In this diary I would like to present a somewhat different (and hopefully easy to understand) view of what is going on in the world economy, and by extension in the US economy. I want to try to explain why what we are doing is not working ... and what needs to change before things can get better on a sustained basis.
To put it simply the world economy is constipated.
On one side of the economy we have those with no money (unemployed workers, governments with huge budget deficits, people under water on their mortgages) on the other side we have those that are almost literally swimming in money (countries with massive FX reserves, companies with record cash on their balance sheets, the well paid undertaxed employed, and banks with record cash on deposit with the Fed).
What we have is a ton of cash sitting on one side and not moving to the other side. To make matters worse as governments run bigger and bigger deficits all the cash just ends up rushing over to the side that already has all the money (corporate profits/FX reserves) instead of continuing to flow and circulate through the economy. The constipation just gets worse.