I recommend following the link to read this article in full. There are a number of charts and related information that are well worth studying, to properly understand the whole argument.
From Zero Hedge (bold and italics in original, red font mine):
In a moment of surprising clarity, Deutsche Bank’s Jim Reid pointed out what is largely taboo in the financial industry – the truth. “Looking back, real GDP growth in the US through the latter half of the 2000s and the 2010s has been at the lowest levels since the cyclically scarred decades of the Great Depression and the First World War.”
What is amusing, is the constant state of shock of supposedly serious people who are stunned that despite the Fed being constantly in the markets, and buying up trillions in securities, the US economy has not responded in a favorable manner. Of course, nobody has pointed out that if all it took to generate growth out of thin air without consequences was for the Fed to print, i.e., monetize debt, this would have started 100 years ago in 1913, and by now the US economy would be so advanced it would be colonizing Uranus. Logic, however, is not a Keynesian economist’s best friend.
That said, the reasons surrounding the lack of US growth are secondary for the time being. A bigger question is what happens from here, now that even respected banks, and even ivory tower economists have admitted that QE has been a complete failure for the broader economy, and the common American, benefiting only the uber-wealthy. Which leads us to a different topic. Syria.
In an uncanny historical analogue of the current economic predicament, we have to go back only 70 years or so back, to the time of the first Great Depression: that was the first and ostensibly last time, when the US economy was performing in a comparably subpar fashion to trendline.
So in an extreme (if logically forthcoming) scenario when the Fed’s final proposed fallback strategy of “forward guidance” which is destined to replace QE now that tapering is on the table, were to fail, as many already suggest it will (just look at the BOE), the final solution for the US central bank is one – Nominal GDP Targetting, which stripped of its fancy title is really a euphemism for “print until you drop”, or rather monetize securities and inject money without regard for inflation (paradropping bundles cash may well be allowed as Ben Bernanke would be happy to admit), with the only intention of promoting growth at any cost.
But will “Nominal GDP Targetting” work?
After quite a detailed analysis, including multiple charts, we get to the answer, and the crux of the article:
In other words, targeting GDP for the sake of GDP, concerns about inflation aside, when soaring inflation would also lead to surging interest rates, has become impossible.
So what is the only possible way out left for a country in which monetary policy has failed on all fronts except to inflate asset prices to stratospheric levels, and yet the economy still refuses to budge? For the answer we go to Deutsche Bank one last time:
During the US Great Depression the huge declines in consumer and businesses confidence in the face of mass unemployment can be seen in the extremely and persistently low level of velocity…. As it turned out, the US economy managed to grow at an average of 13.5% a year over the next 10 years and was back on ‘target’ by 1944…. Velocity also moved during the recovery from the Great Depression as the US war machine swung into action in the early 1940s.
In other words, at a time when the US was in almost an identical predicament and GDP catch up would have been impossible by any other means, what happened? World War. Luckily, for the US it generated unprecedented growth and cemented its status as the world’s super power, and the USD as the reserve currency. Others were not so lucky.
Are we the only ones who suggest that the only outcome is a military one? No. Recall from Kyle Bass:
Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.
Which also means preconceived from the start. So despite a recent sense of detente in Syria, pay close attention: never since the cold war has the world been so close to the edge of a full-blown global military conflict. Whether or not the Syria “trigger” has been produced as the catalyst that will spark growth, or is merely a precursor to such an event is still unclear. However with every passing day, the US economy lags ever more behind its “trendline” and the common man gets left ever further behind the superclass of financial asset oligarchs, a state which the president opined recently was unacceptable. The question is whether millions of war casualties for the sake of yet another economic “golden age” aren’t.