Twisted Picture of a Consumer Economy Running on Fumes of Stimulus

Incomes from wages, interest, and dividends sagged from pre-Pandemic era. But stuffed with stimulus, Americans broke records splurging on Goods, as spending on Services, the biggie, lagged far behind.

By Wolf Richter for WOLF STREET.

Consumers – lacking income from wages, interest, and dividends, but stuffed with stimulus money, the extra $600 a week in unemployment benefits, the amounts not-spent on mortgages in forbearance or default, the amounts not-spent on rents under eviction bans, and too the amounts from the stock-market gains – splurged on goods. They spent record amounts on durable goods, such as appliances, laptops, and bicycles. And they spent near-record amounts on nondurable goods such as cleaning products or food.

And some of those goods are made in the US, but a lot of those goods are made in China, Mexico, Germany, Bangladesh, etc., and thereby much of that stimulus was a stimulus for those countries, and for the container shipping lines, and also finally in the US for trucking companies, railroads, and mostly online retailers.

But the biggie in the US is services such as rent, health care, or food services. Before the Pandemic, 66.7% of what consumers spent went to services. But consumer spending on services was down 9.2% in July from pre-Pandemic February.

That’s the type of twisted picture that the Bureau of Economic Analysis reported today, of a consumer economy that runs on the fumes of stimulus.

Stimulus pumps up personal income.

Personal income from all sources in July, including stimulus and the extra $600 a week in unemployment benefits, but also rental income, dividend income, etc. – but not stock market gains – ticked up 0.4% from June to a seasonally adjusted annual rate of $20.04 trillion. This was down from the spike in April caused by the stimulus checks, but was still up by 4.8% from February and by 8.2% from July last year.

How did unemployment benefits impact personal income? Unemployment insurance exploded by $1.336 trillion (all annual rate figures), from $27.8 billion in pre-Pandemic February to $1.364 trillion in July.

Personal income, including unemployment benefits rose by $920 billion from February (19.12 trillion) to $20.04 trillion in July.

Personal income without unemployment insurance dropped by 6.7% from February, or by $1.34 trillion (all annual rates), to $18.7 trillion in July. This $1.34 billion decline was driven mostly by declines in:

  • Wages and salaries (-5.0%)
  • Contributions by employers to pension plans and social insurance (-2.7%)
  • Interest and dividend income (-4.3%)

Personal income from wages and salaries alone, while ticking up from June to $9.2 trillion (annual rate), was still down 5.0% from pre-Pandemic February:

Consumers splurged on Goods, but scrimped on services.

Total consumer spending in July, at $14.2 trillion (annual rate), slowed its recovery, ticking up by 1.9% from June, and was still down, despite all this stimulus money, by 4.6% from February:

Consumers forked over a record amount for durable goods, $1.74 trillion (annual rate) in July, up by 12.2% from February and by 12.6% from July 2019. This includes a surge in spending on laptops and other electronic equipment needed for working, teaching, and studying at home:

Consumers splurged at near-record pace on nondurable goods, $3.10 trillion (annual rate), up 3% from February but down a tad from the record set in March, when they cleaned out supermarkets down to bare shelves, ranging from pasta to toilet paper. This was followed by a plunge, and now back to Pandemic normal, where people eat at home, work at home, study at home, and teach their kids at home, which shifts purchases from businesses and schools to households, and therefore to consumer spending:

But consumers scrimped on services. At $9.35 trillion (annual rate), spending on services was down 9.3% from February. Even during the Financial Crisis, spending on services barely dipped. But this time it plunged, and it has recovered only to a level where it had first been in late 2017.

Services include the biggies, such as rent, health care, insurance, travel and lodging, cellphone services, cable TV and broadband subscriptions, electricity, water, sewer, but also haircuts, food services such as in restaurants, auto and home repairs, and the like. Normally, around 67% of total consumer spending is for services.

So this Pandemic-economy picture emerges:

Consumers are spending the stimulus money on goods, and particularly on durable goods.

By working, eating, teaching, and studying at home, they’re spending money that businesses and schools would have spent otherwise – and this part of their spending is just a shift, a zero-sum game in the overall economy.

By spending record amounts on goods, they’re channeling some of this stimulus money into imports, which is a stimulus for manufacturing sectors in other countries but gets deducted as a negative from the US GDP calculations.

And Consumers are not spending this stimulus money on services, which would mostly go to service providers in the US.

Now folks are sitting on the edge of the national chair, waiting for the next stimulus check and the extra unemployment money – because without them, many folks won’t have enough money to keep splurging on goods like this.

The Pandemic Economy Massively Changed How Americans Buy Stuff. Read… Ecommerce Sales Spike 44% in Q2: Even Groceries, Building Materials, Garden Supplies, and Furniture

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  189 comments for “Twisted Picture of a Consumer Economy Running on Fumes of Stimulus

  1. 2banana says:

    I have not heard that before…what does it mean?

    “Now folks are sitting on the edge of the national chair…”

    • Wolf Richter says:

      My own trademarked expansion of the term “sitting on the edge of your chair” — meaning nervously expecting or awaiting something on a national scale.

      • Joe Saba says:

        well maybe then govt ought to setup FEMA like places(good use for EMPTY HOTELS) when we evict and/or foreclose
        they could otherwise allow landlords to use UNPAID RENT VOUCHERS for things like property tax and income tax

        • paul easton says:

          Use FEMA to warehouse the former middle class. To house the formerly homeless make it legal to sleep under bridges. But what will they do with all the surplus houses now owned by private equity? UBI for the upper middle class?

        • paul easton says:

          That UBI idea was dumb. There are not nearly enough people in the former upper middle class to fill the houses. They need to auction off floods of green cards.

      • Yancey Ward says:

        The image I get is a stray cat waiting at the back door to get fed in the morning.

      • Guillaume Blondel says:

        Wolf your articles are always very well done and written. Do you have a Twitter account that we can use to share them?

  2. Engin-ear says:

    Great reasoning and insights…

    My understanding now is that the (small?!) part of central banks’stimulus that manages to make its way to consumers through the lands of Big Finance, finally goes mainly to goods manufactured elsewhere and thus stimulate other countries..

    How ironic and bitter…

    • Monkey business, monkey economy

    • Mara says:

      There’s no manufacturing in the US. We don’t build anything because everything is cheaper over seas and American workers are expensive to employ. The reason that is, is because land prices are high. We could easily go back to $7 an hour wages if average rent was $200. Then people could get their cheap labor. But that means real estate people lose their shirt. But it also means businesses can easily pop up since a $1k month rent on a business makes it a lot easier to open then say NYC where many businesses have $25k rent just to sell t-shirts.
      That also requires squeezing out big business that has deep pockets and a lot of political influence. That also means getting the boomers on board who would see a huge dip in the value of their houses (of housing isn’t a commodity they’ll their investment just gets torn to shreds).
      So we need a larger safety need to protect people. Medicare 4 all, better retirement opportunities then the SS (or a much better funded SS). All of these are pretty conservative concepts but in the US people act like any of these changes means electing Lenin with Marx as a VP. Instead i think the American people will embrace tent cities and call homeless old people “leeches” for being unable to work. Then they’ll have a mental break down when the young people refuse to live under a system. Black people and immigrants will get the blame for landlords fucking everything up to profit.

  3. MonkeyBusiness says:

    Don’t forget the contribution of Broken Windows to the upcoming GDP. All those property damages resulting from riots will need to be repaired.

    • Petunia says:

      No, most of the damage from the riots will never be repaired. The victims are finding out riots are not covered by insurance. Most of those areas can be written off for a generation.

      • SiT23 says:

        So my shorting of foreign tourist hotel stocks is still good, but doubling down on replacement window glass supply chain stocks is bad, huh? Might still look at plywood supply people instead!

      • Stuart says:

        What is the source of your information ? Assuming it is not made up.

        • Petunia says:


          My source is me. I watched this happen in NYC in several minority neighborhoods. Ten and twenty years later those areas were still not back. It is only in the last ten years that some of the Harlem and Brooklyn properties were redeveloped. Same thing happened in Detroit, Baltimore, and many other places.

          Destroying communities for a generation is no joke. Keep an eye on the progress of the current path of destruction.

        • Wolf Richter says:

          Petunia and Stuart,

          I’m going to chime in here. My answer to the question whether or not damages from riots are covered: It depends.

          Insurance companies are regulated by the states, and so it depends to some extent on the state insurance regulations; and it also depends on the language in the insurance policy.

          The quote below is from our insurance regulator in California, and it gives you a feel for how much it depends on the language. That said, an insurance company’s business model is to deny, deny, deny a claim first, and fight the claim until forced to pay, usually through legal action, which can take years. Insurance companies are litigation machines.

          Here is the insurance regulator of California, concerning claims about damages resulting from riots:

          “Although the information below serves as an overview, policyholders are strongly encouraged to read the terms of the policy purchased, as terms and definitions can vary from one policy to another.

          “Business/Commercial Insurance

          “Standard commercial policies typically include coverage for physical loss or damage to the insured premises and other business property resulting from looting, vandalism, and riots. Whether a specific loss will be covered depends on the actual language in the applicable policy and any coverage exclusions that may apply. It is important to check your specific insurance policy for the following coverages…

        • Petunia says:


          Wolf edited my response to you because I called you a not so nice name which I thought you deserved. The reason I did so is because people who can’t debate an issue are always quick to direct a personal attack on those they disagree with. I prefer to debate, but I also don’t want attackers to think it’s ok to attack with no consequence.

          Apologies to Wolf for creating more work for him, you on the other hand deserve none.

        • Lee says:


          Travel insurance insurance usually exludes things such as riots, war, and terrorism……………………..

          It usually excludes most everything as you have to fight to get anything anyway.

      • Jeremy Wolff says:

        Insurance policies specifically include looting in their policy. However, the premiums go up after the claim on the next renewal. In Chicago, I have seen businesses already repaired two times for looting and still open for business.

        • Petunia says:

          The insurance issue is a big deal because it becomes a big reason businesses don’t return. The premiums become unaffordable or the companies stop covering the area.

          With demographics being a big part of lending and insuring, a damaged zip code eventually affects everybody in the area, businesses and residences. If the cost of insuring homes goes up or disappears, house prices come down, lending dries up as well.

      • VintageVNvet says:

        Depends on the location Pet:
        I watched a guy walk up Telegraph, then down Bancroft breaking out every window he could with a long 2×4 in Berzerkeley 50 years ago; most of those stores were back in biz within a couple of days, and completely repaired within weeks; or, in the case of the bank on Bancroft, a remodeled front facade with windows too small for a person to go through if the glass were broken out.
        OTOH, driving on the main drag south into Detroit in August of 2000, I was amazed to see miles of burnt out homes and businesses that appeared to have been that way for many years.

      • Massbytes says:

        I have wondered why no one has commented on this. I actually have read my insurance policies. Those clauses about not being covered in the case of riot, civil insurrection, war et al really caught my eye.

    • Phil says:

      I live near Hartford, CT. Where is the nearest place I can go to see some serious property damage from riots? It sounds like a big deal so there must be something near me?

      • Anthony A. says:

        Go to Waterbury, it looked like the riots happened there years ago and it’s just like the new stuff except the plywood on the windows has patina. Take a ride up Willow Street (closed windows, of course), or North Main.

        • paul easton says:

          You mean it’s like a riot museum? Aren’t there any new ones around?

        • Anthony A. says:

          Paul, I am sure there are new ones, but generally they are an expansion of the previous ones. I haven’t been back to CT since last October. I’ll report the new ones when I take my next trip (once they open the state to us Texans).

        • Phil says:

          Oh you mean economic malaise in a minority urban environment? Is that what we’re talking about? It almost sounds like a socialist explanation of why minority communities are so upset, instead of evidence of a riot.

      • Yancey Ward says:

        Fifth Avenue in NYC.

        • Phil says:

          I looked at the first live webcam of 5th Avenue I could find… it looks normal, where is the riots/damage? The way you guys make it sound, I should see SOMETHING on the webcam, right?

          Google search “5th Avenue Cam – EarthCam”

          It seems like somebody is exaggerating maybe?

        • time2wakeupnow says:

          Not sure where the web cam you accessed via Google Earth is showing, but here is a recent video taken by someone driving down 5th Avenue with a cellphone. Looks to be pretty devastated
          by my assessment. And since this was captured in just 10 days or so, I’d guess that most of these shuttered and boarded up 5th Avenue businesses remain just as they appear in this short video:

      • NBay says:

        Actually the national and corporate sanctioned violence produces the absolute best riots, if ya really want to see one. I was in the Military-Industrial Complex sponsored Vietnam Riot for 13mo and it made the stuff now on TV (even if they re-run all the best parts) look….well….pretty amateur, so please excuse me if I personally don’t feel too threatened.

        A lot more money was made than on fixing broken windows, that’s for damned sure, so it was fantastic for GDP and jobs, but very very bad for the national coffers.

        Anyway, as usual, it’s the people that were stuck living there that got the worst of the whole show, and a lot of the more active participants.

        • Winston says:

          Compared to the level of violence and rioting in the late 60s and early seventies what is happening now is absolutely nothing by comparison. There is a graph in a PDF history of US terrorism I’ve seen where the graph showing things like bomb threats and riot numbers absolutely dwarf what we are currently experiencing.

          However, back then we weren’t in the no win situation brought about by the end times of central bank manipulation of the economy and a pandemic.

          Also, we were only a matter of years instead of decades as we are now into the universities teaching of the neo-Marxist Postmodernism “philosophy.” To learn about that, and you should because it explains EVERYTHING you see in our modern leftist political culture, watch on YouTube the 12 minute video “2017/02/25: Jordan Peterson: Postmodernism: How and why it must be fought”.

        • Petunia says:


          The center of the lefty BS that caused all the trouble in the 60s and 70s is the same university that “educated” some of our most recent presidents and secretaries of state. Even back then it was considered a communist drug den by the locals surrounding it.

        • NBay says:

          Yeah Winston, financial terrorism seems just A-OK with you, jungle rules, winner take all, and devil take the hindmost. The losers of course can often become “terrorists”, unless they just sit there and take it like a good peasant.

          I always laugh at people who say, “I made a killing” in this or that financial deal, as if they were trained warriors of some kind, which they are not. Hell, kids playing monopoly can even do that stuff.

          I don’t get totally open ended greed at all, I really don’t….and please spare me Uncle Milty’s trickle down lecture, ok?

      • paul easton says:

        I live on Main St in Hartford. Once there was a long parade of cars that went by all blowing their horns. But you can’t have much of a riot if you are afraid to get out of your car. Hartford is weird.

      • roddy6667 says:

        I lived in CT for 65 years before retiring in China for 7 years. I am currently visiting in South Windsor. We will return to China as soon as they allow Americans back in. So far, South Koreans and a lot of Europeans have been welcomed back.

    • Bobby Dents says:

      What riots?? They were so small in scope.

  4. Lasse says:

    Personal income from all sources is up but spending to services is down. Why?

    Working from home means more sparetime and less driving to and from work. Aren’t everyone spending their time @ fitness centers? Sales of computers was up? Are we spending our time behind screens? Is that it?

    • Rowen says:


      Shutdown meant no non-essential procedures, everything from $100 dental cleanings to $100K hip replacement surgeries.

      • Joe Saba says:

        just ask nurses about their bought of UNEMPLOYMENT
        and outpatient stuff still down 50%

      • Maximus Minimus says:

        Just an anecdote. In February, ahead of the curve, I bought a haircut machine, and did a good job cutting my hair ever since. Since then, the price of the machine has at least doubled, or tripled on Amazon. Is that an indication of where the hairdresser business is going?

        • Khowdung Flunghi says:

          We also bought an inexpensive electric hair clipper when this all kicked off and have been giving each other haircut in the interim. We’ve gotten good enough that neither of us is embarrassed about going out in public, and have avoided spending a few hundred dollars. We’ve actually made it fun and will probably keep doing it when things reopen. For giggles, we put on “The Rabbit of Seville” while we’re giving each other haircuts.

        • RagnarD says:

          another anecdote: I bought a Samsung washing machine got a good price for it it was like $475 in April, now it’s +$200, no discounts. / deals to be found, as i’m looking for a companion dryer. When I was shopping for it initially, salesmen were saying how things were hard to get because of the supply lines and manufacturing being shut down. So now you have what appears to be the double whammy where demand is up and supply is down. it’ll be an interesting Black Friday Thanksgiving weekend if this trend holds

    • Petunia says:

      Most service providers like hair dressers or manicurists are limited to 25% or 50% capacity. Assuming their clients can return, they will only have half of their business back at most.

      Also many of these providers are not longer accepting cash as payment, another reason customers are not returning. If you are in forbearance on your credit card, you may no longer have it available for use.

      • MarMar says:

        In the Bay Area hair and nail salons can open on September 1st for *outdoor* service only. Assuming the wildfire smoke isn’t too bad.

    • I hear this on the local network. Cable is the first thing to downsize. People post notices looking for tradesmen, cheap and reliable. The plumbing companies are in fierce competition to unplug your drain for less than $50. Not so much a demand issue, consumers seek out the lowest cost solution.

      • economicminor says:

        Dr Lacy Hunt says we are in for a long period of slowly deflating assets. He also said that wages would also decline? He quotes a lot of economic formulas he says are pretty much proven over long historical testing. No way to get inflation without actually printing money and he said if the FED does that we will all be miserable fast. He has some recent interviews on YouTube.

      • quack says:

        Before calling a plumber to unplug your drain try to put some dishwasher liquid into the water. You will save your $50

  5. I feel foolish for paying my bills in 2020. Next go round I’m going to buy myself a Tesla truck and then smash it into some local restaurants thus driving the domestic economy to better sustainability.

    • edmondo says:

      Just buy the stock. The vehicles are crap but the stock is a 7 bagger since February.

      • Massbytes says:

        “The vehicles are crap”….says the guy who doesn’t own one. Tesla’s vehicles are number one in customer satisfaction. And the stock is pretty good also.

      • SwissBrit says:

        The vehicles are amazing – anyone who’s ridden in one or driven one will tell you so, unless they’ve simply got a soft spot for the ‘feel’ of driving an ICE car.

  6. Tony22 says:

    “because without them, many folks won’t have enough money to keep splurging on goods like this.”

    Speaking for myself and friends, plus just observing the news for the last 6 months, there is a huge inventory of food, toilet paper and consumer goods in the homes of most people who could afford it. That may be one reason that sales are down, not because the big free money checks have stopped. This will buffer the lack of PPP money, for a while.
    Then, when people have no money and the stockpiled goods run down, it gets real ugly.

    Prediction: “Nice car you have there. How many cases of canned goods for the pink slip?”

    • edmondo says:

      do you know the difference between “goods” and “services”?

  7. The Original Colorado Kid says:

    I believe in trying to help everyone stay afloat, so I spent my $1200 stimulus money on getting my car with 230k miles in shipshape condition (CV joints, brakes, shocks, etc.). Some of the cash went to the mechanics, and since they probably got the parts from other countries, some went to foreign interests.

    My nephew called to ask me what the future holds (I have no clue). My advice was to run a tight ship. Get things fixed and batten down the hatches.

    • Clete says:

      Even if you aren’t in forbearance on your card, you may be at your limit (seeing Cap One cut limits, e.g.). This cashless situation could have a big impact on tips as well.

      • Clete says:

        Sorry, not sure why that response posted here. Was supposed to say:

        We gave our stimulus to the homeless. At least I assume our contractor is living in his truck, from the looks of things.

  8. Seneca’s Cliff says:

    The economy is a lot like a car you purchased in 2001. At first all the money you spent on it was services, car washes etc. then in 2008 you had premature engine failure and had to replace the engine again. Then it was smooth sailing again with most of the money spent on services, but a little more cause you needed more tune-ups and such. Now in 2020 your old car (the economy) is near the end of its life and most of the money you spend is on products like xerex to plug radiator leeks, and magical mystery oil to keep the oil pressure up. You know that any day you will hear the sound of a connecting rod going through the side of the block but you don’t know when.

    • The Original Colorado Kid says:

      I agree, and good analogy.

      But sometimes you can create a better macroeconomy for yourself by being prudent and staying ahead of the curve and making wise purchases. The rod may come, but you’ll have saved enough for a new car when it does, if you’re smart.

    • Corolla says:

      Plot twist, it’s a Toyota. It will drive another 30 years with the rod knock.

      It is now 2050 and the connecting rod has finally gone through the engine block. Turns out, the Toyota drives better than ever before, with the friction of the bad rod gone.

      • VintageVNvet says:

        That actually happened to me with a 55 chevy station wagon C, circa 1970:
        Had that old six cylinder and threw a rod at one point, made a heck of a loud noise for a week or so, then the noise stopped and the car ran fine for several years without any other problem…
        Gave it away when I left the area, as did not consider it quite ready to drive across USA. Great car, wish I still had it.

      • The Original Colorado Kid says:

        It actually is a Toyota. A 2007 Fj Cruiser, built completely in Japan. Best car I’ve ever owned. These are the first repairs I’ve had to make.

        • The Original Colorado Kid says:

          Oh, and I used to have an old Corolla. Used to take it four-wheeling. It finally died around 450k miles. I think Japan finally got wise and started making their vehicles in other countries because the Japanese were too conscientious and the vehicles never broke down, so people weren’t buying new Toyotas as fast. And I’m old enough to remember when Made in Japan was a joke.

        • corollas says:

          The Original Colorado Kid- lol, I had a corolla I took “4wd-ing” down the river bank. Sold it at almost 200K and it will probably go for another 100K. Low clearance but they are unibodies and have sort of a skid plate all over their bellies.

        • MCH says:

          Toyotas are quite impressive, finally donated mine this year after 16/17 years. There was a weird engine noise, and I figured taking it to the shop would have costed more than the car. Since I wasn’t using it anyway, save on the insurance cost. After all, why pay anything for non operations.

    • Engin-ear says:

      Comparing the (real) economy to a car is intriguing, but I fail to see the concept.

      Our real economy did not start in 2000, and unlike cars, it is unstoppable and unbreakable to absolute zero: economy is a wealth creation, as long as homo sapiens exists, wealth creation will continue (whatever the output level is).

      • rhodium says:

        Initial argument is basically that capital depreciation exists but it cannot be fixed or replaced, as if everyone is laying down and refusing to work. Obviously not the case so I disagree with the given car analogy. However, more and more income is being extracted by the rentier class and the monopoly sector. The rest of the economy is filled with zombies vying for the dried up discretionary income of the lower classes. It’s not a recipe for a vibrant consumer economy. We could say it’s more like a car that should be running on lighter weight oil but someone instead filled it with heavy weight oil and the engine is now struggling and prone to timing errors. Massive debt expansion is like trying floor the accelerator harder to make up for the thick oil, but the oil holds it back, and the excess friction causes timing errors and we wonder what’s wrong with the vehicle when it starts to buck and shudder. We can always keep repairing the car but in the mean time it’s depreciating a lot faster as we floor it.

    • andy says:

      I can live with extra tune-ups, oil leaks, radiator leaks, push rods. As long as there is no range anxiety. Anything less than 400 miles on one battery is just unacceptable.

      • jm says:

        Three and a half hours at 70 miles an hour is 245 miles. Tesla 3 Standard Range is 250 miles. Five minutes at a supercharger adds 75 miles, 15 minutes 180 miles. Tesla drivers taking long trips get the car recharged during meals or “pit stops”. How many people frequently need to drive more than three hours without a stop?

        • VintageVNvet says:

          good point jm,
          this old boy used to drive without stopping until the vehicle needed gas, crossing USA dozens of times in 72 hours by my self , or about 60 with another trusted driver doing their part…
          Now, with a 33 gallon tank, and many years later, it’s more like when i need a pit stop every couple of hours or so, including ”fresh mints” of course, and even most times a bit of chat with the other folks doing similar.
          IMO, the issue, formerly known as problem, is that the locations of charging stations, etc., are still fairly mysterious for the vast majority; think it will be OK in a decade or so, except maybe in the vast west of Texas, where even the gas stations are many many miles apart.
          OTOH, by then Texicans may be even more ahead of the curve than now, and install some wireless charging facility being powered directly from the gazillion wind mill farms growing there daily, eh?
          Surely someone will figure that out fairly soon, and make a couple trillions (slightly more than pocket change maybe?) charging a nickle a mile for cars, equally cheap cheap for semi-articulated heavy trucks, etc., at least on the major interstates.

  9. RightNYer says:

    Just goes how stupid the American consumer is. Instead of saving the $ for what is coming (and in my opinion it won’t be good, regardless of what Congress or the Fed does), they splurged on crap.

    • Cas127 says:

      Generally agree, but another view is possible.

      US public, knowing that G can only/is going to debase the currency again (of which recent Fed inflation stmt is the laughably lagging indicator) has rushed to exchange Fed’s Weimar money for real goods, with longer term value.

      Given the choice between the Fed’s toilet paper and real toilet paper, people could be choosing the latter.

      • RightNYer says:

        Fair enough, but buying gold coins with that would make more sense than buying disposable goods.

      • historicus says:

        The Fed will ignore inflation…
        then declare it a good sign of economic activity..
        then limp in with meager 1/4pt hikes…
        then it will run away … out of control.

      • economicminor says:

        FED has been trying to debase the currency (create inflation) since the crash in 2000.. Has it worked? Running up asset prices isn’t the same thing. For us to have real inflation they must get the money into circulation and that is hard when so much of the newly borrowed money just goes to pay off other debts or consumed. They do not have a mandate to print, only buy up debt.. Sure they can run the interest rate to negative but that will kill all the banks, insurance companies and pension funds. The FED is virtually out of bullets and it can only jawbone. Or Break the Law which I don’t think Powell will do but we’ll see. When the Dems take over totally in February they may try and borrow us into a bigger hole but I don’t think they will change the FEDs mandate and allow them to print. Never know though do we.

        • rhodium says:

          That’s the key problem isn’t it. The money doesn’t really go into circulation in a sustainable way. Very quickly, either because it is given straight to the wealthy vested interests or just through profit margins and large amount of revenues being paid straight to the top, the money ends up at the top. What do they do? They buy assets and accumulate. For every buyer there is a seller. If the wealthy continuously own a greater share of the wealth, that means they are effectively asset stripping the lower classes (because there is logically no where else these assets are coming from if they are not new). The “liquidity” from the fed is meant to stimulate the economy. I think they still don’t understand the way that the economy increasingly tilts towards asset extraction and rent seeking for the appearance of value creation. More money being pumped in isn’t really effecting productive capacity in the real economy. The fed’s own estimates of capacity utilization have been trending down for decades. If capital is underutilized according to their own data, then presumably the owners do not find it worth their time and energy to actually produce things for those who would eventually buy their goods and services. How does pumping money change that? Beyond the immediate short-term it appears to be not at all.

        • cb says:

          rhodium said: “The “liquidity” from the fed is meant to stimulate the economy. I think they still don’t understand the way that the economy increasingly tilts towards asset extraction and rent seeking for the appearance of value creation.”

          One might consider that the FED knows exactly what they are doing, and are happy with their role in asset extraction and rent seeking. Why think otherwise?

        • 123MathMan says:

          I’m not stating any of this will happen or that it’s desirable but the FR and US government haven’t even cracked Pandora’s Box of what’s possible. They’ve got more bullets than imaginable of they chose to use them. And the market won’t bat an eye if they do. That said, policy plays a key role in the future. That means the FR working in concert with Treasury to print money. I could be completely wrong, but I’ve been writing for a decade US empire will end in 2022. Lots behind that but it could be very positive for US. Or, very negative. Regardless, rest of world won’t pick up the slack.

          The FR can run its balance sheet to infinity. It could put the entire economy on it if necessary. For years. And not damage Treasury holders. US did some semblance of this with HOLC in Great Depression but focused on housing. FR is now doing same by nationalizing much of housing. Gives government huge flexibility including pausing payments for as long as necessary to avoid foreclosure. Could do the same with rental properties too. Commercial real estate isn’t so easy due to vacancies but there is flexibility there too.

          The US domestic economy effectively doesn’t exist anymore. The US economy is anywhere dollars are accepted. So world is domestic economy. Bad news re Great Depression and gold standard breakdown where US had domestic economy to rely on. Today’s economy has no resilience. It’s completely reliant on discretionary spending. Wolf’s analysis is excellent.

          Politicians are just stooges who bend to the will of power. For the last 150 years that has been corporations. You will see that change. The real power lies with the people when they are organized. That shift is just starting. Politicians will bend to the will of the people at the expense of corporate power. That means devastating changes for the investor class and the professional class but it will also start the cleansing of the rot in this country.

          This could take multiple turns but it will not be any type of civil war. Prior unresolved redresses of the massive labor and working class wars from 1870 to 1940 are here to resolve themselves. Violence is the new normal. And it will be here until these issues are addressed. The only thing that stopped the last labor war was World War II.

          The only question I see as power is taken back by people and localities because a far off bureaucracy has no solutions other than printing money is if the US survives. That statement applies to all large bureaucracies such as China, Brazil, Russia and the EU.

          I know people don’t wish to consider things they don’t understand but astrology tells us this is the most profound moment in over 2000 years. It’s most likely from my lens that World War III is humanity’s war against the state. And we’ve just started.

    • Lance Manly says:

      Actually it is bifurcated, the savings rate of the top 20% is way up, while the suckers in the bottom 80%, not so much. Huge wealth transfer up. Thanks Jerome.

      • RightNYer says:

        As I said before, he’s an economic terrorist. He and the other central bankers deserve a Nuremberg style “crimes against humanity” trial when all of this is over.

        Someone like Wolf should preside over the hearings (coincidentally, Richter is German for “judge”).

        • paul easton says:

          He is only following orders. In Nuremberg trials that was disallowed as a defense, but the main wreckers are the big shots giving the orders. Are there particular people who do that, or is it the ruling class in general? How big is the ruling class?

        • RightNYer says:

          I don’t really know. I think it’s more that they are a team of oligarchs (meaning no individual “big shots”) actively trying to destroy the world. For what end, I don’t know.

        • VintageVNvet says:

          The real oligarchs will not be counted, any more than their wealth is allowed to be counted, as they pull the strings controlling their puppet politicians and their other servants.
          As to how many, start with the various old old families in each country, say from 1700, and proceed to current times. My current SWAG would be around a thousand families throughout the world, but obviously, if the minions of the oligarchs are doing their job, one could never really put any reliance on any number.
          Yes, there are some newbies, and they too must be able to keep their mouths shut, keep out of the news, and keep their wealth well hidden.
          For instance, the Koch family would clearly like to join, but, in fact, they are very new to the game, another of the families whose start was based on the oil at signal hill in SoCal, so clearly too new to be allowed in, yet.
          And, while some want to see the current situation a battle between the soros and the kochs, IMHO it is more like the battle between the original bifurcation of the movement of modern humans out of Africa, with the two branches, moving east and west, finally meeting in ”The New World.”
          Interesting times for sure!!

      • historicus says:

        The savings rate being up seems to correlate with low rates, surprisingly…
        but in a way it makes sense.
        People are hunkering down…low interest rates, faked low rates, slow economic activity, not raise it.
        I for one would be traveling and buying things if rates were equal to the inflation rate..or higher..which is the financial history of this country.
        But not now….hunkered down…in the zip code.

    • splugie says:

      I splurged on a new refrigerator as my old one died and couldn’t be repaired. Also a new water heater as the old one died. And a can of primer.

  10. Cas127 says:


    Thanks again for the big picture macro stats.

    With individual companies, it is very easy to get lost in the weeds, the unique details of which obscure the larger trends and contradictions.

    But macro stats tend to expose the inherent contradictions and counter productive nature of many government “fixes” (“wise” Keynesian stimulus leaking/bleeding out to nations exporting to US for many decades).

    • lenert says:

      Because our trade deals are structured so auto and IT workers, have to compete in a global labor market but doctors and other highly paid professionals don’t.

  11. YuShan says:

    What this suggest to me is that the stimulus was overdone and not very well targeted.

    • RightNYer says:

      It was done awfully. What SHOULD have been done is that employers that had revenue drops (service, hospitality, etc.) should have received money to keep their employees on payroll. The $600/week, irrespective of how much one was making before, was the height of stupidity. As was allowing 400 person law firms to collect PPP money. Instead of keeping certain unfortunately positioned businesses forced to close afloat, we stimulated the American consumer to splurge on crap.

      • Petunia says:

        I disagree. I don’t think any stimulus money should go to businesses, it should all go to consumers. Let the people vote with the dollars, let them decide who survives and who should not.

        • RightNYer says:

          Yeah, except that many small businesses were mandated closed, or suffered even after reopening because people are understandably worried about the virus. I don’t see how giving people money, ostensibly to support local restaurants, that instead goes to AAPL to buy new iPhones is particularly stimulating for the economy as a whole.

        • Petunia says:


          I do understand that businesses were unfairly shut down, however, putting them into additional debt doesn’t help them. All the restaurant owners in my area that got money are sorry they took it. Most would have shut down if they had known better.

        • RightNYer says:

          Exactly. It shouldn’t have been loans, but payroll protection and rent grants. Giving people money to buy from Apple and Amazon didn’t benefit anyone other than their shareholders.

        • MonkeyBusiness says:

          I agree with RightNYer. Also landlords are getting stiffed. No point giving money to irresponsible people. Based on current data, people have been spending the money like drunken sailors. New iPhones, new game consoles, new game equipments, etc.

          What is this? A state sponsored party?

        • RightNYer says:

          Monkey, exactly. Landlords have been stiffed, restaurants, bars, and other businesses that can’t safely be open are closing in droves, all while people are given free money to splurge on crap.

        • VintageVNvet says:

          Gotta go with the NYR on this one Pet, et alia:
          Not any kind of LL, but the small and family ones and twos are getting the royal shaft, so far. I have had much greater success in former lives renting from moms and pops LLs than the big boys, and last time, when TDY for months, the same was true.
          Very unfair, and I hope that somehow the folks in DC realize this and do something to make up for the guv ment mandated destruction of their properties.
          Realize it’s more likely the hedgies and PE folks going to get what they need, as the expense of the small LLs, etc., but, once again, some kind of relieve is needed before they are forced to have fire sales of their housing.
          BTW, not saying those wanting work should be without assistance, and, really, why not same same for them too?

        • cb says:

          @ RightNyer and MonkeyBusiness

          why support the rentier class, landlords?

        • MCH says:

          I think the entire stimulus was screwed up in execution and the mishmash of laws like ban on evictions and moratorium on mortgage was stupid.

          The goal should have been to set things up to run as much like prepandemic as possible in financial terms. Take care of all the down streams and make sure there is some degree of money to live on, for example instead of $2400 a month without restriction on how it’s used, it could have directed this rent or mortgage payments. Laws could have demanded banks to not tighten lending standards so much.

          But the stupidity is all about how people are hurting NOW, throw money at them and adjust laws in a way that adjust behavior. Not thinking about how these behaviors are going to be difficult to change back.

          Decades from now when historians look back on all of this, it will be held up as an object lesson on how not to mess things up. In a mad rush to satisfy their base, the Jackass and Dumbos have both contributed to a long term economic disaster.

        • RightNYer says:

          CB, where did I say the landlords should be bailed out? I said that they shouldn’t have been forced to provide private charity, which is what the moratoriums on eviction were.

      • andy says:

        Not crap. Monthly iPhone 11 installments, Amazon Prime, Starbucks bottled water, necessities.

        • RightNYer says:

          Buying new iPhones qualifies as unnecessary crap in my book. Same with Chinese made stuff off Amazon

        • Petunia says:


          I have a $14 smartphone, but I’m not arrogant enough to think I know what people need. Except for you, what you need is an arrogance check.

        • RightNYer says:

          Nobody needs an iPhone 11. I still have my iPhone 7, and it works fine. It’s not “arrogance” to think that taxpayers shouldn’t be giving money we don’t have to people to splurge on expensive consumer goods. We should have been helping businesses (and employees of businesses) who were negatively affected by the pandemic.

        • MonkeyBusiness says:

          And Petunia needs a morality check. Stiffing landlords and other obligations is ok apparently.

        • Petunia says:

          MB & VV,

          I’ve been stiffed by landlords large and small these last ten years. I had to get legal help to deal with the big one, it was worth it too.

          The small one wanted rent but didn’t want to fix the dishwasher, he thought I should do the dishes by hand. He changed his mind when I stopped paying rent. When the stove stopped working it was because of a dangerous electrical problem, he was lucky the house hadn’t burned down. That’s a bit of my morality tale with landlords.

        • The Original Colorado Kid says:

          I still use an old flip phone, even though I can easily afford an iPhone. RightNYer is right. Unnecessary overpriced crap, IMO. I had a friend give me a new iPhone and I gave it back. It’s just an electronic leash. OTOH, my son loves his and can barely have a conversation with anyone because his nose is always stuck in it.

        • RightNYer says:

          Original Colorado, there’s nothing wrong with someone spending money they earn on crap. My issue is that taxpayers shouldn’t be subsidizing this type of “consumption.” It doesn’t stimulate what needs to be stimulated, and doesn’t keep people in their jobs.

      • sunny129 says:

        American Economy ( Stock mkts) is based purely on CONSUMPTION ( mostly debt supported) for the last 3 to 4 decades! So what did you expect? No one thinks of a ‘sustainable’ economy, needed in the coming decades.
        Live for today and worry about tomorrow, later!

        • NBay says:

          Growth for growth’s sake is the ideology of a cancer cell.

        • Old School says:

          I think we are about 70% consumer driven.

          Sustainable is kind of a modern buzzword. I live a very low consumption life because I am retired, live in a 100 year old house, use very electricity. If everyone did it the economy would collapse, but there was a time I was big consumer with two new homes because I was in the go go years of life. Government probably messes with economy too much. Freedom means economic freedom as well as long as you aren’t doing something destructive.

      • Lee says:

        We did that in Oz – gave money to businesses to keep people employed.

        It went straight into the bottom line for dividends, increased profits, and bonuses to the bigwigs.

        Businesses here got loads and loads of bucks, grants, deferrals and write-offs. Unemployed people got a huge top up every two weeks with all sorts of rules and regs eliminated for them to get top dollar. Foreign students got grants and rent relief. Renters got rent relief.

        Self funded retirees and people not in the system got nothing. Zip. Zilch. Nada. Zero. Nashi.

        People on the national pension got $1500.

        That is one month’s worth of top up for those in the system or unemployed regardless if they had $1 million in the bank.

        Oh, well, I did get something……………my mobile phone carrier gave me free calls for three months!!

    • Cas127 says:

      But thank God the G’s perpetual bureaucracy is run by the Ivy League’s best and brightest, infinitely superior in understanding and preparation to the benighted hundreds of millions whose income and savings the G’s power is founded upon.

      Deep State/Sh*t State…all one in the same.

    • andy says:

      Stimulus for whose personal banker was able to submit forgivable loan application on day 1. Money is gone before small businesses learn it was even there.

  12. David Hall says:

    35 states have been approved for $300/week Federal unemployment assistance (CNBC).

    NYC is prepared to layoff workers due to decreased tax receipts and increased spending on pandemic response.

    M2 money supply has expanded.

    • ru82 says:

      M2 has to go somewhere because it is not staying in checking accounts or being used to pay mortgages. I guess online retailers are benefiting a lot.

    • Some states like MO are more than half government employees. When the NYC solution catches up with them the repercussions will be far more devastating. These are states with fewer ICU beds. Won’t take much to overwhelm flyover America. when the pandemic catches up with them. M2 receives funds directly from the Fed, while the monetary base is shrinking. Money is leaving the economy. The stock market is a curious sidebar to that.

      • cb says:

        @ Ambrose Bierce “M2 receives funds directly from the Fed, while the monetary base is shrinking. Money is leaving the economy. ”

        Sounds like a contradiction. Please explain how this can be. Perhaps numbers would help.

        • Money velocity is the indicator that money is leaving the economy. (When money goes into gold for instance) The monetary base was off the post GFC high before the crisis, made new highs and now is off those new highs. One can posit why, we know the MB rises on the back of Fed stimulus, why does it go down?

        • cb says:

          @ Ambrose –

          We have a different understanding of money velocity. My thinking is that money velocity is just the number of times the money supply turns over to create a given GDP.

          When money goes “into” gold, the money just transfers from the buyer of gold to the seller of gold. The money is still in the economy.

          I am not aware that MB (monetary base) has gone down.

    • NBay says:

      Not much velocity though, eh? Ya think it has to do with marginal propensity to consume……uhhh…..”variations”??

  13. andy says:

    For all your armchair historians/economists, this is like the opposite of 1929. Maybe 1928, by a stretch.

    • Lance Manly says:


    • CHO Cell says:

      Or it might be 1920, end of the Spanish Flu or 1355 end of the Black Plague in Europe. In both cases incomes and economic activity greatly expanded.

    • Old School says:

      Nobody knows the future but I am thinking we might repeat the great depression stock market pattern where there was the bounce and then great decline. Stocks lost about 2/3 value and then 2/3 more for a total of 89%. About 2/3 loss is my base case, but you have to be prepared for worse than that because it has happened before.

  14. Cmoore says:

    This is definitely a very confusing time. FANMG stocks are selling at huge PEs which makes no sense. Gold and Silver going up makes sense though. It kinda seems like the calm before the storm. It has given us more time to get ready for what is coming down the pike and it ain’t pretty. I guess they will try to keep the economy limping along until after the election then the Mother of all Mayhem will probably take over!!

    • ru82 says:

      Facebook….provides very little to no economic benefits to most businesses yet they make billions. I guess that is the outcome of a service based economy. You just need know what people buy and sell and what they like…and hence you get a company like Facebook that can spy on you to give that info to retailers?

    • sunny129 says:

      ‘It kinda seems like the calm before the storm’


      NOT when Fed is ready with digital currency created out of thin air, to support this bubble mania. More Trillions to come!
      NO one is complaining or demanding accountability. Just party on at the Wall St!

    • Old School says:

      I think you could just drop the company names and say they are going up because they have been going up. In some ways it makes sense because the biggest gains can be made at the end of a bubble. The smart money probably knows how to get out before the kabang. It’s not my style of investing, but I have been 90% out for 4 years, waiting and waiting and waiting.

      • cb says:

        more accurately you would say they are going up because of Government interventions and FED (Federal reserve) money creation and interest rate suppression

        really, it is very simple

  15. dr spock says:

    So, when does jesuit jerry start buying up all the delinquent mortgages from the banks and selling them at distressed prices to the hedge funds? Oh, he already has bought them? ……And you say it takes time and patience to get the former owners out of their houses “humanely”, like maybe 5 years? Oh, and then to help them out even more, he’s gonna “institute” negative interest rates to these now homeless to get them back on their feet?

  16. Drunk Gambler says:

    ” they’re channeling some of this stimulus money into imports, which is a stimulus for manufacturing sectors in other countries ” – by American Corporations!
    True – doesn’t reflect on American GDP, but still benefits American Companies

    • Drunk Gambler says:

      People spending less if anything at all on:
      Reaustorants, Plane Tickets, Hotels, Vacations, Bars, Make-up, Barbershops, Movies, Car Rentals, Clothing and still list goes on…
      There is your extra money for new gadgets and bikes.

      • Paulo says:

        My sister in law is one of the managers at a wealthy neighbourhood grocery store. She says sales are ramping up again by people building up their supplies. In Feb/march it was insane….like an onslaught. Today it is like an unfolding plan. Boy Scout be prepared buyers. This is a very wealthy area. Regular folks don’t shop there.

        After dealing with a recent family death and having to deal with someone elses’ stuff, vast amounts of stuff (and who wants to put on an estate sale these days), we have decided to start really paring down. The local habitat store did well this summer with our donations.

        • BrianC - PDX says:

          Yeah I agree. I had to handle the estate of my Parents. 55 years of accumulated “stuff”. It took 4 days for my sister and I to go through the house and get rid of the stuff that had no value and could go to the landfill. (Children of the depression.) While finding things like a $200k insurance policy stuffed into an old envelope and maybe $1000 cash in various books, envelopes and other places.

          I have a much different relation to “stuff” now. If something comes in the house, something has to go out. Though I’m still dealing with stuff from the estate.

          I also use Craigslist a lot more to find things. Picked up my Consew industrial straight stitch sewing machine from Craigslist. When I’m done I’ll sell it on Craigslist. :)

      • VintageVNvet says:

        Agree with you DG,,, but you forgot gasoline:
        Filled up for the second time this year yesterday; total for the year, so far, 26 gallons; last year by this time, at least 350 gallons; at average, say $3/gal., ( cross USA x2, +CA-OR-CA) well over $900, eh?
        Not one single out of area vacay this year, and not appearing to be likely rest of year even though we would like to do so.

  17. Dan Romig says:

    Yes indeed, they spent record amounts on bicycles. My bike shop in St Paul is quite busy.

    Did I need a new turntable? No, but when I listened to it the first time in January, I said to myself, “I should have done this years ago.”

    Did I need a new motorcycle? No, but when I rode it the first time in March, I said to myself, “I should have done this years ago.”

    Did I need a new sports car? No, but when I drove it the first time in May, I said to myself, “I should have done this years ago.”

    Do I need a new carbon-fiber road bike? No, but when I test drove the owner’s new Bianchi Oltre XR4 Disc with 12 speed SRAM wireless electronic shifting, HED Vanquish wheels and disc brakes two weeks ago, I said to myself, “Ain’t waiting this time.”

    The frame arrived Monday the 24th, and I should be riding it by next Monday or Tuesday. It would have been nice to ride it this afternoon, but that’s OK; my bike shop in St Paul is busy.

    Lastly, did I need a new refrigerator? Yes, my old one broke down Wednesday so I bought a new one yesterday. I had a choice: wait a week to have one delivered, or back up my truck to the loading dock and drive it home myself. A nice cold Bitburger Drive is calling my name from the kitchen …

    • Clete says:

      No garage fridge for the beer? Always keep a backup.

      • Paulo says:

        Yup, and since Minnie was eliminated 1st round, Dan will need some beer to cry into. Go Canucks.

    • lenert says:

      If the minimum wage had kept pace with productivity growth since 1968, as it did from 1938 to 1968, it would be $24 an hour today – a full-time minimum wage worker would be earning $48,000 a year. A two minimum wage earner couple would be earning $96,000 a year.

      • OutsideTheBox says:

        And because it did not keep up, we now have this new creature called a billionaire…..

        USA greatest product….. all the workers get stiffed on pay so we can have evermore of these loathsome creatures…..

        • Dan Romig says:

          My last job working for someone other than myself or with my father was in 1984 when I worked for a billionaire – although he wasn’t one at that time.

          How did the guy I worked for get to be a billionaire? Easy. Take out a mortgage on your home to open up a stereo shop in St Paul. Be honest and give customers a fair deal. Diversify the product line and open new stores. When you grow older and retire, you set up a philanthropic foundation and you donate millions of dollars to good causes and to the University of St. Thomas.

          Richard Schulze is that guy. He founded Best Buy, has billions of dollars, taught me a lot about business and is a good man.

          “…where they will not be judged by the color of their skin (or the amount of their wealth), but by the content of their character.”

        • OutsideTheBox says:


          I disagree.

          Your comment stinks of bootlicking.

          Apologists for the billionaires are traitors to people who actually work for a living.

      • Lisa_Hooker says:

        And a package of 3 boxer shorts would be $75.

        • OutsideTheBox says:

          Disagree……Labor is only ONE cost of production. There are many others that affect price….. or to use the accounting phrase ‘cost of goods sold’

  18. Pete Stubben says:

    What happens — soon — when city & state employees by the hundreds of thousands get furloughed, then laid off. (1) Will this break their union; and (2) will they get $600 or $300 PPP checks, too?…and u know what those former & ex-municipal employees will be buying from home…XXX movies!!!


    ps — maybe the SPACs will then buy the porn studios too!!!

  19. Endeavor says:

    Talked to a friend in the advertising business. Said business is terrible. Not a demand but supply issue. Auto dealers as well as RV and toys like jet skis, all terrain vehicles etc. are sold out. No need to advertise. Can’t believe Hertz isn’t isn’t pushing out the unneeded rental fleet in the face of this.

    • Bobber says:

      I’ve been watching the Hertz site. They are pricing within the Blue Book range, so no big deals being offered there. I’m waiting it out, to see if their Chptr 11 turns into a Chptr 7 liquidation. They’ll have more urgency to sell at some point.

    • Wolf Richter says:


      Volume at used vehicle auctions peaked in late June and has been declining ever since, and supply (including the Hertz units) are balling up. Last reporting week (as of Aug 27) was the first week in 18 that auction prices actually dropped, after forming a beautiful rounded top of losing momentum. This is really interesting to watch.

      This is the backbone of the used vehicle business, and it looks to have peaked and is starting to roll over.

      When I get the Manheim numbers in early September for confirmation, I might cover this. This whole thing is just totally amazing. Never seen anything like this.

      • edmondo says:

        Isn’t the same thing happening with housing? The big initial jump followed by a rounding then a fall? There’s zero inventory so the buyer’s pay whatever price the seller wants and hopes to God that they stay employed and can eek out the mortgage every month for 360 months. Watch mortgage originations over the next few months, I suspect the numbers will keep declining.

  20. DR DOOM says:

    Whether it is twisted or not we need more fumes. The Administration cannot win re-election if the supported consumption stops. Money Printer gonna keep going Brrrrrr…….. and I hope it sprays all over the average joe. If the dollar is going to collapse of inflation and de-basement or asset collapse due to deflation I want the average joe or Jane to get a lick in.

  21. Old School says:

    I remember reading on Japan 20 years ago the experts saying Japan was goofing off by not recognizing bad loans, but extending and pretending. Then ten years ago Europe. Now USA.

    My theory is you do the damage when you blow the bubble, Policy is mainly going to determine who is going to eat the losses and over what period of time.

    You can see with Congress, the politically connected will do the best. The commercials on the radio are shameless for the bailouts each party is bribing us with.

    • YuShan says:

      Yes, you are totally right. The problem is in blowing a bubble in the first place. Then the damage is done and all you can do is decide who is footing the bill and when.

      The BIS made a famous report years ago, which proved (based on many historic examples worldwide) that routine CPI deflation is not harmful, but crashing bubbles are, because it crashes the banking/ credit system. Their recommendation was that central banks should focus on making sure asset bubbles don’t form in the first place, because if they do a crash is inevitable, with long lasting consequences.

      It’s interesting that this came from an institute like BIS. Of course, it’s being ignored and you will never hear anybody in power about this because it doesn’t serve their interests. You will also not hear any celebrity economists (like Krugman) about this. In fact, Krugman is on record recommending in the early 2000’s that the Fed should blow a housing bubble as a way to rise out of the recession caused by the crash of the dotcom bubble. It amazes me that types like that are still taken seriously.

  22. Michael Engel says:

    1) Fed inflation target : 2% / The average miss since 2008 is 0.5%.
    2) In the last 12 years the average inflation was 1.5%.
    US treasury average yield est @ : 0.5%. 0.5% – 1.5% = (-)1%.
    3) UST dividends since 2008 til 2020 : 12Y x $20T debt x (-)0.01 = (-)$2.4T.
    4) The Fed will show flexibility, because gravity with worsening NR will
    keep the yield curve flat, at best. US yield curve is defective because the global NR.
    5) UST10Y might slump underwater. The 3M might follow suit and join the Snake River club.
    6) A global recession will force the Fed to cut it’s anchor to zero rates. JP will change his mind about never NR.
    7) USD weekly long term trading range : 1991 hi/lo between 80.60 to 98.23.
    After 30 years USD is backing up around 98.23 for 5 years.
    8) USD will soon jump.

  23. Yort says:

    Who knew a near depression would be so great for GDP. Like dying and having your life insurance spent instantly by your heirs, Greaaaaat for GDP. Perhaps another two or three hurricanes in 2020, again Greaaaat for GDP. Planes crashing to Earth, Greaaat for GDP (and Boeing!)…

    No need to contemplate why we will never be visited by any “intelligent” species from another planet. They probably will fly over Earth and dump their toilets as they chuckle at the silly human ants spending their entire existence creating never ending “GDP”…

    • Yort says:

      So is there an alternative to centering our American existence around never ending “GDP”? Search for Forbes article “New Zealand Ditches GDP For Happiness And Wellbeing”:

      Recently, GDP has come under scrutiny as a planning tool, with some decision-makers turning instead to the Happiness Index, a marker that focuses on the wellbeing of the citizens rather than an economic bottom line. This Index would help governments use their budgets with the aim to increase the welfare of its citizens instead of the nation’s Gross Domestic Product.

      • Lee says:

        Ever been to New Zealand?

        Ever been to the South Island?

        Lots of nothing there.

        Take a drive around the South Island and leave the windows down on your car and you’ll be able to tell from kilometers away that the next small settlement is coming up soon from the smell – the smell of sheep dung!!!

        Christchurch is a nice little city or at least it was before the earthquakes hit and I haven’t been back after that. It is the second biggest population centre in the country and about the same population of the Melbourne suburb I live in so that gives you an idea of how small the total population of the country is.

        The entire country has fewer people than the city of Melbourne.

        The South Island had really, really good roads out in the country areas that are much better than the ones found in Victoria.

        They also had high speed Internet way out in the middle of nowhere years and years before we had it here in Oz in the big cities.

        Income is much lower than Australia and income taxes are much higher too. However, GENERALLY, there are no capital gains taxes on NZ investments, no local rates on propery, and no estate tax.
        No social security or national pension taxes and the retirement age is still 65.

        National pension in NZ is about NZ$25,000 or so for a single person and about NZ$19,000 for each person if you are a couple.

        Their property bubble in Auckland and some other areas makes the one in Australia look like nothing.

        And if you are an Australian citizen, you will usually be allowed to live, work or study in New Zealand and will not need to apply for any type of visa before travelling.

        Tourism is a big money maker for them, but the prices for many things are relatively costly and there is a national sales tax of 15%.

        Someday, I would like to visit the North Island and spend a couple of weeks driving around there like I did around the South Island.


        They do speak a funny kind of English there too!

        • What effect does the influx of global preppers have on the politics and the economy? Reminds me of when a religious cult took over a small Oregon town.

      • Engin-ear says:

        Something about the very essence of States blocks the use of old and efficient metrics applied for private companies.

        GDP for a state is like yearly revenues for a company. Nobody stops at reviewing the company revenues. The question of yearly profit and losses arises instantly.

        Yet I don’t see the questioning if the State become richer or poorer beyond the GDP.

        Perhaps it is because the Company is about money, and the State is about power.

      • YuShan says:

        GDP-growth is simply what it is: the growth of total spending in the economy. It serves some purpose, but it doesn’t reflect economic reality for the majority of the population.

        If you have to track one headline number to indicate the state of the economy as perceived by the population, perhaps medium real income would be a better indicator.

      • Lisa_Hooker says:

        Much better would be the Fantasy Index where everyone’s dreams come true without cost.

  24. Brant Lee says:

    Well, well, a lot of the stimulus climbed the southern border fence due south or floated off in the empty containers back to China? Who knew?

    But hey, the U.S. has about 19 million millionaires and around 12 million manufacturing jobs so let’s live the good life while we can on services, sub-prime, and the stock market. Now, citizens are just wanting to be like their heroes from the great recession with bail-outs, stimulus, QE, etc. Can’t we all just pay the 0.25% and not worry about the principle?

  25. Lynn says:

    Wages and salaries (-5.0%)

    I’m sure your numbers are right- or the same as where you got them Wolf, but… it just doesn’t look right. Unless maybe a lot of executives got huge raises for laying off people.

    • Wolf Richter says:


      Yes, there is some of that.

      We saw that average hourly compensation spiked early on in the crisis as lower-wage workers were getting laid off by the tens of millions and high-wage workers largely retained their jobs and switched to working from home, and many in the executive ranks got big pay packages.

      So this changed the averages by a lot. The spike in average hourly wages was historic, from one month to the next, because companies shed their lowest paid workers and retained their higher-paid workers.

      The measure in this article is a little different in that it is a total “seasonally adjusted annual rate,” rather than an average. But it reflects similar dynamics, in that the wage losses mostly occurred in the lower-paid ranks.

      So for example, an executive-level job might make 1,000 x the wage of lower-paid jobs in the company. So laying off 1,000 people in that company would be balanced out, in terms of the total wages and salaries paid, by hiring just one executive at that pay rate. We’re seeing some of that.

      These aggregate numbers are hiding all of the underlying dynamics of how this economy has split into two.

      • RightNYer says:

        Right. But I can’t recall any recession in history where massive unemployment in one area (retail, travel, hospitality, food service/bars) hasn’t spilled into the others. For example, if Hilton is not doing well, it’ll hire fewer consultants.

        The bifurcated economy, between the low wage service workers and white collar professionals working from home, is the reason for the stock indices being where they are. Unfortunately, this type of dichotomy also creates civil unrest. You can’t have a stable society with such a stark difference between haves and have nots.

      • Lynn says:

        Thanks “These aggregate numbers are hiding all of the underlying dynamics of how this economy has split into two.”

        Yes they certainly are. So it’s more or less an average of all workers hourly wage rather than the total amount of all workers wages paid. I guess that’s one way to spin a dime.

        I swear the only reason everyday people got anything out of the stimulus is because someone burned down a Wendys… I don’t know what they’re thinking by widening the wealth gap now or if they even are thinking. There’s going to be a lot more burning down if the homeless problem gets worse. It got worse after 2008, I suppose it’ll get worse again. At some point it breaks the country’s back.

        People think they can avoid the homeless problem and civil unrest by moving to suburbs and rural areas. Not quite. I live and travel in rural areas and there is just as much here as in cities. There are just as many homeless, living in state and national parks and random empty parcels. You don’t always see them because they’re in the woods, but if you step off the roads there are camps and evidence everywhere. There are fewer protests but more armed robberies I think per capita. Which are in reality much more dangerous.

  26. Rod says:

    Does all this “stimulus” portend a financial shift? For the last few decades the stim bucks have gone almost exclusively to the few percenters who kept it quietly amongst themselves – buy a yacht or a mansion or shares from another few percenter and nothing much trickles out of these closed few percenter loops so the funds are basically warehoused. Is that why they didnt cause the expected inflation? But now stim bucks are out of that loop and circulating freely. Surely inflation of all the stuff they spend on (which Wolf detailed above) must follow?

    • Tom Pfotzer says:

      Those “stim-bucks” only got one trip through the system: from Gov’t to citizen to retailer to Big Player sinkhole. One trip, no multiplier.

      Not much inflationary pressure therefore, and still a lot of deflationary pressure in the form of debts not serviced, wages not earned, spending above trendline not happening. Wolf’s charts show that the stim bucks just restored the spending – temporarily – to trend-line.

      If the stim-bucks are discontinued, money supply deflation will commence in earnest…unless somehow the economy is returned to normalcy.

      Of course, the money creation will continue apace. It can, so it will, and the money creation game can go on quite a long while, as we’ve seen. This is what freaks out all us “old school” types.

      The point is that there are deflationary effects happening at the same time as money supply is increased through gov’t deficit spending / Fed balance sheet increases.

      The whipsaw effect may confound the gold bugs. No “straight line to heck”.

  27. CHO Cells says:

    You do an excellent job presenting data and explaining it’s meaning. I don’t always agree with your conclusions, but your articles are more data driven than most articles published by Bloomberg, The Economist, or The Wall Street Journal.

  28. Tom Pfotzer says:

    Wolf mentions that services spending was down, and presumably it’s down because Corona make it less possible to buy these services.

    Now let’s examine these “services” we’re buying. I’m quoting from Wolf here:

    “services include the biggies, such as rent, health care, insurance, travel and lodging, cellphone services, cable TV and broadband subscriptions, electricity, water, sewer, but also haircuts, food services such as in restaurants, auto and home repairs, and the like. Normally, around 67% of total consumer spending is for services”

    So 67% of household expenditures are for things like “health care, insurance, travel and lodging, cellphone, cable, broadband, restaurants and haircuts”.

    Consumption of each of these items can be significantly reduced via changes in behavior, and in some cases with very little reduction in std of living.

    Even rent can be reduced; move to a less-costly location.

    My own spending is turning toward investment in productive capacity, and the “production” is all about substitution of things I used to buy from others with products I make for myself using these new tools / facilities.

    This isn’t a new thing for me, but Covid-19 and its effects indicate that I might want to accelerate the process. So I am.

    It’s not rosy though; making things for yourself involves significant short-term dislocation and reduction in std of living. It’s a long road from amateur to efficient producer.

    • paul easton says:

      I can suggest an easier means of cutting back. Live like an animal. Don’t cut hair or beard, don’t buy or wash clothes. Sell the car and take the bus. Soon you will be eligible for subsidized housing and then you have it made.

      • Tom Pfotzer says:

        Or I can ignore the foolish and snide remarks of someone that’s not doing a lot of adapting.

        Some people, like you, for ex. are avoiding adapting to the obvious. I prefer to do my adapting when it’s easy(er).

        • Lisa_Hooker says:

          Been cutting my own hair successfully. Now I’m buying tools so I can do my own dental work.

      • Old School says:

        We are kind of human animals and sometimes I think we get too far from our natural state.

        I mean look at Hollywood lifestyle. Who would want to live that way? Living in a 20,000 sq ft museum behind a wall with six expensive cars can’t do much to make you happy for very long.

  29. Bobby Dents says:

    1.quiet reopening begins in the populace i-95/15 areas in 3 days.
    2.durables are collapsing
    3.300 dollar checks are not happening. It doesn’t matter if states are approved for it or not.
    4. There is no large stimulus coming
    5.move on

  30. fred flintstone says:

    Someone smarter than me just posted the following. “The Fed’s monetary and regulatory policies have contributed to a form of capitalism where the rewards are going to the 1% and the risks are borne by the 99%.”

  31. Martin says:

    Wolf, this all feels very familiar. Money printing leading to buying anything that’s durable and cheap in terms of currency, starting with fancy upscale stuff (cars, maybe property) all the way down to furniture, appliances… then when you can’t even beat money devaluation that way, least to say, saving, carpe diem begins… restaurants, trips, whatever you can afford since durable goods are out of scope… and finally, inflation emerges but not for salaries. Public deficit, money printing, incompetent economic and political elites, and the left disputing the link between monetary policy and inflation (AOC’s MMT). Meanwhile, stock move up through the elevator as the only path for dumping cash… until the scheme is left without newcomers. I’m not saying that’s what will happen in the US, but feels very similar to the early stages of what I saw in my country. Wanna guess where I’m from? It starts with and A. Very interested in reading your rebuttal and why I should still trust the dollar as a foreign investor. Thank you so much.

  32. Kimberly says:

    :/ I shorted the market the same time as you Wolf maybe a little before. Losing hope day by day lol

    • Old School says:

      Warren Buffet’s proven himself a savvy investor. Never short, no matter how much you are tempted unless it’s just play money. Tesla should be a lesson for us all.

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