From a two part comment at The Phora: http://www.thephora.net/forum/showthread.php?t=83978 ['The New Terrifying Normal'] which in turn discusses: http://pjmedia.com/victordavishanson/the-terrifying-new-normal/ Clear reference to these two posts intended: http://stumbleinn.net/forum/showpost.php?p=354172&postcount=18 http://stumbleinn.net/forum/showpost.php?p=354173&postcount=19 It is hard to answer a question that assumes the economy *has* to do well, or that there is some solution to the economic which is as pleasant (for White Americans) as it was in the past. The economy has clearly moved to a different operating point (loosely, and equilibrium, though not in the technical maths sense of that word). The same thing happened in 1933-1937 and only the war economy of 1941 finally kicked us back to 'good' equilibrium. These things don't really have causes -- they are more like emergent properties of a complex dynamical system. We *might* be able to do something to change the system operating point, but unless we get some leverage on the problem, it is more than likely to be pushing a boulder uphill, only to have it roll back to 'where it wants to be'. One problem is that current media/academic analysis is proscribed from discussing the obvious. By obvious, I mean simply applying the equations and concepts of an undergraduate Macroeconomics course, in the most straightforward way, and drawing conclusions. The economic pundits (Paul Krugman, say) talk a lot about the part of the story, Aggregate Demand (as determined by the equilibrium of the IS-LM model, or http://en.wikipedia.org/wiki/Mundell–Fleming_model if you want to be a hair more complex). What is said is perfectly correct, and indeed the simplest Ec 101 sort of models in fact tell the whole story -- the deafening silence from the Liberals on 2/3s of that story is the only interesting thing about it. -- Aggregate demand (AD) is down, because 4-6% of the entire population has stopped working and given up. -- We are in a liquidity trap, and monetary policy no longer does what it used to -- Economies can stay in this state indefinitely without activist fiscal policy (Japan has been stuck in a similar state since 1991). All this is very true. Now, about Aggregate Supply and the side of the story you never here from liberal pundits: Aggregate Supply (AS) has to equal AD in the medium run, in which wages and prices are somewhat flexible, esp. the latter. It's not an either/or thing (though persistent deficit of demand -- 'a general glut' as it has been known for 200 years now -- is quite possible, and takes 1-2 decades to work itself out of the system naturally). I don't think we're ever going back though, because of the Supply Side. Summary: (1) AD can heal itself in 15 years, even with bad policy. Sooner if we have a war. (2) What about AS? AS is an equilibrium point that AD is attracted two, and it is defined by equality of two relations: (a) the price-setting relation and (b) the wage-setting relation. You can do the analysis either way, because AD *has* to end up in the same place AS does, in the medium run (a few years at most). Here is the point seldom observed (by pundits, but dead obvious): the price setting relation is that the real wage in the medium run must conform to the markup businesses charge for their goods (businesses have to cover their wage costs by marking up the goods sold): 1/(1+mu)= W/P, where W is the average wage, P is the price level (deflator), and mu is the average markup. FACT: W/P has been dead steady, with small oscillations, for White men and actually everything else, since the Oil Shock of 1973, Unlike the old story ('because of technological progress, you will be better off than your parents') the middle class is just holding on. The elite are filthy rich, and the poor have entitlements. The middle has managed -- by putting the wife to work, mind you -- to break even for 40 years. That time is ending. Conclusion: the price setting equation can't have changed (mu, the markup for goods, is the same now as in 1973, and that part of AS can't shift). We could have a general deflation and real wages *could* drop, but they haven't. The pain has been, instead, in the wage setting relation of AS: W/P = F(u,z) ... 'Your real wage is F U' [real wages are some random function of unemployment and other state variables in the economy] This equation means that when times are rough (if u is high enough, for long enough), then people will accept lower real wages. However, people are so leveraged up, they would rather collect unemployment bennies or do *anything* but sell their house at a loss. Prices don't drop, wages don't drop, people just say screw working and do something else. Everyone is worse off (esp. those still working and paying for the party). W/P is going nowhere -- and hasn't for 40 years -- and it won't until the Boomers finally die off or become unsustainable by their children (the coming crisis). So the wage setting relation will shift along the horizontal W/P-fixed-markup line, to higher unemployment, u* -- permanently. The price setting relation is a horizontal line that hasn't moved, yet u has moved permanently. This can only happen if the AS curve as a whole moves left -- forcing AD to move with it. Notice the causation here: it is unemployment that is causing 'deficient demand'. There are lots of goods people would *like* to buy, and people willing to make them, but it won't happen because, in the end, the persons who refuse to work don't have money to employ the others -- a vicious cycle. This gets us to the core problem: the long term. The long term is given by a scaling ratio (that governs the employment of capital to produce goods), and it has permanently shifted. The scaling relation is the variable Y/AN -- national income (total monetary value produced by labour, of course), divided by the 'efficiency of labour' (how much one can ), and the size of the population. Y is down, for sure. A is also down (better educated, White workers are retiring, to be replaced by assorted ill educated Whites whose capacities to do anything has been destroyed by a Marxist school system, and assorted lazy muds) N is up -- illegal immigrants, 'fatherless' children, more people collecting entitlements including boomers, the whole nine yards. Y/(AN) is the Victorian formula for progress and beating Malthus: even though N goes up geometrically, raise A faster (using progress and technology), to raise Y even faster than N, so per capita well-being outruns the 'hungry 40s' and potato famine. Technology can do this forever, and one day we'll all live like kings and have robots doing our work for us (yay, progress!). But it isn't working that way, is it. Businesses like to keep Y/AN constant -- having it going down is exceeding painful in terms of retooling. Y does indeed tend upwards with N (our anemic 'recovery' is driven by population growth, and the simple need for basic services and goods that implies, which certainly helps). Efficiency per worker (A) is the killer. Are we, per capita better off? No. Y/N, the well being of the labourer and his family members, as a way to split up the pie -- just sucks. Why? A, worker efficiency at applying capital (technology) to his task, has to be down -- it's the only explanation that fits the facts. It has to be down enough to depress Y/N. Summary: Technology is not keep up with the non-labouring anchor baby production rate, so the per labourer cut of the pie is smaller. White Man, your family is larger than you thought -- and a lot blacker if you add up all the mouths you have to feed. You've got parasites. More than a few cowbirds in your nest. The two states of the economy (good and bad) represent two equilibria -- the one that can be supported by Whites, and the one that Immigrants can support. The only thing business can do to compensate for low output of the latter per worker, is to employ more capital -- but that takes investment [buying more computers was part of the 2010 economy]. Essentially, replace actual service with a call center and a lot more computers, programmed by fewer Whites or worse by lots more H1-Bs. It should be obvious why the AS side of the AD=AS relation is never explained (even though they have to tell the same story), or why the long term growth implications of Y/(AN) scaling are never discussed. A -- 'the technology level of American Society' -- is going down, due to mal-education, less efficient labour, and a decline in technological (engineering) culture. Obama and Romney are both specialists in making this trend continue, exactly as it has since the early 70s, and esp. since 2000. Insanity is electing the same parties over and over, and expecting different results every time.