‘Animal spirits’ update

The President’s reelection chances hinge upon the unemployment rate remaining below 8.8 percent, the current adaptation level.  Any rise above that level will signal the beginning of a recession or negative growth episode, if the pattern that has occurred every other time the unemployment rate rises above its adaptation level persists.

I continue to pencil in a rise in the unemployment rate in 2013 as the US falls off the fiscal cliff to one degree or another, with monetary policy impotent to do anything more than goose financial markets hooked on cheap money like heroin junkies.

The current situation continues to resemble the year 1973’s setup, with the Michigan survey measure still much lower than the A metric.  Interestingly, then the Michigan measure rose going into the recession as the A metric plunged.  After the cycle bottomed, the A metric shot up and the Michigan measure again became more pessimistic.

The potential for long-term pessimism, or what Keynes called “the state of long-term expectations,” becoming very dismal indeed in America is large, as Americans of even the slowest cognitive abilities wake up to the fact that the plutocracy has bought off the Congress, the President, and the Supreme Court (the justices who ruled for corporations being people in Citizens United were just thinking what they were told to think as good conforming conservatives).  The plutocracy would like to set up their families as the lords and ladies of the new world, ever Anglophiliac in their pretensions, with the rest of us as their wage-serfs.

Here is Joseph Stiglitz trying to say the same things in a way that won’t get him kicked off the MSM media… this is the latest on our continuing feature, “Neofeudalism watch.”

I hope that American creativity will come up with a solution to the problem of the extreme dysfunctionality of the American political economy.  What we have now cannot persist without creating blowback and further dysfunctionality.