Efficiency Bubble and the U.S. Recovery

After the collapse of the housing bubble in 2008, we have been trying to identify the next big bubble that is doomed to crush. This past weekend, while I was talking with one of my friends dad, he mentioned to me how he believes there is an ongoing efficiency bubble. He says that "people are to afraid to lose their job so they are working harder than ever." I immediately linked this to mainstream topic of discussion in our International Political Economy class; the U.S. recovery or the lack of it.

At first it may seem rather odd how both of these relate. However, let me offer some background information that will help to wrap this idea. Therefore:

1. Since 2008, the United State government has been injecting money into the economy through changes in fiscal and monetary policy (> U$1 trillion). Yet, economists as Paul Krugman still argue that the stimulus package(s) is not enough to jump-start the economy.
2. With unemployment numbers at unprecedented levels since the 1990s, people have been, as this parent well said, "working harder than ever."
3. U.S. firms revenues and margins are near pre-Great Recession levels. In addition to this, blue chip firms such as Microsoft have been issuing debt at record low interest rates and purchasing their own shares in order to cover their interest with their dividends. 
4. Finally, U.S. firms are sitting in piles of cash and have no investment plans (interesting fact: at one point in time during the fiscal cliff of 2011 AAPL had more cash in hand than the U.S. government). 

With this four points in mind, I am going to explain my reasoning as for how this "efficiency bubble" might be the reason that the U.S. economy has not experience as much growth as it should have. They way in which this relates with the slow U.S. recovery is pretty straight forward. First, due to the financial crises of 2008, people start working harder and become more efficient; hence, increasing the total factor productivity of the economy.  As a result of this, firms start to increase their revenues back to pre-2008 levels. However, due to the low interest rate environment that the FED created, neither banks nor firms have any interest in lending nor investing. On the contrary, given that capital is so cheap this days, all they do is to take in as much cash as possible at historically low interest rate (sometimes negative real interest rates) and save them for the future.  If you combine all of these, you can picture why the recovery from the recession has been dramatically slow.

In my opinion, is not the size of the stimulus thats should explain why growth has been so slow. It is the lack of government coordination and investment expectations that have cause the recovery from this crises to be even more painful. If U.S. firms opted for a "Big Push" or a Rosestein-Rodan growth model, then the size of the stimulus will become irrelevant when analyzing the recovery from the 2008 crises.