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New York Times Says "lack Of Major Wars May Be Hurting Economic Growth"

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http://www.zerohedge.com/news/2014-06-14/new-york-times-says-lack-major-wars-may-be-hurting-economic-growth

It is no secret that as the Fed's centrally-planned New Normal has unfolded, one after another central-planner and virtually all economists, have been caught wrong-footed with their constant predictions of an "imminent" economic surge, any minute now, and always just around the corner. And yet, nearly six years after Lehman, five years after the end of the last "recession" (even as the depression for most rages on), America is about to have its worst quarter in decades (excluding the great financial crisis), with a -2% collapse in GDP, which has been blamed on... the weather.

That's right: economists are the only people who will look anyone in the eye, and suggest that it was harsh weather that smashed global trade, pounded retail sales (in the process freezing the internet because people it was so cold nobody shopped online), and even with soaring utility usage and the Obamacare induced capital misallocation still led to world's largest economy to a 5% plunge from initial estimates for 3% growth in Q1. In other words, a delta of hundreds of billion in "growth lost or uncreated" due to, well, snow in the winter.

Sadly for the same economists, now that Q2 is not shaping up to be much better than Q1, other, mostly climatic, excuses have arisen: such as El Nino, the California drought, and even suggestions that, gasp, as a result of the Fed's endless meddling in the economy, the terminal growth rate of the world has been permanently lowered to 2% or lower.

What is sadder for economists, even formerly respectable ones, is that overnight it was none other than Tyler Cowen who, writing in the New York Times, came up with yet another theory to explain the "continuing slowness of economic growth in high-income economies." In his own words: "An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace."

That's right - blame it on the lack of war!

The world just hasn’t had that much warfare lately, at least not by historical standards. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today’s casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.

Well, that's just unacceptable: surely all the world needs for some serious growth is for war casualties to be in the billions, not in the paltry hundreds of thousands.

Keynesianism 101 continues:

Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html?_r=0

..

It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

War brings an urgency that governments otherwise fail to summon. For instance, the Manhattan Project took six years to produce a working atomic bomb, starting from virtually nothing, and at its peak consumed 0.4 percent of American economic output. It is hard to imagine a comparably speedy and decisive achievement these days.

Luckily we have plenty of scope for some good old fashioned war growth.

Japan / China

Nato / Putin

Middle East

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It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

War brings an urgency that governments otherwise fail to summon. For instance, the Manhattan Project took six years to produce a working atomic bomb, starting from virtually nothing, and at its peak consumed 0.4 percent of American economic output. It is hard to imagine a comparably speedy and decisive achievement these days.

So essentially science and technology are key drivers of economic growth? Who knew :blink:

Too bad the average economist/politician seems incapable of understanding that the benefits of investing in science and technology can be had independent of mass bloodshed and nuclear brinkmanship.

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virtually all economists, have been caught wrong-footed with their constant predictions of an "imminent" economic surge, any minute now, and always just around the corner.

The economists I put most faith in aren't predicting an imminent economic surge. They're more leaning towards secular stagnation, very low growth and very low interest rates stretching out as far as the eye can see.

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The United States by the way has been continually fighting wars these last 14 years... and actually fighting or preparing for wars continually since the Truman Presidency....

Oh and Tyler Cowen is a knob :D

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US needs gladiators fighting to the death on TV every Sunday PM, no off season!

No squeamish citizens allowed :D

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Listening to Blair on the TV news today talking about sending in Western forces to Iraq just made me think that he was a salesman for the banks and arms industries.

How are the share prices of Lockheed Martin, BAE and Co doing this past week or two?

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There's no mystery. A vast bubble of fraudulent mortgage securitisation disappeared in 2008 and took with it millions of overpaid bubble jobs in banking, insurance and construction. Those bubble jobs aren't coming back. The toxic debt structures they helped create however will take decades to unwind.

Edited by zugzwang

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