Reaganomics and Clintonomics failed America.
Insightful economic analysis suggests our economic integrity was seriously undermined over the past three decades.
Insufficient investment, volatile monetary policy, and irresponsible fiscal measures were the principle causes.
Since 1980, U.S. investment as a percentage of GDP was sliced in half, from nearly 24 percent to 12 percent, leaving the United States 174th in the world. The result was a dearth of real value added products and productivity.
During this time, the physical money stock grew 20-fold while monetary velocity (transactions per dollar) was halved. There was “too much money chasing too few goods.”
The excess money found its way into financial derivatives, artificially increasing the price of financial products and real estate.
During a recent Bloomberg Television interview, Bill Gross (Pimco managing director) and Larry Fink (Blackrock CEO) concluded that the return on capital relative to labor was excessive. Mr. Gross now expects the nominal return on financial assets, such as equities and bonds, to plummet 50 percent.
Political legislation enabled an environment of highly undercapitalized financial markets, which promoted debt driven consumption and a tremendous transfer of wealth. A recent study published by the Journal of Economic Literature, indicates the top 1 percent earn more than the bottom 50 percent, their income grew 10-fold in 30 years, and their income share skyrocketed to 20 percent (from 8 percent).
Robert Reich, Labor Secretary under President Bill Clinton, suggests the top 1 percent received 45 percent of the economic gains during the Clinton administration and 65 percent during the Bush administration.
In addition, the Census Bureau reports real median wages increased a mere one-third of 1 percent annually during this time.
The American economic landscape has been altered significantly. Its repair and resurrection may require decades of creative innovation and prudent political reform.
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