Discretionary demand will return when the government stops arbitrary redistribution of that discretionary spending. Government expands the Ripple economy at the expense of the Korbell economy.
No, it won’t.
Look at Japan. Has their discretionary demand returned? Has their economy come roaring back, 20 years after they started down the road we’re on now?
Nope. They just went from 66% debt:GDP in 1992 to about 215% debt:GDP. They’ve QE’ed their way to infinity and beyond. Economists now refer to two “lost decades” in Japan’s economic history.
Why hasn’t their economy hasn’t gone anywhere?
Because they pioneered the idiotic schemes that we’re now pursuing: The Japanese kept their big, over-levered banks afloat at the expense of the rest of their economy, while allowing the banks to have escaped punishment for their fraud and malfeasance.
What should have happened was that the large investment banks should have been allowed to crater. Yes, it would have been disruptive. But that’s how free-market economies work: Stupidity should be rewarded with pain, in amounts commensurate with the stupidity.
Instead, we’ve warped our entire economy into propping up Wall Street. That’s exactly what the Japanese have done for years. They thought they’d get away with it because they had a trade surplus (and we don’t) and they had a current account surplus (and we don’t) and therefore they thought that they could just QE their way out of this as long as demand stayed up in the US.
Well, it didn’t work for Japan, and they had those advantages.
We are pursuing the same idiotic schemes, but without any advantages other than we currently enjoy reserve currency status - and by handing the PRC enough cash, we’re insuring that the US dollar loses its reserve status. The Chinese are going to want a insulate themselves from a collapse in the US dollar, and they’re pursuing that agenda now (and have been for four years).
The GOP has been singularly stupid in carrying the water for the banks and Wall Street, where anyone who can read financial statements should have seen clearly that the bankers needed severe pain - either through free-market failure, or stiff regulatory penalties and criminal investigations. One or the other.
Meanwhile, the DNC is making sure that the banks have to swear fealty to the DNC to keep the fairly useless regulations off their backs.
Populism is usually a pretty ugly thing, but in this case, the populist position of allowing the banks to fail is perhaps the best thing that can be done to force Wall Street to stop robbing the US economy blind.