperity that we have.
The same sort of thing was said about all those toxic mortgages in 2005. Just sayin'.
Second:
PELLEY: You mentioned growth last year being slightly over 3%. That was with the tax cut and with unemployment in this country at a rate that we haven't seen in decades. Is that the best the economy can do now, 3%, slightly over? Are the days of 4% growth over?
POWELL: The labor force, back when we used to have 4% and 5% growth years, the labor force was growing quickly, 2.5%, 3% in some cases back in the '60s and '70s. We have an older population now. And our labor force is growing more slowly. It's growing less than 1% a year.
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And we have an unusually large number of people in their prime working years who are not in the labor force. The United States has a lower labor force participation rate than almost every other advanced country.
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So as technology evolves, it requires rising skills on the part of the people. U.S. educational attainment has not moved up as rapidly as it has in other countries. Globalization's also a factor. For many advanced economies, manufacturing, to some extent, has moved into developing countries.
Third:
PELLEY: According to federal statistics, the upper half of the American people take home 90% of income, leaving about 10% for the lower half of Americans. Where are we headed in this country in terms of income disparity?
POWELL: Well, the Fed doesn't have direct responsibility for these issues. But nonetheless, they're important.
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But the data show now that actually, the chances of making it from the bottom to the top in the United States are lower than they are in many other comparable countries.
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There are plenty of prime-aged people who are not in the labor force and who would be better off in the labor force.
So, in sum, it's all labor's fault. One point he makes is factually wrong, using the Fed's own data. The aging cohort of the population has shown a rising participation rate, blaming old folks for stagnation is bogus. With automation, of various sorts, displacing labor, and said more heavily capitalized production puts more pressure on aggregate demand; amortization of the machinery can only be done with higher prices (ugh) or more sales. Where is increasing demand going to come from as income and wealth stagnate? Stupid.
Powell, in good company with his cabal, refuses to acknowledge the triple sources of inflation. Always and only blaming greedy workers does more harm than good, most of the time.
Contrast this nonsense with David Leonhardt today.
Here's the truth: There is no boom. The economy has been mired in an extended funk since the financial crisis ended in 2010. G.D.P. growth still has not reached 3 percent in any year, and 3 percent isn't a very high bar.
Why is this happening?
There are two main culprits. The first is a savings glut. Americans are saving more and spending less partly because the rich now take home so much of the economy's income — and the rich don't spend as large a share of their income as the poor and middle class.
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The second big cause is an investment slump. Despite all the savings available to be invested, companies are holding back.
Or, as has been written more than once: it's the aggregate demand, Stupid! Growth is a demand side phenomenon, despite the braying of Laffer and such.
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