June 5, 2012
It’s A (Liquidity) Trap! What Star Wars Tells Us About the U.S. Recovery

This may not be our darkest hour, but the disappointing May jobs report showed the U.S. economy once again slowing towards stall speed. It’s not just the anemic 69,000 jobs the economy added last month. More disconcerting were the sharp downward revisions to previous months. It looks like we could be in for an unwelcome rerun of the summer doldrums we have gotten to know all too well in 2010 and 2011.
Markets have a bad feeling about this. It isn’t just about the deteriorating U.S. outlook. Europe and China are turning to the dark side of growth too. The euro is continuing its game of Schrödinger’s currency: At any moment it is both saved and doomed. Right now, it’s looking more and more doomed. Then there’s the slowdown in China — along with India and Brazil. These economies powered global growth during the dark days of 2008 and 2009, but seem certifiably wobbly now.
The Fed is our last hope — and there isn’t another. Republicans in Congress continue to block further fiscal stimulus, despite historically low borrowing costs and a clear need for better infrastructure. So that leaves Ben Bernanke & Co. as the last and only line of defense. But with short-term interest rates at zero, how much more can the Fed do? What would more quantitative easing accomplish — and what does that even mean?
In a galaxy far, far away, there wouldn’t be any question about whether the Fed could kickstart more growth. That galaxy is called Israel, or Sweden, or Switzerland. Even with zero interest rates, a central bank can increase growth thanks to three things: expectations, expectations, and expectations. Oh, and expectations. But we’re getting ahead of ourselves. Let’s step back and first consider why critics say the Fed is “out of ammo”. Then, we’ll explain why that’s wrong — by referring to the ur-text of monetary policy: the script of Star Wars. Really.
Read more. [Image: Reuters/Lucasarts/Kasia Cieplak-von Baldegg]

I dare you to find every Star Wars reference in this story.

It’s A (Liquidity) Trap! What Star Wars Tells Us About the U.S. Recovery

This may not be our darkest hour, but the disappointing May jobs report showed the U.S. economy once again slowing towards stall speed. It’s not just the anemic 69,000 jobs the economy added last month. More disconcerting were the sharp downward revisions to previous months. It looks like we could be in for an unwelcome rerun of the summer doldrums we have gotten to know all too well in 2010 and 2011.

Markets have a bad feeling about this. It isn’t just about the deteriorating U.S. outlook. Europe and China are turning to the dark side of growth too. The euro is continuing its game of Schrödinger’s currency: At any moment it is both saved and doomed. Right now, it’s looking more and more doomed. Then there’s the slowdown in China — along with India and Brazil. These economies powered global growth during the dark days of 2008 and 2009, but seem certifiably wobbly now.

The Fed is our last hope — and there isn’t another. Republicans in Congress continue to block further fiscal stimulus, despite historically low borrowing costs and a clear need for better infrastructure. So that leaves Ben Bernanke & Co. as the last and only line of defense. But with short-term interest rates at zero, how much more can the Fed do? What would more quantitative easing accomplish — and what does that even mean?

In a galaxy far, far away, there wouldn’t be any question about whether the Fed could kickstart more growth. That galaxy is called Israel, or Sweden, or Switzerland. Even with zero interest rates, a central bank can increase growth thanks to three things: expectations, expectations, and expectations. Oh, and expectations. But we’re getting ahead of ourselves. Let’s step back and first consider why critics say the Fed is “out of ammo”. Then, we’ll explain why that’s wrong — by referring to the ur-text of monetary policy: the script of Star Wars. Really.

Read more. [Image: Reuters/Lucasarts/Kasia Cieplak-von Baldegg]

I dare you to find every Star Wars reference in this story.

  1. davidbobzien reblogged this from theatlantic
  2. spacecowboywhit reblogged this from theatlantic and added:
    Reblogged largely for the picture of Obi-Wan “Old Ben” Bernanke. Also relevant to a couple of my interests.
  3. inbonobo reblogged this from theatlantic and added:
    use the force, ben..
  4. jacquesofalltrades reblogged this from theatlantic
  5. ronaldgrey reblogged this from theatlantic and added:
    See: Saving the Economy From Obama’s Liquidity Trap We have not yet begun to succeed. Form a more perfect union through...
  6. ohmarjorie reblogged this from theatlantic
  7. becomingbrey reblogged this from theatlantic and added:
    so many- and subtle ones, too
  8. newsandtrade reblogged this from theatlantic
  9. ssasdrawkcab reblogged this from theatlantic
  10. alexjamesfitz said: I’m going to get back to work now, guys.
  11. laughterkey reblogged this from theatlantic
  12. urethra--franklin reblogged this from theatlantic and added:
    I have to send this to my Econ teacher
  13. theatlantic posted this