‘Worth Celebrating’ My Eye!
Once upon a time, the Wall Street Journal supported a bevy of reporters who were no one’s fool and who evinced a decent level of economic literacy and respect for the institutions of free markets and sound money.
Obviously, no more. We were reminded again today that these financial journalists of yore have been replaced by scribes who dutifully transmit the statist propaganda that emits from the Eccles Building and from the elected and appointed Federales encamped throughout the Imperial City.
Thus, the WSJ’s in-house Fed shill, Greg Ip, recently saw fit to praise the $10 trillion bacchanalia of fiscal largesse ($6 trillion) and Fed money-pumping ($4 trillion) that has been stood up by Washington since March 2020.
According to the Wall Street Journal’s man on the policy beat –
…..this week we got proof of something that really went right: the economic policy response. The pandemic-induced shutdown was initially the worst to hit the U.S. economy since the Great Depression….And yet poverty, by its broadest measure, went down…..after taking account of government benefits such as stimulus checks, food stamps and tax credits, the share dropped to 9.1% from 10.5% in 2019.
The Federal Reserve gets some credit for rapidly slashing interest rates to near zero and intervening in markets to prevent the economic crisis from becoming a financial crisis. But once the Fed’s interest rate ammunition was exhausted, fiscal policy rose to the challenge. Congress ultimately authorized $5.9 trillion of emergency measures of which $4.6 trillion has been spent….
As important as the magnitude of this relief was the variety. Unsure of the most effective remedy, Congress rolled out several: forgivable loans for small businesses that kept their employees (the paycheck protection program or PPP), stimulus checks to almost everyone, unemployment insurance expanded to gig workers and topped up with an extra $300 to $600 a week, low-cost loans from the Fed and Treasury to medium and large businesses, aid to state and local governments.
Much of this was experimental, and the lessons learned may lessen the toll of future recessions. By depositing cash directly into household bank accounts, Treasury has learned how, with congressional approval, to deliver stimulus almost as quickly as the Fed. PPP has yielded new tools to preserve employer-employee bonds in the face of shocks, reducing wasted economic potential.
Nonetheless, the economy today is in a far healthier place than was imaginable in the spring of 2020. That’s worth celebrating.
What an unrelieved load of horse pucky!
It’s hard to know where to start, but the notion that the massive eruption of stimmie spending generated a “healthy” economy is flat-out preposterous.
That’s because if you get your first principles correct, you focus on production, not spending. The former is the supply-side wellspring from which sustainable incomes, savings, investment and rising wealth and living standards arise. As per Say’s Law, spending is enabled by production, it does not cause it.
So the chart below on the latest relevant August numbers tells you all you need to know. To wit, during the last 18 months US households bought merchandise goods like there was no tomorrow – with monthly retail sales (red line) rising from $460 billion in February 2020 to $547 billion during August 2021. That’s a record 19% gain during a period when unemployment had soared and output had crumbled.
By contrast, manufacturing output (purple line) in August – the putative source of this cornucopia of retail goods sales – was up by just 1.5% from the February 2020 level. That is, where it counts on the supply-side there is nothing worth celebrating at all.
Manufacturing Production Versus Retail Sales, February 2020-August 2021
Of course, the goods which leapt off retail shelves and on-line order pages have to come from somewhere, and as it happened that “somewhere” was comprised of soaring imports and a radical drawdown of retail inventories.
Article from LewRockwell