Majestic Overshoot of Stimulus Money Ended. Faced with Second Wave, Americans Cut Back, Even on Durable Goods

Consumers still earned more in November than in the Good Times, but a lot less than back when free Pandemic-money was massively hailing down.

By Wolf Richter for WOLF STREET.

Consumers are starting to run out of artificial steam. The free Pandemic money has been dropping for months and in November nearly faded out. For the first time since April, consumers spent less all around; they spent less on services, nondurable goods, and even on durable goods, which had been spiking in astounding manner.

Personal income.

Personal income from all sources in November fell 1.1% from October, to the lowest since March, to a seasonally adjusted annual rate of $19.49 trillion, according to data from the Bureau of Economic Analysis today. It was down 7.6% from its fabulous stimulus-and-extra-unemployment-money-induced spike in April. But it’s still up 3.8% from the Good Times a year ago, now, during the Pandemic when over 20 million people are still claiming state or federal unemployment benefits:

All dollar numbers cited here are “annual rates.” The BEA releases the personal income and spending numbers in form of seasonally adjusted “annual rates.” They extrapolate from the data of the current month what an entire year might look like at this rate, roughly multiplying the number of the current month by 12, plus and minus some adjustments. For example, in 2019, personal income was on average $1.54 trillion per month for an annual total of $18.5 trillion.

Income from Free Pandemic Money.

Income from unemployment insurance (UI) had exploded from $28 billion (annual rate) in February to $1.40 trillion in June, fueled by the extra $600-a-week in federal unemployment benefits, which expired at the end of July, and by the federal PUA benefits claimed by gig workers. By November, income from UI had plunged down to $277 billion (annual rate), the lowest since March. But it was still about 10 times the Good Times level!

Stimulus payments of the $1,200 per adult and $500 per child for eligible households started pouring into bank accounts in April ($2.9 trillion annual rate that month). The BEA adds these stimulus payments to the relatively steady welfare and other government payments (for short, “welfare payments”), which amounted to around $500 billion (annual rate) during the Good Times. In April, the combined stimulus and welfare payments spiked to $3.4 trillion (annual rate). By November, the stimulus payments had faded, and the combined welfare and stimulus payments dropped to $632 billion (annual rate).

UI, stimulus, and welfare combined, after having spiked to $3.87 trillion (annual rate) in April, dropped to $910 billion in October, the lowest since March, meaning all of the stimulus and extra unemployment benefits, and some of the regular unemployment benefits have ceased:

Income from wages and salaries.

As free pandemic money plunged, income from wages and salaries, including from self-employment, ticked up 0.4% in November from October, the smallest month-to-month increase since the plunge in April, to $9.62 trillion (annual rate), down 0.4% from February. But it was up 2.0% from a year ago. This income is “in aggregate,” all earners thrown together into one bucket, including those that have received multi-million-dollar increases in annual incomes:

The Majestic Overshoot of Pandemic Money ends.

The stimulus payments and extra unemployment benefits from the federal government under the CARES Act added substantially more in income, starting in April, then the aggregate drop in wages and salaries, and this majestic overshoot is in part what triggered the Weirdest Economy Ever:

Income from other sources, November v. Good-Times February.

Proprietors’ income (farm and nonfarm) in November at $1.77 trillion (annual rate) was about flat with Good Times February, and down $163 billion from October.

Proprietors’ income included $87 billion (annual rate) of free Pandemic-money via the Coronavirus Food Assistance Program for farms and the Paycheck Protection Program loans for farms and nonfarms. This was down from October’s free Pandemic money of $302 billion (annual rate).

Supplements to wages and salaries – employer contributions to employee benefits, pensions, and social insurance – ticked up 0.5% in November from October, to $2.16 trillion (annual rate) and were about flat with Good-Times February.

Interest and dividend income fell by 3.4% from February to $2.87 trillion (annual rate), a result of the Fed’s interest rate repression and corporate dividend cuts.

Rental income ticked up by 0.5% from October, to $819 billion (annual rate) and was up 2.0% from February.

Government transfer payments to persons under Social Security, Medicare, Medicaid, and the Veterans Administration jumped by 5.2% from February to $2.77 trillion (annual rate).

Medicare, Medicaid, and many VA benefits are paid to healthcare providers, but are considered “personal income” because patients are the beneficiaries of the services. The sharp increase in those three since February is partly a function of treating Covid patients:

  • Social Security benefits +2.3% to $1.09 trillion (annual rate)
  • Medicare payments +6.9% to $860 billion (annual rate)
  • Medicaid payments +7.4% to $669 billion (annual rate)
  • Veterans’ benefits +7.0% to $147 billion (annual rate).

Spending ticks down across the board.

Total consumer spending in November inched down 0.4% from October to $14.57 trillion (annual rate), which was down 2.1% from February and down 1.3% from a year ago. This was the first time since April that consumers backed off on spending, compared to the prior month, with the declines occurring across all three segments – durable goods, nondurable goods, and services. For the 11 months through November, spending is down 2.8%.

Note that none of the spending data is adjusted for inflation, and in some categories, there have been hefty price increases, including an 11% year-over-year increase in used vehicle retail prices.

Spending on durable goods backed off a crazy spike for the first time since April, falling by 1.7% in November from October to $1.76 billion (annual rate). But this was still up 13.2% from February and 13.0% from a year ago.

For the 11 months through November, spending on durable goods was up 5.2% from the same period last year, despite the plunge in the spring.

Consumers had spent a portion of the Pandemic money on these goods, such as laptops, smartphones, hot tubs, appliances, bicycles, and new vehicles. Many of these products or their components are imported from China, Germany, Japan, Mexico, etc., and the US stimulus ended up stimulating their economies. Now everyone there is praying that Congress will pass many more big-fat stimulus packages:

Spending on nondurable goods declined for the second month in a row, in November by 0.6% from October, to $3.12 trillion (annual rate), but was still up 3.4% from February and 3.8% from a year ago. For the 11 months, spending was up 2.1%, despite the plunge in the spring:

Spending on services – rents, healthcare, insurance, plane tickets, hotel bookings, haircuts, subscriptions such as broadband, cable, and cellphone, etc. – ticked down 0.2% in November from October, to $9.69 trillion (annual rate), the first decline since April, which left it down 6.0% from February. For the 11 months, spending on services was down 5.4%:

In November, services accounted for 66.5% of total consumer spending. Normally services account for 69% to 70%. This is the big shift of consumer spending from services to goods.

Many of the services that consumers routinely bought, such as flights, lodging, and cruises, including to international locations, and tickets to entertainment and sports venues, etc. have been curtailed or shut down during the Pandemic, or consumers don’t feel like buying these services due to the risks. And some of this money not-spent on services got spent on goods.

But November was the first month since April when spending on all three sectors took a step backward from the prior month, as the overshoot of free Pandemic money has started to fade. Consumers in aggregate are still earning more than before the Pandemic, but a lot less than they earned in April, May, and June when gobs of free Pandemic money hailed down on them.

Consumers cut back on applying for credit cards, and the Fed is not amused. Read… Another Piece of the Puzzle of Plunging Credit Card Balances

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  187 comments for “Majestic Overshoot of Stimulus Money Ended. Faced with Second Wave, Americans Cut Back, Even on Durable Goods

  1. Joe Saba says:

    I told my wife I won’t buy gifts for kids(all over 18)
    $50 cash each
    and maybe $100 for wife
    wife will spend overboard- but she just retired and won’t have 1st check til end january – oops – and no I won’t bail her out
    me – I buy what I want when I want – price not important

    • Frederick says:

      Why not give them silver coins and teach them what real money is Not fiat paper which is inflated away That’s an education they will never get in school that’s for sure

      • Mark says:

        Take the $1200 and buy a Gold American Eagle …….

        Then go 10x on it when the massive currency debasement destroys the dollar.

        Winning

        • MiTurn says:

          “massive currency debasement destroys the dollar”

          Yup, it’s coming!

        • NBay says:

          And when I go out into this “destroyed dollar” world to spend my shiny new Gold American Eagle……..?

          I’m afraid we are all stuck with the coin of the realm, however it goes. Gold is just a trading commodity…something to gamble with…..for those few that can.

        • Winston says:

          “And when I go out into this ‘destroyed dollar’ world to spend my shiny new Gold American Eagle……..?”

          Exactly. If it’s a precious metal for spending requirement in a Mad Max world, junk silver (old dimes, quarters, and halves with 90% silver content) is the way to go.

          From a Dilbert cartoon:

          You’ll be sorry when the world economy collapses, but I’ll be OK because I hoarded gold at my house.

          On day two, you’ll trade it all for a sandwich.

          Only if I’m hungry.

        • Randy says:

          And just where are gonna get this gold American eagle for $1200 bucks? From Santa Claus

      • andy says:

        What can one buy with silver coin. Moonshine?

    • rodolfo says:

      Ok Joe, We know who wears the pants in your family!!

      Keep up the good work!

    • DawnsEarlyLight says:

      I threw a handful of gold coins into each of my kids hanging stocking.

      I hope the chocolate doesn’t melt!

      • Joe Saba says:

        got it
        actually I already gave kiddies some silver coins year ago – they still sit in safe

    • josap says:

      Glad to hear you are doing well Joe.

      Hope the rest of your family will do well in the future.

    • bob says:

      So much charity and selflessness.

  2. WES says:

    Tomorrow the weirdest economy ever will get another adrenaline rush!

    Helicopter money! MMT money! Free money!

    What is there not to like?

    What could possibly go wrong?

    • MonkeyBusiness says:

      For the billionaires, nothing can go wrong.

      For everyone else, …. hard to say.

      Kevin McCarthy, the House Minority Leader has said that he will block the 2K thingy. But man the current bill as it is is truly laden with PORK. Gender studies in a foreign country? WTF.

      • Tanstaafl says:

        He surely won’t kill the special provisions for racehorse owners and the tax deduction for wages and salaries already paid by the taxpayer. Maybe he’s okay with affirming the right of the Tibetan people to reincarnate the Dalai Lama and legalizing the use of Smokey the Bear by private parties. Funny things one can find in a 5,593 pages corona relief bill.

      • GaiusMarius says:

        “Gender studies in a foreign country? WTF.”

        You’re referring to the omnibus spending bill, which is attached to the pandemic relief bill but totally separate. For context, all foreign assistance in that bill totals $4 billion. By comparison, the pandemic relief bill alone is $900 billion.

        You’re upset about millions going to a program you know nothing about while ignoring billions going to utterly ridiculous things, like bailing out the airlines AGAIN.

        • MonkeyBusiness says:

          I already complained about the airlines in a separate post. Either they go bankrupt or the taxpayers should own them. But yeah separate or not, there should not be anything for any other country when people in your own country are suffering.

        • Anthony A. says:

          There is no justifiable reason to piss away my tax money on foreign countries, no matter what the intended purpose is.

      • timbers says:

        Try wrapping your mind around the fact a single conservative Republican Senator I’ve never heard of can stop a huge major peice of legislation, but Bernie Sanders a legend – or any actual Senator speaking for the interests of common folk, can’t. Ever. Then you’ll REALLY learn something.

      • NBay says:

        Forget the item sound bite, it means nothing. Follow the money trail through the connections here, that’s where the real action is.

      • Randy says:

        Money for the reincarnation of the dali lama. Pork you say. 5500 pages long. Not a single congressman or senator could possibly have read this bill in it entirety before voting on it. “There is no distinctly American criminal class – except Congress”
        Mark Twain
        Just as true as the day March Twain said it.
        This country was created by corruption and corruption will be it’s destructor.

    • Apple says:

      Yes indeed.

      Buy your wheelbarrows today, hyperinflation tomorrow.

      Also gold.

    • Fat Chewer. says:

      Wolf, it appears rent collected increased, yet money spent on rent decreased. Is this an anomaly? Or is the increase in rent hidden by the other items within the larger group of money spent on services?

      • Wolf Richter says:

        I think we get in trouble when we compare disparate data sets like these and try to draw conclusions. Rental income includes rents from all kinds of properties, including industrial, storage, manufactured homes, etc.

      • Heinz says:

        I noticed rental income is up in the article as well.

        Apparently, this prolonged eviction moratorium is not impacting many landlords negatively.

        • Fat Chewer. says:

          Do you think this little bit of information will make Joe Saba happy? I doubt it.

    • Frederick says:

      But don’t addicts usually require larger doses?

  3. GotCollateral says:

    …and the last one said (about the debt-for-reserves-swap-stuck-on-bank-balance-sheet-to-prop-up-household-and-corporate-zombies-on-life-support-before-covid19 eCONomy): “Roll over, Roll over”

    lol

  4. Yort says:

    If the Jan 5th Georgia Senate runoff turns from “two red” to “two blue” due to a shift in outcome predictions from the $2,000 vs $600 direct stimulus “team red” fiasco…2021 could be very different than the current Wall Street “gridlock utopia”. Just imagine a $2,000/month UI, per person, printing about $500 billion each round. What kind of effect would a $6 trillion per year direct consumer stimulus enduce to our Fed centrally planned economy? Not judging as I have no idea what is “right or wrong” as that is subjective at best. Yet objectively the odds just went up today that 2021 could turn out nothing like Wall Street is predicting…on basis of future tax policy, fiscal policy, stimulus policy, currency devaluation effects, etc…

    • BuySome says:

      The truth is just about everything in America is defacto collusion for price fixing. So any UBI without mandated price control would mean squat. A loaf of bread would simply go to $2000 overnight and that monthly check would get you one day of wheat sandwiches. (The so called “black market” is the only place where capitalist competition actually occurs.) You would need a complete seizure of all business and personal activity to have any income safety net…and rest assured, that would bring out the civil conflict in an instant, regardless of what our Northern neighbors with their long barrels claim.

    • Zantetsu says:

      If the government printed 1 million dollars per U.S. wage earner and sent that money to every single person in the USA, the effect would be:

      – Below some threshold of personal wealth, you’d gain: if the amount of wealth you already held was sufficiently less than 1 million dollars, then the 1 million dollars would more than offset the loss of purchasing power of your existing small amount of mony.

      – Above that threshold, you’d lose because the loss of purchasing power that you had due to the new inflation, is greater than the value of the 1 million dollars you got.

      Obviously if you take this to some kind of extreme then it becomes a complete reset: send everyone 100 quadrillion dollar checks and basically all money becomes worthless and everyone has exactly the same amount of wealth.

      Now if you send everyone of a certain income level $600 or $1,200 the calculation gets harder. The losers are everyone above a certain threshold of personal wealth but I’m guessing this is a very low threshold. I don’t know exactly what is though.

      It would be interesting to calculate it and determine how many people who are getting checks are actually getting screwed despite thinking that they’re getting free money.

      Of course, those of us who never have and never will get a welfare check from the government of any kind (knock on wood) just lose, and the only calculation to make is, exactly how much are we losing?

      To be honest, I don’t think some kind of reset is a terribly bad idea. If the printing is enough to reduce my personal wealth by half (and therefore everyone with more wealth than I have by more than half), and yet it makes the country more liveable for millions of poor people people, I’d be OK with it.

      On the other hand, just printing money doesn’t do anything to actually increase productivity or build infrastructure that we can get value from in years to come, so all that money would do is effectively rebalance current wealth … I don’t think we have quite enough to just coast forever on what we have, so we need to become more productive as well. Not sure how to accomplish that …

      • Zantetsu says:

        I should point out, that money printing just resets fiat based wealth. Everyone would still own what they currently own, so Bezos would still have a humungous mansion or three, while many people would still have nothing or next to nothing. But Bezos would suddenly have a very hard time paying to maintain his properties (including taxes) and so he’d be forced to offload and downsize. The result of that would be a reduction in asset prices at the high end, might trickle down to making property and other assets more affordable for all the new “millionaires” (i.e. the 99%).

        • andy says:

          If Bezos forced to downsize he can always buy Greenland.

        • Zantetsu says:

          With what though Andy? If his free capital were suddenly worthless, he’d be forced to see assets to acquire enough of a highly inflated currency to be able to purchase Greenland. Thus leading to downward pressure on asset prices as many of the rich are forced to sell their assets.

        • Zantetsu says:

          “Forced to see” should have been “forced to sell.”

        • adrian says:

          Bezos has most of his money in one of the largest, most profitable, and fast-growing business. The value of his business would explode as well, so I’m not worried about him. The biggest losers would be people with lots of cash on hand but no assets.

      • Chris Herbert says:

        Of course, if we had no stimulus money for anyone or any business, would that be the ‘weirdest’ economy. Nope, that would be a Depression. Given the fact the last Depression is fairly well documented, and massive stimulus did reverse it–even before WWII really created the ‘weirdest’ economy–I think what Congress has agreed to do is OK. Could be better aimed, but using interest rate manipulation is a fuzzy tool. Quite unpredictable, unless it’s a yank your neck back rise.

  5. andy says:

    I have been outspoken critic of index investing here for the last 2-3 years.
    Alas,
    John Mauldin says ‘friends don’t let friends buy index funds”.
    Hussman says he suspects index investors will be the ultimate bag-holders.

    Perhaps Tesla woke them up.

    I’m waiting for Chinese fraud companies (that trade here) to lead the way. Alibabas and Pinduoduos.

    • Apple says:

      Maudlin has been a wealth of no information since this pandemic hit for someone supposedly so well connected to Wall Street and DC. His move to Puerto Rico for tax reasons seems to have left him out of touch.

      Wolfe on the other hand, has been on point with his analysis from his world headquarters in San Francisco.

      • andy says:

        World headquarters. Get out.

        • Wolf Richter says:

          Yes, my WOLF STREET media mogul empire’s world headquarters, right here on a high-brow street in San Francisco, 8 feet from this now world-famous high-tech PG&E utility pole…

        • Robert Mullennix says:

          Wolf, wow that pole looks ready to fall over in a small tremor. Wtf?

        • Shiloh1 says:

          What’s the EMF level?

        • andy says:

          Prolly rubbing elbows with the Speaker. While social distancing of course. :-]

        • Are they going underground in your area? Underground utilities is an enhancement to RE prices. Been thinking about it for my home.

        • Wolf Richter says:

          Ambrose Bierce,

          Ironically, when some developer built a 5-story condo complex at the other end of the block (replaced a low-rise office building/parking lot), PG&E put in a new underground power line just to the condo complex, from the main line that is already underground along the main street that crosses right here.

          That new underground power line, linking the main line to the condo complex, is on the other side of the street from this pole.

          So instead of putting all our power lines underground, they just put the new line to the condos underground. They also put a big brand-spanking new transformer under the sidewalk right in front of the condo complex. So now we have these two systems on our street: the brand-new underground powerline and transformer for the condos on one side of the street, and the ancient poles, decades-old transformer, and raggedy power lines for everyone else on the street.

          How much more would it have cost to put it all underground at the same time and get rid of the poles?

          But there is an accounting issue: The new line to the new condos is not an “expense” but an “investment” that will generate new revenues for the next decades. But putting the rest of our powerlines and transformers underground would generate zero new revenues – similar to “maintenance.” And that’s how this infamously maintenance-minimizing utility is thinking.

        • MCH says:

          Wolf,

          That pole doesn’t have nearly enough hardware on it. Why the hell isn’t PG&E renting out the space to install a set of 5G transceivers, how inefficient of them. You must complain.

          And that pole looks fine… it’s still standing after you posted about it two three years ago… right?

          If it’s still standing, they must cram more stuff onto it.
          😱

        • Wolf Richter says:

          MCH,

          That’s the same image from 2019. I should take a new photo to show the progress of the rot :-]

        • MCH says:

          It’s only been a year since that photo? Wow. Time is going slower than I thought. Or I’m aging faster. OMG.

        • Anthony A. says:

          Wolf: Are sure you are not in India?

        • DawnsEarlyLight says:

          Wolf, I see a good tap-in for a window air conditioning unit!

        • NBay says:

          I’m not fooled. That is quite obviously a device that will create a worm hole in space-time. I can’t tell by looking where it goes to, though.
          There is more to this website than people think.

      • AttorneyPR says:

        I moved to Puerto Rico for tax reasons. I can breathe again and support my ailing parents. What’s so out of touch about this? Or, Puerto Rico?

        • andy says:

          How much is 1br appartment in San Juan these days? Closer to the old town. Most beautiful women there.

      • Carl Steinmetz says:

        Wolf, thanks for the picture of beautiful scenic San Francisco from your worldwide headquarters;-).

      • JK says:

        Holy cow Wolff! You sure you’re in “The City?” That set up looks like you’re in the favelas of Brazil.

    • GotCollateral says:

      > Hussman says he suspects index investors will be the ultimate bag-holders.

      Yup, maxing out my tail risk position on HY corp debt indexes on every OTC retail broker account I can open now besides IB… which paid off well going into march… and will again when the next shoe drops in the collateral market

      • andy says:

        How does one go about all these tails?

        • GotCollateral says:

          You have to calc payout probability above some threshold multiple above your buying price of deep OTM put with as much theta as possible, and little IV as possible. I do this with mont ecarlo simulations against black scholes asumptions (which people use write options on pretty much everything) and my custom assumptions when bs breaks down.

        • andy says:

          Half-off puts 6-12 months out paid 1:25 in March. Vix was 10-12 at purchase. I got out at 1:6 to 1:10. Kicking myself.

          Do agree about shoals of Monte Carlo. Beautiful.

    • Zantetsu says:

      I so agree with you. I have come to realize that Index funds are basically a giant scam whereby huge financial institutions skim off of millions of retirement investors who don’t know better.

      Up until Dec 24 of this year (i.e. tomorrow) my company had a 401k option for trading your own stocks. It was fantastic, even though I only realized that this option was available after 25 years of dumb index fund investment. I made significantly more since moving my money into that fund on July 15 this year than I have ever made on the Index funds.

      Much to my chagrin, my company decided to terminate the program as of Dec 24 so I my only choice is revert to Index funds.

      I am 100% committed now to leaving my company after my March and June bonuses get paid. Honestly, I did so well managing my own 401k (making more per month than my actual job) that I wonder if I shouldn’t just quit now and find somewhere else to work that has a self-directed 401k option …

      • Ethan in NoVA says:

        Past performance is no guarantee of future results.

      • Beardawg says:

        You can invest in real estate with a SD IRA as well. I got out of my 401K / 403Bs as fast as I could many years ago. Pay the juice to myself, not a Fund MGR.

      • Rg says:

        I said the same thing in 1999. A rising tide lifts all boats.

      • Zantetsu, the equity markets are going to be an absolute minefield going forward, I would seriously consider a precious metals IRA that you can roll-over your current 401k into. I opened mine in 2003, and except for the requirement to time annual distribution prices (sold some Ag at $24.44 this year for operating expenses in retirement), it is one of the best things I have ever done. THINK OUTSIDE THE BOX IN AN UPSIDE-DOWN WORLD!!

        Both Gold and Silver are signaling a Dollar that is headed for massive DEVALUATION against assets that hold their values when the wheels come off the cart.

        Having Au and Ag in vault storage using the custodian’s preferred provider (in my case Delaware Depository), you own the physical itself and not a claim on a third party such as HSBC when buying GLD on the shaky exchanges. This massive Gold ETF is having bullion count audit problems, probably due to leasing gold from the Bank of England or just plain fraud, so do not buy a security interest in Au or Ag, but the real deal. SOME FREE ADVICE FROM AN INVESTOR WHOSE Au IS UP 23% IN 2020 AND WHOSE Ag IS UP 44%.

        The financial markets are a giant accident waiting to happen. THIS AIN’T YOUR GRANDFATHER’S COUNTRY. Merry Christmas.

        • Robert says:

          Can you withdraw precious metals(take distribution) from your precious metals IRA ? Our do you have to sell gold and withdraw fiat?

      • andy says:

        Solid plan.

      • MCH says:

        You mean you did so well in the Fed fueled run up this year that you are wondering why you should go out on your own and make billions?

        Good question. Strike out, young man, you can do it. Yes, you can. Don’t be a slave to the man.

        • Zantetsu says:

          Every single time I have spent time investing on my own, I’ve done better than index funds over that period. Yes, past performance is no guarantee of future success but I don’t know what to say, I just always seem to beat indexes and given that I am no financial wizard, I have come to the conclusion that indexes are poor investments pushed by the huge financial industry because it’s the easiest way for *them* to make the money instead of *you*.

      • Happy1 says:

        Check back in 10 years. See Warren Buffet bet.

    • David Hall says:

      The losers get delisted from an index while winners grow to take their places.

    • w says:

      Re. Crap Chinese co.s listed here,just read yesterday that a new s.e.c. Rule gives them and other fakey foreign co.s three years to align their accounting/audit protocols with standard practices legally accepted by s.e.c.

  6. Martha Careful says:

    Global GDP has been weak for well over 10 years — and then, the pandemic exposed the core systemic rot, but what else can be done, other than to buy time, and hope there is future stability and some return to normal. The late Obama era and the entire trump era have been highly unproductive, so a return to normal seems out of the question, because, that’s too far gone. Having a more stable president will be like breathing fresh air, but the economic challenges ahead are seriously daunting and probably beyond the capabilities of all the people elected to guide us.

    Nonetheless, the only thing going for us, is to buy more time and hope that the pandemic bubbles that currently thrive on stupidity and greed will hold firm, and not pop too fast. The other side of that coin is far more ugly!

    From June: The roughly $22 trillion of liquidity the Federal Reserve, European Central Bank, Bank of Japan and Bank of England are pumping into financial systems matches the size of annual U.S. output.

    Also: Total U.S. debt is on track to hit $80 trillion in 2020, the IIF report said, up from $71 trillion in 2019. In the Euro area, debt rose by $1.5 trillion to $53 trillion through September.

    • Heinz says:

      “Having a more stable president will be like breathing fresh air, but the economic challenges ahead are seriously daunting and probably beyond the capabilities of all the people elected to guide us.”

      Surely you jest … my belly almost split from laughing at that.

    • Anthony A. says:

      “Having a more stable president will be like breathing fresh air, but the economic challenges ahead are seriously daunting and probably beyond the capabilities of all the people elected to guide us.”

      What? A stable president? This guy can’t even complete a sentence without help.

    • DawnsEarlyLight says:

      Where’s Morgan Freeman when we need him?

    • Lisa_Hooker says:

      Buying more time seems a great idea. I’m running low on mine. Could you tell me where I can obtain a bit more?

  7. Memento mori says:

    The government sending money indiscriminately to people who haven’t loss any income is incomprehensible. Looks like we have completely lost any common sense and responsibility. This will end in tears.

    • Kunal says:

      Govt sending money to anyone is wrong. If someone is in financial distress and cannot but the latest iPhone it’s their fault. Wise ones will learn and will save for rainy days in the future. Fools will keep suffering.
      What government is doing is a crime against foundations of a capitalist economy.

      • Jon says:

        I support government sending money who are left un employed because of pandemic via un employment benefits

        But I don’t see any reason to send direct checks to people who are not impacted by pandemic

        Fyi.. I don’t qualify for direct stimulus

    • Zantetsu says:

      The government already sends money to billionaires who never lose any income, now they’re just spreading some of that to the lower end too. Obviously those of us in the middle lose in both scenarios but I mind less when the little guy finally gets a little juice than when the fat cats do.

      • Beardawg says:

        Zanetsu

        I agree. Once capitalism has become crony capitalism, the little and middle guy are squeezed. If there can be a clawback of any kind (i.e. Stim / UI) to compete ever so slightly with neverending QE, then I do not see the harm.

        • Anthony A. says:

          Agree, they are going to get this “free” money back in the form of higher taxes once the new set of criminals are in place.

        • MCH says:

          As long as this killing of crony capitalism doesn’t turn into a full blown tilt toward socialism.

          I think the biggest problem is excess, the pendulum keeps oscillating way too far to one side or the other.

    • Chris Herbert says:

      Taxes fight inflation and income inequality at the same time. But everyone knows taxes are theft, correct? (sarcasm) So all we get is tax breaks, poor babies. Here’s the secret sauce. Raise taxes at the top rungs of the income ladder, then pump new money into the bottom and middle rungs of the income ladder. As long as you can buy that which is for sale, inflation won’t be a problem. The real problem in our economy is that all the ‘free money’ Wolf so despises, goes to the One Percent. At the expense of everyone else. That tattered telephone pole is a good metaphor for America.

      • Zantetsu says:

        The problem is that tax avoidance is a real thing. The harder you try to squeeze the rich, the more they just slip through your fingers. They have the resources to avoid taxes.

        That being said, I am sure such a plan will have some of the desired effect.

    • Blockhead says:

      Tears of Joy?

    • MCH says:

      Horses must be tested for steroids as a part of COVID relief… because… you know….

      🙄

      • WES says:

        MCH:

        When the simulation was only $600, race horses were getting more money than each American!

    • Swamp Creature says:

      We’re actually in a business/profession (essential) that is actually making more money and working 18 hours/day, because of the pandemic. I feel guilty taking any money when I currently don’t need it and can;t even spend the money we’re earning.

  8. I wonder if part of the draw down in spending is also that people are running out of non-essentials to buy. I have pretty much completely stopped spending beyond the regular living items because there is really nothing I want at this point. No entertainment (cannot go out). My clothes and shoes last a great deal longer now that I am not really working out of the home. Activities and hobbies outside the home are curtailed now as well, so less need to spend on them as well.

    What would happen if a cash dump for a recovery was dropped and nobody came to the party?

    • Kurtismayfield says:

      Debt will be paid off. The stimulus would just be a massive money transfer to the financial institutions.

      • nick says:

        Not sure financial institutions are all that excited when debt is paid off. Would much rather have the payment revenue than more cash right now.

        • Lisa_Hooker says:

          Exactly right. Banks don’t want money, they want a predictable positive cash flow from “investments.”

    • w says:

      Wow,what a Great position to be in!Maybe use your obviously Extra $ to help animal shelters/petfood pantries both of which nationwide are seeing dramatic increases in rewuests for help from lowcost petcare to petfood. Maybe Land conservation charity,American Rivers,Independent investigative journalists,domestic abuse/human-trafficing charities all could use bighelp,especially the smaller more regional ones.Alot of vets are homeless and in need of mentalhealth services or just someone who cares about them.So much need,so little time!

  9. Ron says:

    As song said money for nothing federal govt biggest ponzu scheme in existence oh forgot japan next g 20 meeting idiot world leaders will fix everything in a pigs eye

  10. Outwest says:

    Look, maybe the US is finished but I wouldn’t bet on it. If you want to leave, well then leave. If you want to stay, then stay – the rest of it is drama for another day.

    The data is in and the more things change the more they don’t. The 80/20 rule is alive and well as it always will be..my unsolicited advice to anyone willing to listen…study, avoid debt, and work hard. The rest will take care of itself.

    • paul easton says:

      No it won’t. The question is whether the biosphere is finished, and no amount of money will save you from that.

      • Heinz says:

        Pardon my ignorance, but what is all this mindless chatter about “the biosphere is finished” about?

        Be assured that Nature is in control, despite the angst of the trembling gentle ones who fear humans are about to exterminate us all.

        The real climate change is about to come down the pike (global cooling, mini ice age) courtesy of predictable, evidence-based natural cycles now in play, and no amount of crying about CO2 and supposed AGW will change that.

        • WES says:

          it is all about the sun!

          Life on earth has always been about the sun!

        • NBay says:

          Here is a CERTAINTY for ya, my “scientific” pal.

          Man’s ever increasing Fossil Fuel Party WILL END….and badly.

          So why try to accelerate it? Obviously people like just doing stuff, so why not try to slow it?

          And be assured “nature” doesn’t give a damn about our species or any other.

          “Control” implies a plan…there is none, we are on our own.

        • Lisa_Hooker says:

          Global Warming == becoming uncomfortable
          Global Cooling == freezing to death
          No one is paying attention to the real threat to humanity. Surviving cooling will be difficult.

    • Frederick says:

      Not “ finished” just degraded is my opinion Sadly greatly degraded perhaps but we can’t really complain because we had a darn good run and we squandered it all So we can only blame ourselves

      • Hear, Hear, Frederick. HOW NOVEL FOR AN AMERICAN TO ACTUALLY TAKE RESPONSIBILITY FOR WHAT HE OR SHE HAS DIRECTLY OR INDIRECTLY WROUGHT! We have continued to elect quasi-morons whose only true qualifications have been to promise the Earth and Stars to all who walk the land. NOW THE BILL IS COMING DUE.

        • DawnsEarlyLight says:

          The bill has always been due. It’s the multi-payer/multi-payment plan.

          Warning: Future payments may not represent historical averages.

          (Fine Print: Payment does not represent financial responsibility)

      • Tom Pfotzer says:

        The game’s not over yet.

        Boomers have the resources, and are a substantial cause of the biosphere meltdown we’re facing.

        Some of those Boomers are facing up to this fact, and doing something relevant and useful about it.

        • Tom, we could spend 100% of U.S. GDP on curbing Global Warming, but until India and China clean up their acts, entire cities in China are deemed too hazardous for human inhabiting, we are merely spitting in the wind. Got to get NASA to speed up the Mars and Beyond missions.

        • MCH says:

          Amen Tom, it’s the Boomer’s fault, make them pay up. Where is the Boomer Remover….

          Let’s see, next it’ll be the GenXers fault, where are the X-exterminators.

          Ok, Millenials are the problem after that, right, when their time comes, we will get some Millennial Milkers to deal with them.

          Who is after that…

          😂

        • Endeavor says:

          Boomers have the resources, and are a substantial cause of the biosphere meltdown we’re facing.

          Baloney.

          Most boomers I know are driving 4cyl and hybrid CUV’s. They are downsizing to 1600 sq ft condo’s as well.

          It’s the Gen X and Millennials driving the lifted PU trucks at 80mph and buying McMansions here in the Midwest. Every weekend in Michigan there is a 200 traffic jam going north with Gen Xers hauling every type of camper and rec toy north to the wooded parts of the state.

        • Tom Pfotzer says:

          David: We keep expecting someone else to fix the problems “and once it’s fixed, then I’ll do it”. If we’ve got $1T per year to spend on defense, we’ve got $1T to spend on survival. Let’s just start with that, and then we can worry about what China/India/all the others are doing.

          MCH: Did I say “all their fault?” No. But I did say “substantially their fault”. YES I did. And the Boomers profited/lived handsomely from the proceeds of despoiling the planet. So, they can just as handsomely fix it right back up.

          Endeavor: And if the Boomers don’t have the resources, it’s likely because they spent them already. That doesn’t discharge the responsibility.

          Ain’t my fault! I wasn’t there! Blame somebody else! Wah!

          I’m too small and weak and selfish to fix what I broke!

          Now bust a gasket with your indignation.

          Lame.

        • MCH says:

          Tom,

          You said: “Boomers have the resources, and are a substantial cause of the biosphere meltdown we’re facing.”

          Anyone who reads that line gets the impression that they are substantially at fault for biosphere meltdown. How do you expect people to interpret this sentence.

          And the implication of the next sentence: “Some of those Boomers are facing up to this fact, and doing something relevant and useful about it.”

          The implication there is that other boomers are not responsible, and don’t want to face up to the fact that they are destroying the biosphere.

          But hey, do you know who was worse than the boomers, the generation before them, and then those before them. The blame game is pretty much endless as you say.

          Fixing it responsibly is a different story. The operative word there is RESPONSIBLY. As opposed to the feel good words of the day like “equality, justice…” all of it sounds good, but is just a mask for an agenda.

        • Anthony A. says:

          Tom, our air is connected to India’s air and their air is connected to China’s air……and then there is Poland (ouch). Fixing our dirty air is a exercise in futility. Everyone needs to “party on” until the dollar is TOAST!

        • Lisa_Hooker says:

          I’m doing my part. I’m trying to stop farting so much. It would help if you stopped exhaling so much CO2.

  11. Island Teal says:

    One thing for sure is that some retail management types are totally cluless re what thier employees are going though on a daily basis. A locally based Exec of Fred Meyers handed out $5 store coupons to each and every store employee with a hearty Merry Christmas. FIVE F…… DOLLARS !!!! You have got to be kidding me !!!

    • Sierra7 says:

      Island Teal:
      That $5 is more than I ever got while spending 31 years of my life for another major grocery retailer! Nada. Niente. Nothing. For 31 years! At the time one of the largest global corporations!
      I am astonished at what some of my children and grandchildren receive as “holiday” bonuses where they are employed. It just knocks me over!
      May we all live to see a better day!

  12. J.M.Keynes says:

    – By definition, demand for durable goods is Always temporary !! Take e.g. furniture, a car, an iPhone, a smartphone, a house. This kind of stuff are bought once and then a consumre don’t need to buy that item no more in the next say 2, 5, 7, 10 or even 30 years.

    • rip says:

      Except that they’ve trained these sheeple to continue trading up every year or two. In Apple’s case, they rig the phone to start giving people issues in order to force them into a new $1,000+ phone.

      • w says:

        NOBODY is Forced into a $1,000.00 phone.OMG how spoiled and materialistic some humans have become!How Did we ever get along without the internet,cell phones,cable t.v.,massive and constant surveilance,fitbit,programmable/remote this and that?
        When is enough,enough?Downsizing to a 1,600 sqft condo?I think the average u.s. Singlefamily home in the sixties was what,700-900sqft?

        Regarding all the climate comments,it is funny that not One pointed out half the reason for the continued lockdowns and they obfuscation of Factual covd deaths is that immediate and Drastic action needed to be taken to give the Earth a break!Look back to internet and news coverage last spring.It was strange,but I figured it out earlyon-climatechange/nature re-emerges/human impact=Bad tie in to lockdowns.Italy:dolphins or whatever in unusual place like Venice canals.Oh,look how much quieter it is or how much cleaner the air is-while people are lickedup,terrified,losing sleep and money and others are committing suicide,but its Quieter.I actually enjoy the quieter,less pollution consequence,but can we not get results in a reasonable,Allin manner?

  13. Micheal Engel says:

    1) NDX weekly log support line : Apr 20(L) to June 29(L) to Aug 31(L).
    2) The DOW daily log 2020 backbone :
    Apr 21(L) to May 4(L) ==> to June 26(L) to July 30(L)/ 31(L) and to Sept 11(L) // a parallel line from Apr 29(H).
    3) Many charts have a similar structure.
    4) The Lazer bent the will of the DOW…

    • Shiloh1 says:

      Since 1970, 50 years ago, inflation is 582%.

      The purchasing power of $100 in 1970 is equivalent to $682 today.

      Adds perspective to amounts of $600, $2000, $16 and $5 in various comments upthread.

      Making $3 to $5/hr part-time in “flunky”jobs as a teenager in mid 70s was worth than more than many adults make today full-time in “real” jobs.

      End the Fed. Send Congress to Pakistan permanently to teach gender studies.

      • b says:

        From what I hear in the press,it is Congress and other gov. Officials who need gender studies,as in how to be respectful and kind to the other gender!! :-)

  14. Old School says:

    We don’t have Fred Meyers where I am located, but grocery store business is very low margin as a whole. You have to remember they are free enterprise and have to exist the hard way, which is to turn $1 into more than a $1 after paying local, state and fed taxes. It’s a lot easier to get the Christmas gift from the Feds that print the money into existence.

    Now if they had a good year and turned a $1 into a $1.15 then I agree it would be smart for them to share the wealth.

  15. Beardawg says:

    WOLF

    This article has some fantastic comparative charts for so many consumption sectors. As always, thanks for your diligence.

    As much as I hate to congratulate the Fed or Gubment because they force their control upon us, the consumption economy seems to have stayed the course (with minor drop in services consumption) at a time when the Gubment tied our hands. They created the problem and sorta fixed it as well (so far).

    Let’s hope they can back off sooner than later so we can get back to churning, earning and learning. :-)

    • rip says:

      You mean voiding contract law and forcing small landlords into bankruptcy while allowing debt junkies to stop paying for houses, cars, student loans, etc. is “fixing it?” WOW.

  16. Micheal Engel says:

    Personal Income from UI, Stimulus & Welfare approx accumulation :
    0.5+0.5+0.6+3.87+2.75+2.2+2.1+1.4+1.3+1.0+0.9 = $17.2T.

    • Chris Herbert says:

      If your numbers are correct, how much of that money went into debt pay downs (banks got the money), imports (foreign corps got the money), asset price inflation (bubble will burst), a vaccine (big pharma once again engorged by federal money) or regular consumption. Wolf tracks the anomalies (weirdest economy ever) but the gorilla in the room is private debt. If enough went to reduce that, then the coming recession will only be a recession. The ‘good times’ were not that good, otherwise we would not have created 30 million unemployed people in a matter of weeks. As for Wolf, keep up the good work.

  17. MiTurn says:

    Me and the wife are saving, but not necessarily money. The writing on the wall tells me that at the very least we can expect high inflation — the further weakening of the purchasing power of the almighty US dollar. So, not savings in the bank, but saving tangible things. That is, we’re stocking up nonperishables.

    So, even if we’re wrong, the worse that can happen is that we don’t have to go shopping for…like…years.

  18. MiTurn says:

    Love the charts Wolf, the best on the ‘net!

  19. malibu says:

    Poor Jack Ma opened his mouth one to many times. Watch a video with him some time the guy is my hero. His famous quote at Davos 2017 went something like this. The U.S. spent 14 trillions dollars on wars the last 30 years instead of infrastructure.

    • Tom Pfotzer says:

      Yes, and hear! hear!

      If the Department of Infrastructure and National Economic Competitiveness had just conducted an annual contest to determine where to invest $500 billion a year…

      Young people: Goverment is a roll-up of what each of us is. Make good choices about what you are, and then demand that of government.

      It’s tough to push around 350 million smart, aware people who all know exactly what their interests are.

      • Heinz says:

        Approximately half of those 330 (not 350) million people are average or below average intelligence. However, ironically many of them consider themselves quite intelligent.

        Of the roughly top half of average/smarter than average individuals (that could actually make a difference in outcomes), many do not have a lick of common sense, or are too self-absorbed, lazy or apathetic…

        And many of the remainder are too smart for their own good.

        • Sam says:

          “Dunning – Kruger”: aka “hold my beer” or “this can’t be that difficult”.

          Observation: irrespective of organization (Biz – for & nonprofit, Edu, Gov, Religion, ect.), <2% of those involved actually get things done.

          Majority of leaders/administrators are over educated, under qualified, replaceable seat warmers allocated by HR for diversity.

          Ymmv.

          Merry Christmas to all. Onwards to '21.

        • andy says:

          Re: “Approximately half of those 330 (not 350) million people are average or below average intelligence.”

          Wrong, clearly. Highly doubt intelligence is linearly distributed. As evident by your approximation. It’s likely 95% demostrate average intelligence. Not that I would know.

        • Heinz says:

          Andy:

          “Re: “Approximately half of those 330 (not 350) million people are average or below average intelligence.”

          Wrong, clearly. Highly doubt intelligence is linearly distributed. As evident by your approximation. It’s likely 95% demostrate average intelligence. Not that I would know.”

          Clearly you don’t know.

          Ever heard of the IQ bell curve and standard distribution?

          “Typically, an individual who completes an intelligence test with a cumulative score between 90 to 109 would be classified as having an average IQ. Roughly 50% of the population falls into this category.”

        • VintageVNvet says:

          VAST problems with the whole concept of IQ Heinz,
          Vastly educated at what was at the time the very best PUBLIC university in USA, top 5 of the world, in both ”hard sciences” and then got lazy and went to social sciences to be able to sleep through most classes, and just take finals for enough grades to be graduated…
          IQ and similar is/are social constructs, as is the over all concept of race(s) of humans; at least try to understand that race and IQ and so forth are devices constructed to divide/separate and then conquer more easily, as has been done so successfully in the last and current centuries.
          None of that actually exists outside of the intellectual constructs, similar to many other such inventions holding back our species from the truth and the benefits of truth for all.
          (Sorry if too abstract for WS folks, but, in any case,,, Merry Christmas and hoping all have a wonderful and Happy Holy Days of each and every kind…)

        • NBay says:

          “Common sense is a collection of prejudices, usually accumulated by about age 18”.
          -Albert Einstein

      • Lisa_Hooker says:

        Apparently it’s tough to educate people to be smart and aware.

    • andy says:

      For a guy with such a huge head Jack Ma is an idiot. Doesn’t get that US spending is what ballooned his dot-com to 3/4 $Trillion.

    • MCH says:

      The fall of Comrade Ma shows that no one is above the party.

      What DXP giveth, XJP taketh. Perhaps a nice tour of a tractor factory in Chongqing or some time in a Honhai factory in Wuhan would be appropriate re-education for comrade Ma.

      Although, Comrade Xi is a forgiving soul, and Comrade Ma may yet reverse his fate by providing sufficient amount of self-criticism.

      Comrade Ma… you may begin.

    • Jonathan says:

      In terms of per-unit distance cost new subway rail in 2010-2020, NYC ridiculous $2.2B per kilometer is ~1500% more than China’s. Even the doubling of the Chinese HSR from their current 36,000km overall length is projected to cost only $750B.

      So I doubt even $14T is sufficient to fix enough infrastructure in the States with current cost structures.

  20. urblintz says:

    Would you take that job during a pandemic? Have the meager offerings to the working class via the CARES act really created a “massive, lazy welfare class” as per your screed? Is 16$/hr going to make any job desirable and gainful? The people getting richer via govt. largesse are the already wealthy.

    Now let’s talk about the subjective nature of the word “revolting” because I might apply the same to your comment.

    • rip says:

      ABSOLUTELY I’d take the job if I needed it. It’s OUTDOORS. I know SCARRRY!!!! to somebody like yourself who is hiding under their bed in fear.

  21. “For the 11 months through November, (total consumer) spending is down 2.8%.” from YTD 2019.

    This is somewhat of a tell-tale indicator of the strength or weakness of the U.S. economy. There has been so much permanent damage done to small businesses and the leisure industry that I am not of the opinion that things will get back to the pre-Pandemic America that so many are hoping for. We are now firmly in the grip of the DEBT TRAP.

    Is not it astounding that House Speaker Pelosi and President Trump are on agreement on something? The checks to citizens should be $2000 if the economy is to avoid a plunge in the First Quarter of 2021. With the $100’s of Billions of rotting Dollars of P-O-R-K in this very belated Spending Package, what’s $1400 for a country that has found the printing press in the basement of the Federal Reserve??!! $600 is a drop in the proverbial bucket for the average American’s monthly expenses.

    Once a country opens Pandora’s Box of Money Printing, it only turns back when the crapola starts to hit the fan: GET OUT OF DOLLARS BEFORE YOU NEED THAT WEIMAR WHEELBARROW TO BUY BREAD.

    • Swamp Creature says:

      The Weimer Germany was a paradise compared this crap that we have endure today in the USA.

      Weimer had new innovations in architecture and art and music

      The local pubs and the entertainment was fantastic

  22. Need to find the “maintenance level” on UI, personal spending. We have seen the peak, now this is the dip, but somewhere in the middle. I seriously worry for the future of those GIG workers, who have no benefits, and only collect UI because this is an emergency. What happens to them in the “good times” when the economy contracts? The future of the former working class, (those who have never had a job and never will) is priority one. No job, no SSN number, no car, no DL number, is the angst over privacy unfounded? A new generation of public service employees is going to balk at paying retirement benefits that go into the pocket of retired workers with outsized pensions. While these people may look politically conservative they are not. Only progressive policies will solve these issues.

    • Petunia says:

      If progressive policies were the answer everybody would be moving to Chicago, New York, and San Francisco. The truth is is one side steals the tax money and the other side blows things up with it.

      • Wolf Richter says:

        Petunia,

        Everybody WAS moving to San Francisco from 2011 through 2019, which is how this place got to be so crowded, congested, and expensive, with high population growth, and they were coming from all over the place, including the middle of the country, because there was opportunity and relatively high salaries and wages. I’m glad this circus has stopped, and that Arizona, Texas, and other states are welcoming these people back.

        I heard there are huge opportunities in growing weed in Oklahoma, and I encourage people to go make their weed fortunes there. Great place. Used to live there for many years. Cost of living is very low, and it’s nice and warm in August.

        • MCH says:

          Although I doubt if our state governmental policies will get much saner as a result, but let’s see.

        • NBay says:

          Yeah, it’s nice and warm in Aug, so go get rich in paradise….please!

  23. Martha Careful says:

    I’m generally pessimistic and skeptical with economic data, but I think this pandemic period is overly amplified and distorted enough to be nothing but chaotic noise — and I assume there is much more to come.

    However, the period ahead will probably moderate towards a new weird stagflation. If anything, the last 10 months show accelerated Darwinism tendencies, and thus the weak and stupid will be more exposed than ever, while those that have been either luckier or smarter, will prosper and survive, as-if nothing happened.

    Thus, gold will not spike to amazing heights, the dollar won’t crash, yields will stay low, housing will boom where locations are desirable, companies that are innovative will increase scale, while zombie entities die-out.

    Essentially, this is a new version of a recession that has no precedent and no correlations.

    The writings of Nostradamus, Christmas 2020

  24. Kurtismayfield says:

    Yep, 33k a year before taxes is a real gift to sort through people’s garbage. I am sure it’s enough to pay the rent, bills, and health insurance as well.

  25. Martha Careful says:

    Have to try my luck getting this post up.

    At FRED I’ve been playing a little with the natural log function for various charts, to get a better idea of long-term value stuff. As I mentioned, I’m skeptical of data — and Wolf is often suspicious of my mishmash customized experiments. This one confuses me, so just looking for feedback.

    Nonetheless, was just looking at Real GDP:

    Real Gross Domestic Product, Billions of Chained 2012 Dollars, Seasonally Adjusted Annual Rate (GDPC1

    I created two charts for left and right format, with one GDP version set to use natural log, with the other normal.

    I had blown this off before, but looked closer today and see that when looking at Real GDP back to 1947, with a natural log, the difference between the two sets is amazing, i.e., the natural log shows Real GDP for Q3 2020 to be $18.5 Trillion lower, than the normal range. That’s a large gap! Maybe I’m misunderstanding the concept here, but I thought a natural log smoothed out historical dat over a long period and thus shows a better value?

    I’m not a mathematical wizard, but it would be nice to understand that gap in terms of where GDP is actually at.

    • Lish_Hooker says:

      Martha, all a log does is compress (distort) the axis scale. As Wolf has pointed out, using log scaling disguises the top and makes it look less horrible. Log does not “smooth” or in anyway modify the data, only it’s display. Wikipedia is quite good for mathematics information.

      • Lisa_Hooker says:

        Consider that log scaling makes an exponential (inflation?) appear as a straight line.

  26. Cobalt Programmer says:

    Durable goods are indeed “durable”. Nobody can use that much toilet paper. They will last long and no need buy again. Same about the other durable goods bicycle or toothbrush, soap and canned food items. How much any one can buy and where to store them? Wait for the $2000 check everyone. A $2000 check in every pot.

    1. Last time I heard its was $600. One time for the normal guys
    2. Obviously, business leaders want their business luncheon be tax-deductible
    3. Leaders who denied the COVID are first in line for getting vaccinations
    4. Do anyone think, all the representatives read the 5000+ pages and voted on it?

  27. roddy6667 says:

    I find the observation that income went up in these tough times to be somewhat dubious. The millionaires and billionaires in the top few percent skew that averages quite a bit. Also, let’s set aside people like me who are retired or receive some kind of monthly income even if we are in a coma. Just the normal middle class and down into the working poor. I’ll bet they haven’t seen an increase in income.

  28. Swamp Creature says:

    $600 is enough to buy a cup of Starbucks coffee twice a week. Give me a break.

  29. Swamp Creature says:

    I noticed the 10 year note approaching 1%. The Fed doesn’t have much control over the long term Treasury rates, so no matter what they do the rate is going up. If they print a lot of helicopter money the rate will go up because of inflation fears. If they tighten up then the rate will go up because of the crowding out effect. The Mortgage rate is tied to the 10 year note. So mortgage rates are likely to go up unless the economy melts down into a severe depression. Whatever scenerio takes place the housing market could be poised for a drop similar to what happened in 2006/2007. I wouldn’t be in this market if my life depended on it. I own the house I live in and that’s it. If the banks were smart they would cut off these cash out refinances immediately, or be caught like the last time with a lot of bad paper.

    • Martha Careful says:

      Rates are going nowhere, money goes in a circle and low rates are here for years to come.

      It’s actually lucky that we had the GFC before this pandemic, because the Fed wizards learned a lot about spinning money in bigger circles. In fact, we have 20 years of crisis behind us, where the Fed learned how to manipulate markets. It’s highly unlikely that they’ll suddenly fail now, even though this crisis is a larger global drama — but all the central banks will coordinate the means to buy time. The asset bubbles are a price to pay, but it’s better to have people winning in the casinos than to have the casinos on fire. Look no further than Japan for low interest rates — and survival.

      Also see, but unimportant: Banks can either keep cash in their vaults or hold deposits with the Fed. Most banks today have accounts with their regional Reserve bank—not only to satisfy these requirements, but also for the payment services the Fed offers.

      Interest as a Monetary Policy Tool
      Reserve banks didn’t use to be able to pay interest on deposits. That changed with the Emergency Economic Stabilization Act of 2008.

      In order to provide more liquidity to the banking system, the Fed needed to expand its balance sheet by buying Treasuries and mortgage-backed securities.

      “The only way we could do that was to expand the reserve deposits the banks held with us,” said David Wheelock, St. Louis Fed group vice president and deputy director of research. “It was necessary to pay interest on those deposits in order to avoid excessive money growth solely as a result of the temporary injection of liquidity into the banking system during the financial crisis.”

  30. Yort says:

    Free money has turned political, and the Fed is losing control of the USD printing press. Looks to me like the Fed has created a free money monster that has flowed well beyond Wall Street. Now the media are catching on to how the January 5th Georgia Senate race could change the entire political landscape for 2021. At some point Wall Street may panic due to the extreme uncertainty?

    Five recent articles on the latest $2,000 vs $600 fiasco:

    “Trump’s call for $2K checks puts squeeze on Georgia GOP senators” (thehill dot com)

    “Trump detonates a truth bomb in the Georgia Senate races” (Washingtonpost dot com)

    “Trump’s demolition of the COVID-19 stimulus package could cost the GOP control of the Senate” (businessinsider dot com)

    “Democrats seize on Trump’s push for $2,000 stimulus checks for boost in Georgia Senate race” (CNBC dot com)

    “$2,000 Stimulus Check Talk Gives Mitch McConnell, Georgia Senators Headache” (newsweek dot com)

  31. Pete in Toronto says:

    Wolf,

    Thanks for another great year of articles on political economy!

    That jingle you heard is a little something in your Paypal account for a beer on me. :)

    Wishing you all the best of the season,
    Pete

  32. MonkeyBusiness says:

    Rand Paul went on an epic rant today and he’s absolutely right.

    “If free money was the answer… if money really did grow on trees, why not give more free money?” he said. “Why not give it out all the time? Why stop at $600 a person? Why not $1,000? Why not $2,000? Maybe these new Free-Money Republicans should join the Everybody-Gets-A-Guaranteed-Income Caucus? Why not $20,000 a year for everybody, why not $30,000? If we can print out money with impunity, why not do it?”

    • Paulo says:

      Rand Paul is an idiot. I don’t see him giving up any of his bloated salary to help out the Country. It’s not like he actually accomplishes anything beyond grandstanding for a Libertarian cohort. They would all have more credibility if they did a give back like normal people have been required to do through these circumstances.

      • MonkeyBusiness says:

        A broken clock is still right twice a day. I mostly do not agree with him especially when it comes to Covid stuff, but on this one he is absolutely correct.

        • RightNYer says:

          The real problem with printed money is that there is a delay (and in the case of the U.S., a not insignificant one) between the printing and the devastating consequences of it. So the governments print, and everyone gets all this “free money” and is happy. And then policy makers say “Hey, we were able to do this with $100 billion, why not up the ante to $500 billion?” They do that, and everyone is even happier. So next there are calls to print $2 trillion. Meanwhile, the effects of the first print are still percolating throughout the system.

          By the time the negative effects have manifested themselves, it’s too late to unwind.

      • RightNYer says:

        He may be an idiot, but in this case, he’s right. If there are no deleterious effects to printing money, why not print $10 million for everyone so that we could all be rich? Obviously, at some point, printing too much devalues the currency too much all at once, and the negative effects can’t be smoothed over or ignored.

      • Swamp Creature says:

        I stand with Rand. He’s the only one that cares about the Constitution.

    • Lisa_Hooker says:

      I have previously called for $100,000 to everyone. Looks great. We will all be happy. For a while. Possibly a short while.

      • MonkeyBusiness says:

        I think people will be killing one another in every house viewing if we give 100K per person.

  33. WES says:

    Government printed stimulus money often has unintended consequences.

    Some of this money seems to drug, sedate, or addict parts of the economy.

    The rest of the economy just seem to get weirder!

    So, please hurry up and print more money!

    I want to see how this experiment turns out!

    • BuySome says:

      Big statue of French chick holding torch sticking out of the sand. Surrounded by a non-stop beach party with dope drops from Oklahoma via Amazon delivery. Highways lined with fast food factories…order via smart phones, pick-up at vacuum tube chutes on the sand. No covidiots permitted entry until vaccinated…standard 666 identification applied to certify for checks. No land payments, it’s public space. Lots of thunder mugs, port-a-potties, or whatever you call restrooms which are continually serviced by foreign laborers on permits. No big cry baby’s allowed, but it will be Planet of the Drapes. Don’t forget your entertainment helmets. Towels 25 cents.

  34. DawnsEarlyLight says:

    Wolf, Happy Holidays to you and your family.

  35. Swamp Creature says:

    All this printed money corrupts everyone and makes the rich richer and the poor and middle class poorer. The rich get the money first and since they are the asset holders their value goes up. Their wealth increases. The poor and middle classes are the last ones to see the money. By the the time they get it prices have gone up negating the value of the money they receive. They don’t have the assets that the rich people have so they don’t benefit from the inflation in asset values. Its not any more complicated than that. The morons that are running our government don’t understand this nor simple economics, and couldn’t pass an Econ 101 course.

  36. w says:

    What they are doing is Very intentional.The Fed never cares about anyone but the Fed and maybe their family.The are not trying to help average Americans.

  37. Swamp Creature says:

    Then its time to End the Fed

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