..Or, "mad" at government, for that matter! Given the fact that nominal level targeting is not yet in place, economics news of the day still carries stories full of complaints about QE which "should" be stopped - as in yesterday perhaps. Oh yeah? Mmmm I feel somewhat combative today so beware - could take a swing at anybody! At the very least this blog post would make me unwelcome in certain company...
Michael Schuman (Time) tells how the global economy has become addicted to Fed money, and explains how sooner or later every smoker is going to have to quit. If only the "taper already" problem were as simple as a smoking addiction. Unfortunately, we are not just talking about random and controllable addictions here, but the ways in which people are expected to live and carry out their lives through monetary activity in general. That's where the real problem lies.
While the punchbowl is still on the table, it would be one thing if everyone just enjoyed it while it was there. But afterwards, all those tables and chairs tend to remain set up (new regulations and further restrictions of economic access as gifts to special interests) as though the punch would never be taken away. Then, no one is willing to remove any of the extra tables or chairs afterward.
By no means can anyone expect to get back to sane and frugal living after QE tapers, under those still existing conditions. Consumers are generally treated as though they were the only ones who were profligate in the good times as a matter of course. Plus, sticky wages alone are hardly responsible for numerous costs which remain obstinate, no matter the resultant austerity and lost jobs. Even now it remains too easy for some to blame the Fed, government, the one percent, whatever - than to look at the areas in our lives where hidden costs continue to accumulate - as services, productivity and jobs continue to be sacrificed.
To be sure, the Fed was too accommodative in the past. But that was decades earlier, and today's accommodations are simply attempts to continue following the economic "marching orders" of life as defined by governments large and small, along with their favored business constituents. In a recent lecture, George Selgin pointed out the fact that every financial crisis becomes an excuse for governments to take a larger role in the economy, from which there is no return.
But the fact that we still end up with too big to fail banks and unreasonable expectations for small incomes often comes down to a failure of imagination. It would be one thing if larger governments actually made a substantial difference in people's lives. Governments grow because it is far too easy for them to foster the illusion that they solve the problems of their constituents. Instead, they make existing problems worse by magnifying the effects of needless complexities by special interests. In other words, we are often too ready to blame government for something that populations are already - unwittingly - doing to themselves.
There has been too little incentive on anyone's part to coordinate economic activity in more amenable, simple and affordable terms. Not only are our governments ready to oblige whenever we have trouble working things out between ourselves, but they benefit from our own crisis of imagination. The reason it takes so much money just to get anything done is that too many people want it that way, and so the Fed goes along with the program. Yes, nations do have reason to be concerned about the coming taper. Because, even though central banks are obligated to take their foot away from the accelerator, no one else feels obligated to in the areas that really matter, and nothing about daily life has adjusted to account for the necessary shift.
Even to talk about a return to normalcy is misleading, for there are few structural shifts in the economy to acknowledge a return to normal output. The fact that some banks are still considered too big to fail and that the major drivers of economic activity have not structurally changed at all, simply means that cutting back on money printing means austerity conditions and a gradual reduction in services over time.
Perhaps the recent efforts on the part of the Fed to communicate better have backfired somewhat, because if there was hope that the marketplace would react with structural adjustments to match the reality of scaling back, it just hasn't happened. Indeed, while monetary printing remains substantial, too many on Main Street feel that more money printing is just unwarranted. However, Main Street is also unaware of its own part in the role of Fed uncertainties or the fact that much excess begins at their doorstep. It's time for everyone to acknowledge their own role in the coming taper, difficult though the task may be.