The Stimulus Boom Is Already Over – Now Comes Stagnation – IOTW Report

The Stimulus Boom Is Already Over – Now Comes Stagnation

Thursday, 1 July 2021, 16:15 MJA Uncategorized 18

Mises-

The United States retail sales and jobless claims weakness, significantly below estimates, coincides with the largest fiscal and monetary stimulus in history. Something is not right when these figures come significantly below estimates in an environment of massive upgrades to gross domestic product (GDP). Why?

The diminishing returns of stimulus plans are very evident. Artificially boosting GDP with large government spending and monetized debt generates a short-term sugar high that is rapidly followed by a sugar low. The alleged positive effects of a $1 trillion stimulus plan fade shortly after three months. I recently had a conversation with Judy Shelton where she mentioned that the recovery would be stronger without this latest massive stimulus package. The economic debacle happened due to lockdowns and the recovery comes from the reopening. We need to let the economy breathe and strengthen, not bloat it.

The diminishing returns of stimulus plans are evident. A $20 trillion fiscal and monetary boost is expected to deliver just a $4 trillion real GDP recovery followed by a rapid return to the historical trend of GDP growth this will likely lead to new record levels of debt, weaker productivity growth and slower job recovery. The pace of global recoveries since 1975, according to the OECD shows a weaker trend. more

18 Comments on The Stimulus Boom Is Already Over – Now Comes Stagnation

  1. Read an interesting observation about the continued, multi trillion dollar stimulus bills. It was along the lines of, “If the Federal government believes it can continue to print unlimited amounts of money with any negative consequences, why are they requiring us to pay any taxes?”

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  7. Spending our way out of debt.
    Good idea … though it seems we’ve tried this.
    Maybe we should take a closer look at Zimbabwe and Venezuela – they seem to know what they’re doing! I hear that just about everybody in Zimbabwe is a Trillionaire!

    izlamo delenda est …

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  8. Racing our way to the lowest level of SUCK thanks to the Socialist/Communist radicals who have Jackass Joe on a short chain and his balls in vice! Venezuela is getting closer by the day!

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  10. Well I don’t know about the rest of the economy but manufacturing seems to still be smoking along. Trumps economy isn’t quite dead yet. Try as they might to kill it.

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  11. There’s a natural tendency for free market economies to cycle through expansions and contractions. Von Mises and Hayek showed clearly that govt intervention in the economy, specifically monetary inflation (a/k/a “quantitative easing”) makes the cycles swing more widely and the recoveries take much longer: bust follows the boom, but the real damage is done during the artificial boom caused by too much cheap money.

    There’s an extremely worthwhile article by Bob Murphy at FEE titled The Depression You’ve Never Heard Of: 1920-1921. It does a fine job of explaining why ever since the Hoover and follow-on FDR administrations, the govt just keeps making things worse.

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  14. Biden’s boom is already over? I guess I missed seeing it start since the economy in TX has been booming and the tourist season in the hill country is busier than I’ve ever seen even with exploding prices. Funny how people flock to freedom no matter what the cost.

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