Ben Bernanke will probably announce tomorrow (September 13, 2012) that the Federal Reserve will institute more bond buying to try to bring interest rates even further below zero so that the pesky unemployment rate, stuck above 8% for the last several iPhone iterations, will finally break downward. Massive accommodative monetary policy has done nothing really to juice the demand for labor, because as quickly as the money is created, it loses momentum (velocity) and just sits, like Vladimir and Estragon, waiting on the Godot of inflation. Without inflation, there is no real wage decline that would make hiring workers attractive, so the labor market can’t clear. What is clear is that all this fiscal and monetary stimulus over the last four years has been about as effective in juicing demand as two decades of very similar monetary stimulus and fiscal deficits were for Japan. The US economy hasn’t yet completely ceased growing like Japan’s effectively has, but then again, the US population isn’t yet in outright decline like Japan’s. The US is rapidly aging, or at least about three-quarters of its demographic (whites and blacks, i.e., its indigenous population) is rapidly aging, and is not having many children, and is mainly already rich. The spirited animals Keynes believed were so necessary to relieving the ennui of economic contraction would apparently rather sit on the porch flipping fleas than run around chasing rabbits.
In related news, Apple is today releasing its latest iPhone, the 5th generation. One columnist at Bloomberg has already cheekily proclaimed that “the modern soul–yearning for coherence and meaning in a fragmented, dissolute, arbitrary age–has found its redeemer. The rough beast has slouched through Bethlehem gate. It’s name, ye seekers, is Siri.” Economist Michael Feroli of JP Morgan Chase thinks the phone might add a half percentage point to gross domestic product this year. Apparently Mr. Feroli doesn’t do math well, or doesn’t quite understand the methodology for computing gross domestic product, or doesn’t know from where iPhones originate. To sell an iPhone in the US, Apple must import the phone from its overseas factories. When imports increase relative to exports, GDP suffers. Maybe Mr. Feroli figures the domestic markup will be so extremely high that the phones will overcome any drag to GDP due to their importation. But if consumer income doesn’t also increase, which it won’t, since Apple hardly employs any Americans, then an iPhone sale in America will simply displace consumer purchases elsewhere, or result in an addition to the consumer debt load. The iPhone 5 might lend coherence and meaning to this fragmented, dissolute, arbitrary age, but it won’t likely juice gross domestic product and most definitely won’t help bring the unemployment rate down. Buying an iPhone does not implicate that creature of economic myth, the Keynesian multiplier, not even if the government is the purchaser and it borrows money to do so. A dollar spent is a non-multiplied spent dollar.
Bernanke has nothing new up his sleeve, and neither does Apple. They are pursuing the same strategy, tweaking their products to try to generate a bit of excitement among the enthralled and credulous masses, but with each tweak, the masses become less enthralled and less credulous. Bernanke’s target audience is capitalists and or speculators. His policy of rent-free money has certainly stoked the fire of asset appreciation. The stock markets are nearing the highs they experienced in 2007 and 2008, just before the fall. The housing market appears to have finally bottomed. Everything from junk bonds to subprime mortgages are making a comeback in the bond markets, as Bernanke’s relentless purchases of somewhat real things with monetary wisps of the imagination have driven rates for good paper well into the negative range, while nominal prices for consumer goods have grown hardly at all. Commodities are starting another push up, and it ain’t because of some shriveled stalks of corn in the American Midwest. As always, when commodities rise in tandem, it’s because the money with which they are measured is falling. All this also happened in 2008, just before the fall, and for the same reasons. Bernanke was trying then, just as he is now, to avoid the pain of slowdown and contraction, doing just as his forebears, from Keynes to Friedman, advised. And my, behold the power and glory of economic sophistries like quantitative easing! Economic nirvana (which is the opposite of Buddhist nirvana, which is a cessation of desire through breaking the cycle of birth and rebirth) must be just around the bend. Surely, if the economy is actively enough managed, desire (demand) will never falter, for any product. Economic nirvana means the UAW can keep rolling out those new Chevrolets and Chryslers till the end of time, and no matter how crappy is the product they put out, demand will never falter.
Apple’s target audience is status hungry consumers, and is counting on its ability to mass market to the herd a means of rising above it, sort of like kids with tattoos think they can express their individuality by getting a tatoo just like everyone else. I’m old enough to remember when getting a tattoo was an act of rebellion (if a rather tame one) and not a delusionally individualistic act of conformity. (I wonder when not having a Facebook page or an iPhone or a tattoo will become hip; when being disconnected and plain-skinned is the new black. But how would anyone know how hip and cool and uninked you are if you aren’t umbilically connected to the world via social media? Do people without Facebook pages really exist? Disclaimer: I have neither an iPhone nor a Facebook page nor a tattoo.) If the money and labor markets are waiting on inflation, the consumer markets are waiting on an upgrade from Apple. American capitalism has resolved to waiting on upgrades to time-wasting devices.
But the day after 9-11, or shortly afterward, is an appropriate time for Bernanke and Apple make their announcements. As I discussed in yesterday’s post, the original 9-11 is the precipitant for all that has since fallen out of solution. And both announcements are fairly indicative of how far things have fallen.