Thursday, October 9, 2014

An Inclusive Economy: Where to Begin?

It's a question which seems all the more pertinent, given the fact that monetary policy is close to stabilization - at least for now. And, at a growth level which many who are sympathetic to market monetarism, are starting to accept. Now it's just a matter of crossing one's fingers and hoping the U.S. doesn't scrape bottom in the next recession. Here's David Glasner: least in the US, the economy seems to have reached a sustainable growth path that seems likely to continue for the near to intermediate term. I think that monetary policy could be doing more to promote recovery, and I wish that it could, but unfortunately, the policy is what it is...Falling oil prices, because of increasing US oil output, suggest that growth may speed up slightly even as inflation stays low, possibly even falling to one percent or less. At least in the short term, the fall in inflation does not seem like a cause for concern.
How to think about this? For one thing, decreased reliance on credit formation could potentially become a positive for growth, were innovation already in place to allow more incremental forms of ownership. However, since that has not yet happened, limits in credit formation continue to be seen as a negative which consequently "must" hold back the economy. Various factions continue to blame one another for structural problems, and growth in aggregate is lost as a result.

One of the unfortunate aspects of this circumstance, is that dependence on credit based consumption exposes the commodity based core which even the central bankers of developed nations continue to rely upon, for monetary formation. Perceptions of a consumer led economy have been more responsible for the representation of individuals, than the actual potential of human capital in aggregate. In short, money has become more important than individual skills capacity, but the two cannot be so easily separated from the other.

As a result, the U.S. economy still relies on commodity factors which can make it difficult for central bankers not to overreact, should oil prices once again spiral. If that were not enough, the gradually declining role of oil in the economy over time, means uncertainty for the long run. Fortunately, a lot of uncertainty could be turned into confidence, should individuals gain the chance to arbitrage their own skills potential as primary wealth.

In order to generate a more inclusive economy, aggregate participation needs to become a more central component of economic - and social stability - than has been possible until now. The spatial densities that would be possible in knowledge use systems could gradually increase today's growth trajectory. What's more, closer densities for living and working can also gradually ease the dependence on oil, so that economic stability remains possible when oil capacity starts to dwindle.

An inclusive economy is not just desirable in terms of monetary stability, it also matters greatly for social and political stability. Approaching the concept in these terms can help to overcome many problems which otherwise seem insurmountable on their own. If there is a missing link between microeconomics and macroeconomics, it would be the measure of our time representation. Perhaps this missing piece of the puzzle, can eventually bring the larger picture into clear focus.

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