Retail Sales v. Raging Inflation, Stimulus Miracle March, and the Red-Hot Shift to Services

It’s rough out there in multiple ways.

By Wolf Richter for WOLF STREET.

Retail sales, released by the Commerce Department today, are sales only of goods, not services. But services account for nearly two-thirds of what consumers spend their money on and include rents, plane tickets, hotel bookings, streaming services, insurance, concert tickets, and the like. There has been a surge in consumer spending on services in recent months, as consumers revert to the pre-pandemic spending patterns and shift spending back to services, which had collapsed. Spending on services had spiked by 12.4% from a year earlier in February, easily outpacing inflation. So this shift to services from goods – meaning from retail – has been happening.

Retail sales in March rose by 0.5% from February, seasonally adjusted, and by 16.8% not seasonally adjusted, to $677 billion, up by 7.0% from Stimulus Miracle March last year, when the stimulus checks got spent, sending retail sales into a dizzying spike.

Stimulus Miracle March 2021 was a very tough month to beat. But Americans did blow by it. What they didn’t do is blow by the now raging inflation.

Raging inflation in retail.

Inflation in retail sales means inflation in durable goods such as cars, furniture, electronics, and tools; and in nondurable goods such as food, household supplies, and gasoline.

Durable goods inflation cooled off a tiny bit in March, due to a sharp price drop in used vehicles, after gigantic spikes, and the durable goods CPI fell 0.9% in March from February. But it was still up by 17.4% year-over-year (red in the chart below). Nondurable goods prices spiked by 3.8% in March from February, and by 13.1% year-over-year (purple).

So retail sales rose 0.5% in March. Durable goods prices dropped 0.9%, which account for the majority of retail sales. But nondurable goods prices spiked by 3.8%. And the result for retail sales in March, after inflation, is “mixed.”

On a year-over-year basis, there is nothing mixed about this, with durable goods inflation up 17.4% and non-durable goods inflation up 13.1% compared to the 7.0% increase in retail sales.

Sales at New and Used Vehicle and Parts Dealers, the largest retailer category, fell 1.9% in March from February seasonally adjusted (red line), on stalling new vehicle prices and declining used vehicle prices. But not seasonally adjusted, sales jumped to $145 billion, nearly matching the all-time record of March 2021, which had been the last month before auto dealers started running low on inventories (purple line).

The year-over-year matching of the record was accomplished by huge year-over-year price increases, which made up for the 15% plunge in the number of used vehicles sold and for the 25.9% plunge in the number of new vehicles sold.

Sales at ecommerce and other “nonstore retailers,” the second-largest category, fell 6.4% seasonally adjusted in March from February, the second month in a row of declines, to $90 billion, and was up only 1.8% year-over-year compared to Stimulus Miracle March:

Food and Beverage Stores: Sales rose 1.0% for the month, seasonally adjusted, to $79 billion, and jumped by 8.4% year-over-year, powered by price increases:

Food services and drinking places: Sales jumped by 1.0% for the month seasonally adjusted, to a record $75 billion, and by 19.4% year-over-year. This is over two-and-half times the rate of CPI inflation for food away from home (6.9%):

General merchandise stores: Sales spiked 6.6% for the month to a record $62 billion, seasonally adjusted, and were up 4.8% from Stimulus Miracle March 2021. Walmart and Costco are in this category, but not department stores.

Gas stations, oh my, no surprises here: Sales spiked by 8.9% for the month, to a record $64 billion, seasonally adjusted, and by 37% year-over-year, driven entirely by the spike in gasoline prices.

Building materials, garden supply and equipment stores: Sales rose 0.5% for the month, to a record $43.6 billion, eking out a year-over-year gain of 0.6% from Stimulus Miracle March:

Clothing and accessory stores: Sales jumped by 2.6% for the month, and by 7.3% year-over-year to $27 billion, seasonally adjusted:

Miscellaneous store retailers (includes cannabis stores): Sales rose 0.8% for the month to a record $15.6 billion (seasonally adjusted), up 13% from a year ago. This category tracks specialty stores, including cannabis stores, beer brewing supplies, telescopes, art supplies, etc.

Department stores: sales fell 0.3% for the month, to $12 billion, but were up 7.4% from Stimulus Miracle March. Compared to the peak in the year 2000, sales were down 39%, as Americans have abandoned that type of retailer, triggering the closure of thousands of stores and numerous bankruptcies:

Furniture and home furnishing stores: Sales rose 0.7% for the month (seasonally adjusted), and by 3.6% year-over-year, to $13 billion:

Sporting goods, hobby, book and music stores: Sales jumped by 3.3% for the month, to $9.4 billion (seasonally adjusted), but were down by 5.1% from Stimulus Miracle March:

Electronics and appliance stores: Sales rose 3.3% for the month, to $7.5 billion, seasonally adjusted, but were down 9.7% from Stimulus Miracle March. This category covers specialty stores, such as Best Buy. Sales of consumer electronics and appliances are huge, but they’re spread over many types of stores, such as General Merchandise (above). And much of it has gone to ecommerce.

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  212 comments for “Retail Sales v. Raging Inflation, Stimulus Miracle March, and the Red-Hot Shift to Services

  1. Depth Charge says:

    I find all of this disgustingly sickening. The grotesque money-printing is just repulsive. I don’t like Larry Summers, but when the FED and CONgress started talking about all of this largesse before they actually implemented it he was warning of overheating the economy. Nobody who was in charge did the math. Just look at where we are now.

    You should never in a million years goose demand in the midst of supply shocks. DUH. And yet all of the people who caused this despicable situation have only been rewarded, with zero accountability. Failing upwards.

    • Peanut Gallery says:

      Cool story bro

    • JM says:

      Depth, it really is horrible. The FED needs to immediately raise rates today 1%. If they really had any concern about inflation, they would have already done this several times the past year. But they don’t care about inflation, as high inflation bolsters the 1% asset prices and low rates enables the stock buy backs and enriches the CEO’s and politicians with their kick-backs. They’ll keep doing what they are doing as long as the wealth transfer benefits them.

      • Wisoot says:

        They dont care about inflation. . . Put a different lens on that statement and flip it upside.
        The agenda being pursued has the side effect of inflation. The agenda main outputs are agressively being pursued.
        Question for the people – is docile your default.

      • dang says:

        Just think how that would create hardship for all the financial engineers paying interest on loans to buy stocks and houses. It may collapse the structure of the promised inflationary bubbles the Fed insures.

        Speculation is better than production in the current Fed model, obviously. They funded the offshoring of production by executive decision making and are concerned about their gamblers losing money.

        • dang says:

          PS

          I think just the Pentagon waste is larger than the entire Russian economy. Something like Wisconsin going rogue and attacking South Dakota.

      • Happy1 says:

        Make it 7% and I agree even more.

    • SoCalBeachDude says:

      There is no ‘grotesque’ money printing at all. There is highly excessive US federal government debt issuance and spending.

      • Bobbleheadlincoln says:

        I guess you don’t read comments on your comments since I have explained before why you’re wrong. The Fed does effectively print money. It is digital and bonds exist because of it that the Fed holds. But the Big Five banks are given the money. Making new money and giving it to banks is quantitative easing.

        • RT says:

          I think he’s arguing that technically no new physical dollar bills are printed. So Fed is not physically printing new dollar bills. But of course, all dollars now are becoming more and more digital.

          I wonder if there’s still a measure out there telling us how much physical cash we have in USD and how much the rest is deposited?

          Do M1, M2 and M3 give us those information? Do they still publish M3?

    • Wisdom Seeker says:

      I’m no fan of Larry Summers but I’m glad to live in a place where criticism such as his can be voiced. At least for now.

      In Turkey or China, such comments critical of government policy get you jail time or worse.

    • Marcus Aurelius says:

      Are you stupid, or is the FED stupid?

      You, as 99% of us, assume you are the smart ones. You, like 99% of us, think WE are the smart ones and know what is happening.

      Really?

      Maybe, WE (as in You and Me) are the stupid ones. Maybe, they are smarter than you. Smarter than me. Maybe, they know exactly what they are doing, and why.

      EVERYTHING about this makes sense if you will take the time, and humility, to briefly assume they know more than you. They have a plan. They have an objective.

      You can’t stand the thought that you don’t count. I don’t count. Nobody reading this counts.

      Try a thought experiment. Try imagining if all of this is intentional. “They” know what they are doing and you, peasant, don’t.

      If you have the ability to do this, you will “SEE” and have ears to “HERE”………………..

      You don’t.

      You, and me, are nobodies.

      • Marcus Aurelius says:

        “HERE” should be “HEAR”

        When English is the 3rd Language one is exposed to, you get confused.

        (Also, being on the “autistic spectrum”, says one’s Psychiatrist, can help cause confusion.)

        • 91B20 1stCav (AUS) says:

          Marcus-was just about to say: “…them’s some big ears…”.

          may we all find a better day.

      • OutsideTheBox says:

        Bob Odenkirk too

      • Wisoot says:

        Marcus If they know more prove it

        • CRV says:

          He can’t, because he is not informed of the plan. Like the 99% we, the readers, are part of.

          He dares you to do the thought experiment. If they do know what they are doing, then all of the consequences must be intentional.

        • because we’re all “slip slidin’ away”

      • Chris P says:

        Marcus
        Best comment I’ve seen in a long time

        • GSH says:

          I suspect that there really is NOT a long-term plan. Most companies are focused on the next quarterly statement, their leadership on stock options, the politicians on the next election. What you are interpreting as a nefarious plan is simply the outcome of short-term thinking across all levels. Maybe this is the best we can do. The Soviet’s five year plans did not work all that well either.

        • Marcus Aurelius says:

          Thank you.

      • VintageVNvet says:

        Sorry FOR you MA,,, because the fact is that everybody,,, yes, everybody, every single sentient entity ”counts” as one, and, in fact, as only one.
        Nobody counts zero or nothing and nobody counts more than one no matter how much propaganda is out there trying to convince otherwise.

        • 91B20 1stCav (AUS) says:

          VVNV-well said. ‘not counting’ only seems to imply one has surrendered to others the option of defining their own ‘scorecard’ in the contest of life.

          another R.A. Heinlein aphorism: “…of course the game is rigged. But if you DON’T bet, you .CAN’T win…”

          may we all find a better day.

      • RT says:

        It is a paradox, if we don’t count then why would they care so much on how to control and use us to enrich them? If we do count, then they don’t care a bit about the regular people and what happens to us after they used us all up.

        So we, the regular people, do count for something. Our labor, our productivity, and many other things count and that’s what they care about. They care to use us to enrich themselves, so in that sense we absolute count for something.

      • stonewepon says:

        There are two competing plans (a plan within a plan) that have their own power objectives. The inner-elite conflict is red hot.

      • Flea says:

        Marcus Aurelius interesting = 2 nd century empower of turkey ,just my observation

    • Bobber says:

      Also, you don’t set up a program like PPP without fraud controls. They say $200B was wasted on fraud, and another $200B may have been wasted on businesses that suffered little or no revenue loss.

      Government needs to show some respect to taxpayers by not wasting their money.

      • Malthus says:

        The problem is that only half the voting population pays taxes.

        • 91B20 1stCav (AUS) says:

          Malt-after two generations of business offshoring previously taxpaying middle-class (old definition) jobs-what else would you expect?

          may we all find a better day.

      • Marcus Aurelius says:

        The Second PPP (Payroll Protection Plan #2 did require proof of 25% decline in sales).

        The first PPP and most loans had no “need” basis.

      • phleep says:

        e-m-e-r-g-e-n-c-y. Urgent unprecedented action always has errors. Especially with government outflows. There was no alternative, other than your local barkeep grabbing a gun and heading into the streets. As in 2008, you don’t see the alternative avoided, which was the complete collapse of the USA and therefore the planet: politically, environmentally, across everyone’s life.

        Complaining (which is reaching overflow, turned-up-to-11 level in comments here, getting terribly redundant in terms of any actual information content, just becoming repetitive venting and posturing) is as cheap as its cost to the source: zero if no new information is offered.

        The economy as shown by the data above is rebalancing. It is marching upward, albeit with an inflation kicker in the numbers. The world shown is not ending. We are (and the Fed, etc., is) in a really dicey place right now. (Look at stocks.) We need some constructive ideas apart from just hiking rates or jailing Powell.

        • Phil says:

          Thank you. I continue to read here *in spite of* the endless grumpy armchair quarterbacking comments. The idea that random Internet commenters are in better command of reality than the people actually running the show is comical. But I trudge through the sludge for the occasional nugget of insight.

        • Depth Charge says:

          “Complaining (which is reaching overflow, turned-up-to-11 level in comments here, getting terribly redundant in terms of any actual information content, just becoming repetitive venting and posturing) is as cheap as its cost to the source: zero if no new information is offered.”

          But your complaining about the complainers while also virtue-signaling about your paid off shack and your perfect lifestyle is somehow doing more? Your high horse is looking a little rickety.

        • c_heale says:

          The complete collapse of the USA (and all the major powers) would have been better for the planet environmentally than the current situation.

          TBTF and corruption is the problem.

    • perpetual perp says:

      Depth Charge and others: It looks like a ‘pick up sticks’ mess, and yes the Fed’s various money injections had some poor consequences. But how did we get there? What event began the panic? Look at the charts of employment. The loss of jobs was the worst in our history. And the fastest too. To do nothing would have been criminally irresponsible. If you need life saving surgery you don’t bring in the primary physician, you bring in a surgeon. The Fed is not supposed to be controlling the money supply. That is the job of Congress, which has abdicated it’s Constitutional responsibilities. As a result we have an oligarchy today, not a representative Democracy. All money flows go into the same bank accounts. Those of the oligarchs. The system is designed that way. Until that is reformed, don’t bitch.

      • phleep says:

        Great points. Just seizing a pitchfork and posturing toward a few visible bureaucrats doesn’t get to the deeper structural problems. The neoliberal financialized order is maybe inching into crisis territory as its answers are shopworn, leaving huge yawning gaps for huge populations. Hopefully we do not wander into authoritarian political “answers.” We are right on the edge of that, looking at 2022-2024 elections.

        • As though absolute authority is better than little or no authority at all. Remember when Powell went along with Trump on dropping rates? Try to imagine that scenario. My president doesn’t want to raise rates so I’m okay with the Feds inflation policy? Haven’t heard one word from X about this, so figure that is his position. This is supposed to be a nonpolitical thread but brother that ain’t the half of it.

    • Sierra7 says:

      DC:
      It’s the “American Way!”
      “Let the good times roll!”

  2. John Apostolatos says:

    “But services account for nearly two-thirds of what consumers spend their money on and include rents, plane tickets, hotel bookings, streaming services, insurance, concert tickets, and the like.”

    That’s all you need to know about the state of our phony economy: borrowing money to eat something, travel somewhere, watch something, etc. without actually producing anything and just consuming. That 1.5 trillion Russian economy matters more than our borrow and service economy.

    If people don’t really produce, then they must borrow to consume products and services, hence the massive trade deficit and loan generation. The rest of the world is saying enough: no more printing dollars for our sweat and labor.

    But the service economy is sputtering:
    – seeing folks whose wives quit working since the babysitter service is too expensive.
    – Not travelling since it is too expensive to eat out and stay at hotels.
    – etc.

    And now it is getting too expensive to borrow and spend.

    • Cem says:

      When it comes to producing in gross output by country, China is the undisputed number 1.

      Number 2? The U.S.A.
      We produce more than any other besides China. So production of goods is not the issue.

      • Jake W says:

        yeah, but it pales in comparison to what we consume.

      • Augustus Frost says:

        Commercially, the issue is the trend of production. I’ve never seen it but even if the absolute volume has been increasing (which I doubt), it’s decreasing per capita requiring more imports.

        Another difference is how much can be produced in its entirety (anywhere) with global supply chains. That’s not measured by GDP.

        Geopolitically, China has replaced the US as the manufacturing powerhouse. Think about how much military related output China will be able to produce in a future conflict. A lot of commercial capacity converted to military use, just as the US during WWII.

        No one can outlast China in a conventional war on their home turf (Western Pacific) because of it, including the US.

        • Cem says:

          We operate 4 of the top 5 largest air fleets.

          We operate 11 aircraft carriers to their 2.

          We have soldiers that have been very recently in active combat, we geographically hold a prime position with large natural resources and huge geographic barriers (two oceans border us).

          It will take years for them to catch up with us on the military might front.

        • doug says:

          We have military leaders who have lost every real conflict since the 60’s.

        • VintageVNvet says:

          there will be no ”conventional” war world wide again due to the capability of delivery of magna munitions at any point of the globe
          that remote capability is growing daily in many many places, and in spite of the propaganda in the forms of misinformation and disinformation, all the idiots in charge know this full well
          local and regional warfare to maintain a ”blooded cadre” yes, continuing since WW2 so far, and likely to keep on for eva in spite of attempts for a lasting peace

        • Flea says:

          Doug I believe we won in IRAQ,also most others were just tug of war games with Russia china

    • perpetual perp says:

      What you are describing is the ‘financialization’ of the productive economy, including the transfer of what were considered public assets. What started out in the late 1800s and early 1900s as subsidizing the private manufacturing economy–it was successful–ended up being hijacked by the financial sector–which has been a disaster.

      • 91B20 1stCav (AUS) says:

        perp-‘…privatize all profit, socialize all risk…’ is the phrase, i believe.

        may we all find a better day.

  3. Hal says:

    “Note seasonally adjusted vs seasonally adjusted”

    Think you need to lose an “e” there, Wolf.
    You can delete this

  4. THEWILLMAN says:

    Consumers can’t outpace inflation.

    That might mean price resistance. It also might mean monopoly pricing where lower quantity at fatter margins maximizes profit.

    • Tom S. says:

      The big guys cannot survive all the little guys getting crushed. Eventually, the bottom falls out and the top comes with it.

      The little guys are starting to get take a beating.

  5. Peanut Gallery says:

    Wolf, also a typo:

    “Note seasonally adjusted vs…”

    • Depth Charge says:

      The horrendous stench of narcissistic personality disorder…

      • Peanut Gallery says:

        It’s called helping another person. Quit with your juvenile anger-fest for just two minutes out of a day and give it a try.

        • OutsideTheBox says:

          PG

          Realize in DC that you are dealing with the worst case of projection in the history of the Holocene.

          The precipitating cause was excess hammering.

      • Wolf Richter says:

        Depth Charge,

        I appreciate it if readers point out typos in the article. I rely on them. They’re unpaid line editors. Similar to unpaid gig workers :-]

        But I don’t like it when commenters jump on typos that commenters make in the comments. Everyone makes typos here sooner or later, and that’s part of the charrm

        Then again, it’s OK to have a little fun with a typo that is funny.

        • Michael Gorback says:

          Such as “Let’s eat, grandma” and “Let’s eat grandma”.

          What a difference a comma makes!

  6. Hal says:

    I don’t know how much I trust it, but my “Zestimate” from Zillow keeps going up, up, up.

    Looking at all this inflation, maybe they’re not far off from reality. I dunno.

    Google your own address and check Zillow (Trulia uses the same numbers, btw). It’s crazy. Or not crazy…

    • JM says:

      No, it’s crazy and affordability has disappeared for a large % of population. Zillow prices can be 20-25% over reality. They do this to pump their own investment holdings higher for neighborhood comps. Been doing that for a few years. Use Redfin instead.

    • John Apostolatos says:

      Zillow thought the same way until they lost 1 billion and closed shop. I am seeing many more bank appraisals coming below Zillow. Look at the collapsing pending home sales that Wolf posted.

    • Peanut Gallery says:

      I also agree that both Redfin and Zillow’s algos are… overly optimistic?

      But remember what Wolf says continually – real estate moves very slowly. And I’m sure these two companies will be the very last people to revised their algos. Maybe only NAR and Lawrence Yun will be slower to revise? LOL

      But having said that, mortgage rates are rising quickly and so far I don’t see lots of for sale signs where I live…

    • Zark Muckerberg says:

      You gonna trust an feature that screwed them over? Zillow then has the galls to make percentage prediction that news media would report on.

      It was like a drug dealer trying to sell his tainted product after getting a bad high off it

  7. Michael Engel says:

    1) RRP is a negative feedback loop sucking liquidity from the markets.
    2) The Fed is not behind the curve.
    3) The Fed is using RRP to fight inflation. It’s not window dressing.
    4) RRP was rising since Mar 2021, for over a year.
    5) Within three months it reached $1T.
    6) In Oct 2021 $1.6T.
    7) In Dec 2021 $1.9T, staying high.
    8) The RRP chart mimic the CPI chart.
    9) If SPX will plunge by more than 1,000 points, JP will not cut rates, as
    he did in Xmas 2018, he will open the RRP valve, providing liquidity,
    creating a stopping action.
    10 If the inflation will rage for over a decade, like from 1967 to 1982, the Fed might be out of ammunition,

    • Marcus Aurelius says:

      Not so:

      gdx is up 2.5

      ZION derivatives, March, 2023 is at 2.00

      Amazon, 2025 bond, priced at 94j

      STD (SouthSeas TuliPonzi Data) is at 94, June call

      MAGA calls at 24

      You need to check you data…………………………………………….

  8. Jackson Y says:

    It’s really easy for Federal Reserve officials to “talk tough” right now when (1) rates are still far below neutral; (2) markets, while off highs, aren’t exactly panicking (the Dow Jones is only 7% off its record); and (3) the economic data isn’t showing deterioration.

    I wonder what would get them to crack this time. Is it a major stock market selloff? Is it an uptick in unemployment? In most downturns, stocks decline before the real economy. Would they pivot back to being dovish once inflation has clearly peaked, or are they committed to 2% PCE no matter the costs? So many questions. 🤔 We’re still early in this rate cycle.

  9. Putter says:

    Off subject Wolf. Will understand if you don’t publish. First home price cut in my neighborhood in Northern California. $599k to $559k.

    • Putter says:

      He who panics first, panics best!

    • Educated but Poor Millennial says:

      In Los Angeles we see 25% over asking price. And some lower than asking price sells. Check Zillow , it’s delusional

      • Jon says:

        LA would be hit hard in the coming years.
        Its shthole anyway.
        The faster the prices went up the harder they fall.

  10. Jake W says:

    i still don’t understand where all of this money is coming from.

    • Anthony A. says:

      I don’t see who is spending it like drunken sailors? Where are they getting the money?

      • Marcus Aurelius says:

        Like I did

        PPP of $68, 000 which I did not need (Don’t have to pay back and is tax free)

        $14,000 from another Gov. Grant (Don’t have to pay back and is tax free)

        $5,000 Grant for EIDL (Don’t have to pay back and is tax free)

        $1,312,000 EIDL Loan, which I did not need. (I am not kidding. 30 years at 3.75 %……………….I am so old it will never be paid back)

        About $6,000 Stimulus for my personal family, which I did not need. Tax free.

        • candyman says:

          So you admit YOU are part of the problem. A GREEDY person. You TOOK, but did not need, the PPP. Simply because it was available, you did not have to partake. SHAME. You took the Grant. You took a LOAN, which you imply you have no intention of repaying.

          Let me note, my sales dropped 2/3 for two years. Thinking we would be closed for 2 weeks, then 2 months, turns into 2 years. Yes, I took $28,000 PPP, and USED it for payroll to keep folks employed. I did not receive rent breaks, forgiveness or such ( and not because I did not ask, I was told the mortgage co. would not approve) I have been runnng deficits for 2 years, because the politics of not reopening, I believe we should have been reopened 1 year ago. Nonetheless, I received the $15,000 GRANT, thank you, it helped pay rent. I also took an EDIL LOAN $25,000, same terms, 30yrs, 3.75% I’m 70! Big difference here, my loan did not require collateral, yours did. So full disclosure, please. You or your estate will pay it back. BTW, I’ve already begun to repay mine, at an accelerated pace, to be repaid in 3 years. I appreciate the assistance, and acknowledge my debt. Call me stupid, but I’m not commenting here, blasting the FED and their greed, and being a part of the problem.

          Thank you Wolf for the great information. The comments section is also eye opening. Love it all! Thank you!

        • Marcus Aurelius says:

          CANDYMAN: Perhaps I used the word “need” incorrectly.

          My business(s) made it through that summer of 2000. The 2 week lock down scared all of us. Nobody knew what was coming, and it was prudent to apply for, and receive, all funding you could since no one had any idea what the future held. Because everybody stayed home, I had no business for that 2 weeks, either, and feared it was the future.

          As you are aware, Candyman, the first $150,000 was offered to everyone. No real paper work. Just sign your name. They used the information from the PPP-1 Application and the earlier 10,000 EIDL grant request. All documents I sent in, then and later, were reviewed for accuracy. God help anyone who lied on all that information.

          Then, when they raised the EIDL to $500,000, one had to complete more documents. Then, summer of 2021, the Government announced you can use the EIDL money to pay down all legitimate business debt. Until then, it was only for operational expenses. That’s when the funds became helpful. Did I “NEED” to pay down debt? No. The previous year did not devastate my business nor put me out of business, but being able to pay off 6-8% Business loans, Business Credit lines, inventory & supply invoices in advance, etc., was smart and anyone here would have done so, and will enable me to withstand what is coming.

          That is not Greed. That is due diligence and what a business person is supposed to do. Then, they increased the EIDL to $2 Million. WTF? I was stunned and shocked but legally qualified for some of that increase. I didn’t determine the amount, the Government informed everyone by using one’s 2019 Tax Return(s).. So, more paperwork, which I spent one week making sure was accurate, and the money has been used to lower more business debt and hopefully enable me to survive the coming devastation, in a few months. Don’t be in a hurry to pay it back, since there is a good chance you will have a more devastating market before the year is out. That is not Greed. That’s future Need. (I’ve been in my main business for 40+ years and am not an idiot (rude, yes)).

          I recommend not rushing to pay any EIDL funds down. Already they extended the payback requirements 2 and 1/2 years after the first funds received ($150,000) and there is talk now of reducing the % from 3.5% to 1%, and forgiving part, if not all, of the EIDL funds, like the student loans!!!!! (Yes, the % accrues). I think the Government is frightened of what’s coming and are preparing to flood MORE money into the system. This time, I am sure it will be need based, but will do no good for those who have gone under already. My “need” is to not go under since I love my job, have a payroll that supports other families, etc.

          Oh, It is a 30 year loan. I won’t live that long. The collateral will cover it. You can’t pay it when you are dead (!!!) and only I could sign for the loan since I have no partners. If real estate does not crash the note will be covered BUT real estate is going to crash.

          The SBA required only business assets as collateral. One could not use personal assets. You were not allowed to have “help” in filing out the forms (so I guess asking questions of an accountant, tax lawyer, and retired IRS agent were illegal, as I tried to make sure everything is-was 100% legal? That’s the gov. for you.)

        • ru82 says:

          Thanks for that breakdown. I have a couple of friends with similar scenarios.

    • Hal says:

      Helicopters

    • Depth Charge says:

      I think a lot of it is PPP loans (gifts). Those totaled almost a trillions dollars, and it’s been pouring into hard assets and durable goods. And then factor in the cash-out refis since we are at the apex of the world’s biggest housing/everything bubble in history and the money is just washing over every nook and cranny, but skewed towards the wealthy. They’re carrying the lion’s share of the spending now. Isn’t it fun watching them play?

      • Jay says:

        PPP was closer to $800B, but with 75% of it staying in the employer’s hands, then I would agree that’s where a lot of this continued, extra spending is coming from. More pointedly, it’s the top 10% of so based on Wolf’s Wealth Effect chart. Then, you move down the ladder to the next 40% and this is where the 90% cash-out refi money is coming from. There’s just no telling how long it’s going to take for $11T to percolate through the system. And IMO, one of the biggest threats to American prosperity is the significant increase in investor-owned properties, especially those bought by the really big investors who are purchasing entire communities to rent.

        • OutsideTheBox says:

          800 billion ????

          Isn’t that the same as the Pentagon budget ?

          Yet no crying and moaning about that is there ?

          Yet here we have the PPP and so many are losing their minds.

          No sense of proportion, eh ?

      • Jake W says:

        and all of the retired people who had huge stock portfolios think they’re brilliant while they’re showing off.

    • HQ says:

      I don’t either, Jake. I understand there were stimulus checks and PPP loans (which were quite frankly disgusting; folks in my industry set sales records in 2020 and so many of them sought and received ginormous PPP checks as gravy; I know because I looked ’em up), but all of that ended a while ago. Local and state governments were showered with cash under federal spending bills, so that might explain some of it, but how is the unconnected and average Joe, Jane and Joe/Jane keeping their spending at the WTF levels? I sure hope it isn’t credit cards and home equity loans.

      Sometimes it feels like there was a “free pile of cash giveaway” and my invite never arrived.

      • Flea says:

        My brother got 330k bought equipment,then loans were forgiven . Sold equipment bought a house for almost fre,free,free, pretty simple really .it’s fraud to the first degree

        • Peanut Gallery says:

          That is absolutely insane…

          Can I ask what was his yearly revenue / yearly payroll on his business?

        • Flea says:

          Peanut gallery no idea businesspeople usually don’t talk about that

        • Pea Sea says:

          100% legal fraud, yes. That’s the way the program was explicitly designed.

    • Harvey Mushman says:

      Here are a few sources:

      1.) with home prices going, lots of people have pulled money out of their houses.
      2.) with stocks going up, lots of people have sold stocks and have money to burn.
      3.) For people who don’t own homes and don’t own stocks, stimulus money turned into money to burn.

      • Wisdom Seeker says:

        “Where all the money is coming from” – it’s just circulating, and now circulating faster. As people get anxious about inflation, they don’t want to hold cash, so they spend it as fast as they make it, instead of saving it for future use.

        All that spending puts more money into others’ pockets, so they spend it in turn.

        The economy becomes a fierce game of “hot potato”, with cash as the hot potato. Anything that might “hold value during inflation” is becoming overpriced. It seems crazy, but then again, inflation’s been absent for 40 years, so maybe this time is a bit different from everyone’s experience from 1980-2020?

        But what if it’s not different? What if the Fed’s just being slower than usual to play its normal game? Personally I’m starting to collect cash again. When the Fed finally gets serious and financial conditions tighten, those cash “hot potatoes” are going to become magical again, like they were in 2009.

      • Augustus Frost says:

        Selling stocks doesn’t free up cash or create spending power for the economy. Whatever proceeds someone receives, someone else spends the same amount. Debits always equal credits.

        On a related concept, there is no such thing as “cash on the sidelines”. Besides, this supposed “cash” is just someone else’s debt. To obtain actual cash, this supposed “cash” must be sold to another buyer.

        You would be accurate if you claimed margin borrowing.

        • Marcus Aurelius says:

          90% Silver Benjamin Franklin 50 cents pieces ARE on the side line

        • Augustus Frost says:

          Yes, and 90% silver US coinage just sits there doing nothing, all the time.

        • Jeff T says:

          Silver half dollars have gone from a value of 50 cents in 1964 to being bought by coin shops for $10 this week. Does that calculate to a 20X return? I think that is ok for a longterm safe place to park some savings.

        • TheAltonRoute says:

          I’ve been collecting coins since the late 1980s. Those silver halves weren’t worth much back in the 1990s.
          I remember the big ads in Coin World advertising BU 1921 Morgans for $7 or $8. What was a common Walking Liberty worth back then? $3 or $4?

    • Lily Von Schtupp says:

      Passed a brand new large pickup truck towing a brand new luxury camper with toy hauler on the highway yesterday.

      The trailer was swaying all over the lane and the young lady driving the truck was struggling to keep things straight, going 40mph in a 65 zone.

      Knowing the locals, she’s taking a year off of college and used her birthday money to bypass the used Econoline route on her way to be an IG influencer ‘living small.’ I wish her the best, but mostly I wish she’d learn the correct weight distribution when loading her trailer.

    • John H. says:

      Jake W.-

      Isn’t the well-spring of all this money the Fiscal spending, enabled by the Fed’s balance sheet and interest rate price fix, and then rippling out far and wide through the banking system?

      The “Cantillon effect” is alive and well in the 21st century.

  11. Tim R says:

    At least where I live, which is a prosperous area with a wild influx of recent transplants, the apparent spending going on is jaw-dropping. The number of crowded expensive restaurants, new vehicle tags, new Teslas of all models, real estate turnover, home remodels and new home builds is hard for me to fathom unless everyone truly is liquid millionaires.

    • Peanut Gallery says:

      Austin, TX?

      • JohnnySacks says:

        Boston, MA. Pick a suburb, any upscale suburb. Dumpsters, teardowns, high priced construction everywhere.

    • Jake W says:

      what is the average age of these people?

    • Sorry Fella says:

      Here in a NYC suburb (Westchester), I have seen some porsches in our neighborhood recently. The share of brand new BMWs, Mercedes Benzs, Teslas and other luxury cars has increased dramatically. I tend to go to a place in Bronx for grocery shopping (ethnic food). The place used to be a dump. Now I can see Tesla, BMW and Audis (probably used and not as frequent as in the suburb though) but still the change is pretty dramatic. Everyone seems to have gotten rich. People are buying boat loads of groceries (expensive fish, beef, goat etc.) even though prices have gone through the roof.

      Frankly, many people do not seem to care about price increases so much. If they got 100K+ in unemployment / PPP, why will they care if groceries cost 100$-500$ more per month?

      • Jake W says:

        i grew up in new rochelle, and my parents still live there. i noticed the enormous number of new luxury cars in their neighborhood this when i was visiting over christmas as well.

      • Lily Von Schtupp says:

        Grew up in Thornwood. Westchester is somehow even more ridiculous every time I drive down there. Pleasantville is starting to look like White Plains with all the luxury apartment buildings going up. I remember when that town balked at allowing a tattoo shop to open.

        The true loss of culture and the final nail in the working class coffin was the closing/tear down of the Port Chester Flea Market. Luxury homes and shopping now, no?

  12. SoCalBeachDude says:

    This thing with rising prices is just like any auction where the prices won’t rise at all without an excess of stupid bidders punching the bid button. So why do idiots scramble all over themselves to bid prices way up beyond any realm of reasonable reality?

    • John H. says:

      SCBD-

      The fear of the dollar’s ongoing decline in purchasing power leads to otherwise illogical behavior. Without the confidence instilled in consumers by a reliable currency, their actions defy the precepts the “old rationality.”

      Two deeply embedded institutions — the welfare state, and the monetary regime (centralized baking) — have united forces. The only possible result is money destruction via money printing and lack of fiscal responsibility. Are you certain that consumers who “scramble all over themselves” to move their wealth out of money (or to live it up while they still can) are “idiots?” I have to admit that I’m torn….

      The unanswerable question: onto which generation(s) will the ultimate consequences of massive money production fall?

  13. Swamp Creature says:

    Anybody experiencing some major cyberattacks on Wolf’s Web Sites, or am I the only one. McAfee caught the attacks and closed out my screen several times before any serious damage was done. This has never happened before.

    • Harvey Mushman says:

      That’s interesting. I was on this site this morning and I got a message from McAfee that my subscription has expired. When I closed the McAfee screen it closed wolfstreet.com as well. I think it happened twice, but now is okay.

      • Old Ghost says:

        “I was on this site this morning and I got a message from McAfee that my subscription has expired. When I closed the McAfee screen it closed wolfstreet.com as well. I think it happened twice, but now is okay.”

        Ditto

        • Wolf Richter says:

          People, you need to clear the “browsing history” stored in your browser, all of it every part of it, for “all time.” Deleting the browsing history is a standard feature of every browser. Go to the tools menu in your browser (top right), look for “history” and follow it.

          This should be done once a day anyway, including for privacy purposes.

        • unamused says:

          “I was on this site this morning and I got a message from McAfee that my subscription has expired.”

          It wasn’t from McAfee. That’s called spoofing. It was a phishing attack. They wanted you to give them your account information. I’m to get Hotmail and Cloudflare to close down a couple of them every week or two but it’s a lousy hobby.

    • Flea says:

      Had a problem couple moths ago

    • Hal says:

      More likely, it’s malware on YOUR box.

      • Root Farmer says:

        Hal,

        Agreed. Several times over the past 5 years I have had a problem where something attached itself to Chrome in such a way that when I reached a specific ad location on a Wolf Street article, it would hijack the browser.

        The solution was to delete Chrome and re-install. Problem solved. I don’t believe it has any relationship to Wolf Street, probably picked up elsewhere but definitely resident on my pc.

    • Wolf Richter says:

      Swamp Creature,

      Clear the entire and all history in your browser, every category for “all time”. You might have downloaded something weird without knowing it. Browsers store a gazillion megabytes of stuff that they download every time you go anywhere online. This includes all kinds of malware. Deleting the history of your browser gets rid of it.

      You should do this one a day anyway for all kinds reason, including privacy. I do it. I have two of my browsers set up to delete the browsing history automatically every time I close the browser.

      Clearing the browsing history is a standard feature on every browser. If you don’t know how to do it, ask me.

      Start here: Go to the tools menu in your browser (top right), go to “history,” and keep going until you get there.

      • Brent says:

        =clear the browsing history=

        Sometimes it is more complicated…

        Windows OS has “process explorer” inside Task Manager.I don’t need constantly running Windows Defender slowing everything down, although it is almost impossible to disable Defender in newer versions of Win 10.Nowadays special app is required, otherwise it comes back to life like f… zombie even if you disable it with Admin Tools-Group Policy.

        By looking at running processes I can spot and track malicious processes to the source and eliminate them.The most insidious crap requires accessing HDD from Linux on USB stick.Linux is not entirely useless ☺

        Android & iOS have process explorers too.

        Now, EVERY browser has their own process explorer as an unlisted developer option, which shows what processes are running INSIDE browser. It pays to take a look thereat once a while, so uninvited “guests” can be spotted and “terminated with extreme prejudice”

        “How to Use Chrome’s Built-In Task Manager”

        The only browser which never surprized me is Brave browser.

        • Wolf Richter says:

          Fine if you want to play with this stuff. But delete the browsing history regularly, and it gets rid of nearly all the stuff you pick up by general browsing on the internet, assuming you have an antivirus system in place to protect the rest of your computer.

        • phillip jeffreys says:

          Agree with comment on Brave.

          Also, AV systems are easy to bypass. Tools such as Sysinternals (or equivalent) are nice – but more is needed if the threat is sophisticated.

      • Zark Muckerberg says:

        I need someone to delete my browser history in case of death, preferably a dog

    • Depth Charge says:

      The only times I’ve ever gotten computer viruses was when I was running anti-virus software from Norton and from McAfee – at different times of course. My laptops were ruined and I had to buy new ones. I realized it was the anti-virus software which allowed the viruses, and the last 10 years I have relied up Windows Defender and nothing more, and I’ve never had a virus. Just thought I’d offer that up, for what it’s worth.

      • Wolf Richter says:

        I use Defender now on all our machines. Works fine. And it’s included in Windows for no extra fee. Norton is a mess. I hated it and finally got rid of it a couple of years ago. Best decision I ever made.

        • Hal says:

          Norton and McAfee both s#ck.

          Built-in Defender is good. Wasn’t originally, but now it does a good job. You don’t need 3rd party junk slowing your PC.

          But, best option for most people is Chromebook or Chromebox.

          Runs Chrome OS. Much less vulnerable than Windows.

          Email and web browsing is all that many people really do (Windows not needed).

          I must run Windows for professional applications I need. Nevertheless, I use a Chromebox for online banking and such. I never do any banking on Windows. Never.

        • unamused says:

          “I use Defender now on all our machines.”

          You should also use a virtual private network.

      • GSH says:

        The first thing I do when buying a new laptop is to delete the preinstalled “free” anti-virus software. Anti virus software is extremely intrusive, inserts itself in lowest critical device drivers and system software and worst of all is poorly implemented and tested. Worst pieces of software you can install on your PC. I just use MSFT’s built in anti-virus features. At least that one is regression tested will all the other MSFT software.

    • drifterprof says:

      I haven’t had any problems using Brave browser.

  14. Moosy says:

    Currently a whole new WTF level of price increases are soon in the airline tickets. Not the 10, 20 30% but multiples.

    2 months out round trip SFO -JFK easily $1500 as cheapest rate.

    United, SW, they are all short on pilots and crew and all flights are filled to the top and be told that more crunching to come.

    • Harvey Mushman says:

      I’m seeing it play out at work big time. We buy semi-conductors for the electronic products that we produce and sell. The biggest problem we are having is with the company “Microchip”. We buy micro-controllers from them. They keep pushing out delivery dates. Also, some parts that used to sell for $1.20 are now selling for $120.00. Pretty soon we will lose money on many of the products that we sell. I think these kinds of problems are starting to sink in with the Gov. I think they will be getting very serious about fighting inflation.

      • Prosci says:

        I can attest to the unsustainable situation in electronics. It’s not just microchip. TI, Atmel, Xilinx, Altera and many more are quoting 52 to 104 week lead times. I have customers buying development kit assemblies just to harvest parts for reuse on their product. It appears demand destruction is just around the corner.

        • Wolf Richter says:

          At least you guys have lead times. My Wolf Street beer mugs don’t even have lead times. I still can’t even get a production date confirmed. I ordered them on May 31, 2021!

      • GSH says:

        Just give it a year or so. There will be an extreme semiconductor glut. Way too many fabs are being built. Linear extrapolation, short-term thinking and “free” government money again.

    • Marcus Aurelius says:

      Imagine you run an airline. Are you sick of running flight NOT at 100%”?

      Solution?

      Cancel flights. The stupid cheap public will have to take what you (and the other Airlines) offer.

      Flight cancelled? Why should you care
      Passengers angry? Why should you care
      Passengers have to wait, rebook? Why should you care

      What is happening now is brilliant. Flights at 100%. Brilliant.

      As for the Public?

      “The Public Be Damned”…William Vanderbilt, around 1880.

    • phillip jeffreys says:

      Bidniz or vacation travel?

  15. cas127 says:

    Wolf,

    Maybe it is just me, but I *think* what I *think* was your main point may have gotten muddled/lost here…spending (all/subset) is actually *down* net of inflation.

    If that is accurate, making it crystal clear in simple terms is very much worthwhile.

    Because it highlights that the economy is *not* improving, it is regressing (once shorn of the illusion that US money printing creates).

    (The details are valuable…but simple, dramatic statements of the truth are what pulls them in. Here, I am getting a bit confused by your desire to cover the waterfront exhaustively.)

    • Wisdom Seeker says:

      I got the same feeling. If this particular part of the article could be made into a graph, it could be the “money shot” for a whole new article:

      “On a year-over-year basis, there is nothing mixed about this, with durable goods inflation up 17.4% and non-durable goods inflation up 13.1% compared to the 7.0% increase in retail sales.”

      Translation: real retail sales were down 6-10% year-over-year.

      Inference: retail is in an inflationary recession.
      Supporting evidence: shipping is also in a recession

    • Wolf Richter says:

      That’s not the conclusion. There are three things here:

      1. Month to month, retail spending may have been higher net of inflation in March, but I cannot put a good number to it (for the reason explained below) — hence my expression “mixed.” Because durable goods inflation in March was actually negative (CPI durable goods -0.9%), on a sharp drop in used vehicle prices and flat new vehicle prices. The majority of retail spending goes to durable goods. Nondurable goods CPI was up sharply (food, energy), and so that pulled into the other direction. So I’m not sure how that totaled out.

      2. Year-over-year, retail spending net of inflation was way down. But retail is only about 25% of total consumer spending.

      3. The other 75% of consumer spending include services, and there, spending is RED HOT, as I pointed out, because spending has shifted from pandemic goods to services, as I pointed out. We will get March spending on services shortly. I expect it to be up by 12% yoy or more. In February is was up 12.4%, as I pointed out, all in the first paragraph. Services CPI in March was 5.1%

      But note: The retail categories here are by retailer, such as “General merchandise stores,” not by product, as are the CPI categories. So you cannot easily convert CPI inflation into retail inflation. I just gave some approximation.

      • Harry Houndstooth says:

        Pure wisdom dispensed daily. Where else can you find an exquisite dissection of the data?

        Wolfstreet Mug BID $250, ASK $525
        harryhoundstooth at yahoo dot com to post a BID or ASK.

        Recession dead ahead.

        Expect Ukraine to win the war. Two Ukrainian built cruise missiles sank the $750 Million (according to Forbes) Black Sea Russian flagship. Putin’s blunder will go down in history. He might be behind bars.

        Another boat of nearly equal price (largest yacht in the world) was seized by Germany from one of Putin’s oligarchs. Not a good day for Putin.

  16. fred flintstone says:

    Where is all this cash coming from? Lots of good answers so far above.
    Add…….up until a month ago the government was printing huge sums of cash and having it monetized by the fed. Then there are all those loans being created at crazy ass rates well below the inflation rate.
    Let there be no doubt……..JP and his crowd wanted to destroy the middle class…….the first step was to make them totally dependent…….no savings or reserves………the next step will be a reduction of their wages. Below market rates for a decade nearly accomplished number 1…….inflation raging which might rage for longer than anyone expects……number 2.
    Vote for whoever you want……makes no matter…….

    • ru82 says:

      There is still a lot of cash in the system. Saving deposits at commercial banks was 1 trillion before covid. It jumped to 3.5 trillion during covid stimulus. The jump was because people were working from home and not hardly spending money on things like cars/vacations and this money was going into savings. Plus the stimulus went to savings.

      Then as the lockdown ended, money was spent like crazy as shown in Wolf’s charts. 1.5 Trillion of the 3.5 trillion has been spent but consumers still have an excess of 1 trillion?

      Plus add in trillions of gains in cryptos and the stock market (even though both are down YTD…they are up a lot pre covid) .

      I know a minimum wage lawn care guy who made $90k on cryptos last year and went out and bought a new car with part of his gains.

      • ru82 says:

        I am just guessing but because of the reasons (plus add in mortgage forbearance and student loan forbearance) I just listed above, the consumer probably accumulated 4 or 5 years worth of disposable income in 12 months months because of covid? They have been spending it. Add to the equation supply chain disruptions you have a big increase in inflation.

        All this has to unwind. It may take a year or two?

  17. Dudu says:

    Everything is up except salaries / wages (excluding poverty level wage)

    I think the plan is on the right track to make everyone poor.
    Poor people consume less, just enough money to afford food and be slave to the system and lords.

    • phillip jeffreys says:

      Unless, of course, they decide to fight back. There’s a whole history of that in Europe. Wouldn’t be surprised, given EU “shoot self in foot” energy/climate policies that civil unrest escalates appreciably.

      Harder to predict in US. Depends in part on where reset of global finance system settles – we’re at the front end of that process right now.

  18. SnotFroth says:

    I spoke with someone who recently returned from a business trip to Las Vegas. He was blown away by the profligacy and conspicuous excesses that he witnessed. PPP and stimmies and wealth effect have officially made their way to the blackjack tables.

    • Jake W says:

      so basically, we took all of the goodwill we had built up since ww2 and threw it all away by printing trillions for no reason and handing it out. the effects on the dollar, worldwide, are now being seen. people don’t trust it the way they used to.

      • Flea says:

        No swift system created a wary global situation ,where your possessions can be confiscated

      • Anthony A. says:

        Not only don’t they trust us anymore, the really don’t like Americans. Period.

        • Flea says:

          We Americans are good and generous people ,with a government on a different agenda

      • Augustus Frost says:

        I don’t think the US has lost global goodwill primarily from “printing”.

        It’s due to foreign policy belligerence and extraterritorial application of US law. The US supported “rules based order” applies to everyone else but not the US who does whatever it damn well pleases when it chooses to do it.

        • Jake W says:

          but they’re related, don’t you see? when you’re the reserve currency, you have a moral obligation not to print away its value, which is effectively stealing foreign reserves. printing is a manifestation of “the rules don’t apply to us.”

        • Augustus Frost says:

          I don’t disagree with you. I’m telling you that the overwhelming majority aren’t even aware of what we are talking about. They notice higher prices but mostly have no clue that the FRB is contributing to inflation in their country.

      • phillip jeffreys says:

        That happens when you unilaterally freeze foreign exchange assets and export dollar devaluation for decades! The sanctions may be well intended but they are precipitating, perhaps intentionally, global reset (excuse the term pls) of the international finance system. US is going to be on the losing end of this when the dust settles.

        • Augustus Frost says:

          I don’t believe the sanctions are well intended. Remember, we’re talking about a bunch of psychopaths who claim fake moral superiority but are actually intent on controlling every single square inch on the planet. That’s US foreign policy in reality.

          The people behind the “global reset” aren’t monolithic. Not sure how divided they are but the approach sure isn’t coherent.

          They are destroying the source of their power base (US and/or Western civilization) which is the visible reason why they aren’t going in charge later. They will mostly or entirely be cast aside when the center of geopolitical influence shifts. My opinion is first to the far east centered on China and then back to the Middle East where it started.

          I’m guessing the US will lose its leading position by mid-century. I’m 57 but after I’m gone, the US is on the path to becoming a 3rd world Balkanized environment, likely not a single political entity.

          The collective policies and cultural changes occurring now are an absolute long-term disaster.

          To anyone who thinks the long-term changes will be an improvement over the past, I wish them a very long life so that they can experience the consequences of these supposed improvements.

        • unamused says:

          “the US is on the path to becoming a 3rd world Balkanized environment”

          Maybe, but in the likeliest scenario it will have the worst features of the dystopias described in ‘1984’ and ‘Brave New World’ before it degenerates into something with the worst features of ‘Lord of the Flies’ and McCarthy’s ‘The Road’.

          Try ‘Orwell knew: we willingly buy the screens that are used against us’ by Henry Cowles. In due course the bizarre two-hour political rants you have now will be abbreviated into the promised Two Minutes of Hate.

          What time is it on a bright cold day in April, and the clocks are striking thirteen?

        • dang says:

          What I always have to keep in mind is that the cost of maintaining the status as the reserve currency is running a trade deficit based on the dollar as the currency.

          By the simple GDP model, GDP = C+G+(E-I}

          Exports – Imports is negative to maintain the status of the reserve currency. Assuming that we would like to continue consuming C automatically requires that we run a trade deficit.

        • Wolf Richter says:

          dang,

          That theory is BS and has been debunked a gazillion times, including by the euro which is the second largest reserve currency, with a share of 21% compared to the dollar’s share of 58.8%, and yet the euro area has a HUGE trade surplus with the rest of the world.

          https://wolfstreet.com/2022/04/02/us-dollars-status-as-global-reserve-currency-drops-to-26-year-low-slowly-but-surely/

        • dang says:

          I don’t agree the US will lose the pissing match over the nothing burger sanctions, imposed on the midget Russian economy. My concern is that we will make a decent society suffer for the sins of a despot who is a necessary stepping stone in the evolution of the society becoming a worthy friend.

          How can Democracy flourish when we strangle the opportunity. Meanwhile, the home boy despots are grabbing everything that is not nailed down.

          I recommend we worry more about the latter one.

    • Dorothea Lange says:

      I’m sorry, but how do you know it was stimmies and PPP? Did you interview everyone at the blackjack, craps, and roulette tables and ask them where they got their money?

      I don’t know much about PPP loans (wouldn’t have qualified), but the “every person” stimulus checks and unemployment add-ons ended months ago. I seriously doubt many parents took their child’s credit checks, saved them up from when they ended in December and used them to bet on Red at the Bellagio.

      I’d be more disposed to believe people employed in high-dollar jobs are gambling their paychecks for recreation. I could also believe that some people are rich with money sourced from real estate, either flips or selling their houses, etc. I could see that as wealth effect, the way the Japanese hit casinos did back in the 80s, showing up at the tables with wads of $100 bills.

      • SnotFroth says:

        Yeah, it’s an assumption obviously, and a sound one. How else does a global pandemic and economic disruption lead to such an explosion of “wealth” and spending?

        PPP and stimmies were the conduits for money to be delivered right into the vein of the economy. We had low interest rates and QE for 10 years prior to this and demand was generally stable. Now we have new cars everywhere, big jumps in consumer spending, CPI at 8.5%, and Vegas is a zoo. I would also point to the recent big debaucherous crypto party in Miami.

        I know plenty of stimmy checks that went straight into speculation in financial markets — wealth effect. Funny how the rise of the “retail investor” (aka r/WallStreetBets) coincided with this period of history.

        But hey, maybe it wasn’t the billions of dollars rushed blindly into the real economy over the last couple years, but rather just a dramatic increase in “high-dollar jobs”.

      • Augustus Frost says:

        The economy was mediocre to poor even with prior fake generated economic activity and an asset mania (2009-2020) and is now miraculously so much better.

        Yes, it makes total sense that shutting down a good part of the economy on one end (March 2020) leads to an organic boom on the other, doesn’t it?

        • jm says:

          Every so often, when the stock market drops a few percent, you’ll read that some number of trillions of dollars of wealth has been lost. That means that when the Fed goosed the stock market up by that number of percent, it handed that same number of trillions of dollars to stockholders, who are mostly in the top 10% of the nation in wealth to begin with. As the Fed has goosed the stock market by many tens of percent, it has gifted many trillions of dollars of paper “wealth” to the top few percent.

      • jm says:

        IIRC, $80 billion was extracted from home equity a few months ago through home equity loans, as mortgage interest rates were starting to rise. Lots of people cashing in on the red-hot inflation in housing prices.

        Also, lots of profit-taking through the sell-off in the stock market, with many stockholders even so still feeling rich due to the incredible kiting of the market to absurd P/E ratios by the Fed. Even with the decline, a lot of people are still sitting on huge profits.

      • phillip jeffreys says:

        And yet the. middle to lower classes spend billions on various lotteries. Behavioral analysis can be a tricky subject.

      • Curious says:

        I know a very wealthy family here who received over 500k+ in PPP.
        They never closed throughout the pandemic. If anything their business was booming because they refused to close and this county never enforced anything. Did they need the money? Absolutely not. They already had multiple brand new Benzs every two years, multi million dollar homes, vacation home on the wealthiest part of the California coast and another vacation home in the mountains. Now they are even richer….

        • Happy1 says:

          That 500K for a wealthy family is likely dwarfed by the value of the stock market run-up, that is if they are truly wealthy, they might have 500K of PPP and 10 million in stock bubble equity.

      • Happy1 says:

        I think the stock market run-up from the bottom in April 2020 is the major factor. Many people saw their net worth nominally double in about 12 months. Other bubbles in crypto are also contributing. PPP for most people I know did actually keep them (their business that is) whole for the roughly 3 months downturn, but the crazy bubble in stock is the most likely culprit.

  19. Don says:

    Oh goody. We get to share the roads with more crack heads on angel dust relying on auto pilot coming back from Humbug Mountain on the way to a battery inferno. Thanks for the heads up.

  20. andy says:

    So what you’re saying they are criminals. Just say so already.

    • Wisoot says:

      Yes as you and I understand the definition of a criminal – acting outside of agreed and documented socially acceptable behavior.
      This pink full.moon of libra focused on justice. Heart felt. Those without heart suffer. Their way is – what a surprise – not the only way. They are too numb to know it.

  21. Michael Gorback says:

    I think we’re getting to the point where shrinkflation is kicking in as well. Toilet paper is getting so narrow that pretty soon we’ll be torn between buying a roll of stamps vs a roll of toilet paper.

  22. Franz Beckenbauer says:

    The 10y treasury yield just broke its truly historic downtrend to the upside.

    And it will take everything down.

    Except – well, you know.

    How many ounces and in what form is all that counts now.

    • Wolf Richter says:

      I’m looking forward to buying some 10-year Treasury notes when the yield is even higher. But it will have to go quite a bit higher before I’m interested.

  23. Anthony says:

    There is another side yet to hit fully in USA inflation. If Europe and other places are willing to pay more for natural gas and refined oil products (than those living in the USA,) then USA and world producers would, naturally, prefer to sell to Europe. Eventually this will increase the cost of these products in the USA, therefore, adding to inflation…..

    Does this make sense ????

    • SnakeEater says:

      Already happening. Check both TTF/UK gas futures contracts and look at US Nat Gas side by side. US Nat Gas has doubled in price since the start of the year and has been hockey sticking it’s way up since then. Euro nat gas is actually down since the start of the invasion and still falling.

    • phillip jeffreys says:

      If there is adequate pipeline and shipping capacity. Serious doubts in that regard.

  24. Beardawg says:

    Interesting comments on where the stimmies came from, went and are still going. The PPP should have been PPPP, with “peculiar” as the 1st “P.”

    I have never seen anything like it – George W and Trump gave us those $600 to $1400 checks and that was great I suppose, but we all have stories of businesses receiving LOTS of arguably unneeded $$$ – I can think of 2 myself. As a musician, I got a massive $1600 forgivable PPP.

    I can’t shake the parallels with the 2008-2012 housing crisis, or perhaps more aptly stated, the “loan” crisis. We all knew people jingle mailing their keys to lenders when they had solid employment / ability to pay etc. It incensed me to no end. They were walking away from the miniscule down payments they made, but then they bought the same (or similar) home for half the price !!

    However, we (the collective public) soon turned our anger focus on the banks / appraisers / loan brokers who made tons of fees on the unsuspecting (and unqualified) buyers. It’s interesting to see how the green light moves from shining on one pile of greed to another.

    The “peculiar” PPP was designed to benefit small / medium business owners and it seems to have achieved its intention. One might argue those (mostly) backbone business owners, and to a smaller extent their employees, were the most deserving of those windfalls – if some of them played it out at the casino (literally), bought a luxury car or a house ……who was more deserving – a Wall Street bank?

    Bottom 50% got the stimmies and the inflated unemployment – small biz got the PPPs – the Top 10% got richer. The green light can be shone on all or none.

    • Augustus Frost says:

      I don’t believe anyone knows how effective PPP was in achieving the stated goals. How is that possible given the scale of the program and lack of accountability?

      It was a giant slush fund. I am completely against free handouts (for anyone) but understood the need to keep small business from completely collapsing.

      I wouldn’t be in favor of it a second time, ever.

      • SnakeEater says:

        As the owner of a small business of about 15 employees, we took the PPP loans. But we were essentially forced to by the government because we weren’t considered an essential business for 2 months in the state we operate in. Our PPP loans were used in the midst of forced closures, and on top of that we have to compete. If all of our competitors are getting free money, we have no choice but to engage in the shenanigans of free money.

        It bugs me as a small business owner because we had stashed a decent amount of cash in order to weather a scenario in which we might have had to shut operations for up to 6 months; cash that could’ve been used to invest in assets when they were cheap. Other companies choose to run ridiculously tight margins and those companies got bailed out by the government. I would have loved a scenario where the gov didn’t bail anyone out because all of our competitors would’ve gotten crushed.

        But once our competitors start taking free money, our hands are tied because we are forced to compete. I would hope that we as a society have learned some hard lessons about bailing out insolvent businesses, but it appears like that hasn’t happened. All we can do is hope that something doesn’t get passed like that again. Otherwise in 20 years there will be only 3 places to shop: Amazon, Costco, and Walmart.

        • Augustus Frost says:

          I understand your issue. I don’t believe “non-essential” businesses should have ever been required to shut down.

          IMO, if any limitations were necessary, limit it to environments with large numbers of people in close proximity.

          I also would not have given PPP for payroll at all, though this is the problem with this type of program since money is fungible.

          It’s insane that some employees were made whole through PPP while others were not through unemployment. I would not have given any stimulus payments either.

        • Happy1 says:

          This mirrors my business (medical) experience. We are an essential business, but experienced the equivalent of 2 months of lost revenue in 2020. The PPP and HHS programs enabled us to retain all 12 employees and our revenue for 2020 was essentially held even as if we had not lost 2 months of revenue. We would have likely kept all employees without the loans but would certainly have furloughed without pay otherwise.

    • Marcus Aurelius says:

      At the time of the first PPP nobody knew what would happen. The Government, in it’s desperation, fear, and desire for Votes, created the PPP.

      It was wrong, unjust and the Government had no business creating Trillions in empty credits and giving them to some people, and not others. If you owned a company, you got money. If you worked for that company, you got nothing.

      A business that did not “take it” was being foolish and not running a business properly. It wasn’t until months, or even a year later, that we learned who went under and who didn’t.

      The PPP was originally a loan, but then they changed it. No recipient asked for that change. So, who among us would give it back? Would you?

      No.

      So stop the moralizing. This is business. Not personal. You want $100,000 from the gov or not. Harvard University got something like 10 Million. Nancy Pelosi’s family businesses got PPP money. It’s wrong, but legal, so when are you returning your unused PPP?

      Never.

      If you used it as the Government told you, then you got the “forgiveness”.

      I remember talking with my accountant about all these “programs”. She said: “The Government is shoveling money out as fast as they can.:

      • TheAltonRoute says:

        I understand what you’re saying.

        We didn’t apply for any government money. Some of the local banks tried to get us to apply for PPP money, though. We were considered an “essential business.” 2020 was a very good year.

  25. The Colorado Kid says:

    Just an anecdote to add because I think this is probably pretty common and accounts for some of the spending, as well as being indicative of the current mindset.

    Have a friend whose son had a good govt. job and quit to be a househusband (3 little kids). His wife is a veterinarian. They sold their house and intended to put the proceeds into a cheaper house, paying off student loans etc. but after the fact couldn’t find one cheaper, so bought a new one instead (because they deserve the best, though it looks like crap construction).

    They took their equity from the previous house to buy a new pickup, furniture (wouldn’t buy used even though their local Habitat for Humanity has many treasures from nearby Aspen at low prices), etc.

    So now they have more debt but with only one income and no house equity and a higher mortgage. They live in such a small town that if she ever loses her job, there won’t be another. They’re in their early 40’s – he’s going to start experiencing age discrimination one of these years if he tries to go back to work, plus his degree is in a field that’s hard to find jobs in (geology). But right now they’re very happy.

    SMH

    • Curious says:

      My friend bought a brand new 45K car based on Etsy income from a tie-dye sweat suit business. I told her, hey, be careful, you’re making a five year financed purchased based on money your making on a fast fashion trend. She replied that she knows fashion.

      Fast forward two years…. her sales are down drastically.

      Told you so?

    • Anthony A. says:

      Don’t worry, once the one job craters, they can collect UE for a year or so, then with three little ones, qualify for good welfare and some really good Medicaid bennies forever. And, love fixes everything. Only in America can a family pull this off.

    • dang says:

      No kidding. I went to Flint Michigan and noticed they were wasting a lot of money just like the people I observed in Baltimore the previous week. Dining large at Mickey D’s.

      No wonder they need a raise causing inflation.

  26. Michael Engel says:

    1) JP might raise interest rates in May by 0.50. By another 0.50
    soon after. Madam ECB don’t care. She kept the deposit rates at minus 0.50.
    2) Buy a house today, because mortgage rates will rise to 6.5% – 7%..
    3) Speculators : Buy T bills today, because in May the 1M will be higher by 0.50.
    4) Yesterday the German 3M fell to minus 0.70 and the German 2Y is zero.
    5) The German front end is hooked to minus 0.50.
    6) US front end to 1.25% – 1.50 in the third quarter. Gravity between US and Germany will pull their 10Y together.
    7) The German 10Y might rise to 1.00%- 1.25%, US 10Y might drop to 2.5%.
    8) US 2Y/10Y will be inverted, because speculators screwed up the front end.

  27. Curious says:

    My friend bought a brand new 45K car based on Etsy income from a tie-dye sweat suit business. I told her, hey, be careful, you’re making a five year financed purchase based on money you’re making on a fast fashion trend. She replied that she knows fashion.

    Fast forward two years…. her sales are down drastically.

    Told you so?

  28. RT says:

    The amount of sales in $USD is going up in many categories. However, I wonder if there’s any data on the amount of goods that are actually being sold compare to previous years?

    For example, how many gallons of gasoline and diesel were sold this month compare to previous month? This data may be harder to come by, but compare the gallons of fuel sold would give us another aspect on how the economy is doing.

    We are all paying more at the pump, but are we still driving the same amount as back in Jan or as in last year? Are we still buying the same amount of food in the grocery stores?

    Another question is when would we see our purchasing behavior change due to the rising cost/inflation?

    • Old Ghost says:

      RT. Yes, it would be great to have info about how many gallons of gas are sold at the pump per day, and if the number of gallons purchased is declining, or rising.

      We are paying less per gallon here in Wisconsin than we did back in March. The station I filled up at last week has come down another 3¢ so either production is up, or people are buying less.

      • RT says:

        Here where I live, we are still paying about 50c to 70c above what we paid at the beginning of the year. It’s a little less than the peak during March, but it is still way above $3 per gallon.

        I am just wondering if the price really affected how people are driving right now. But even for my family, we are no driving less. We are actually driving more due to all the activities that comes with spring.

        • dang says:

          I am just wondering how the heck the price of gasoline is sticking at 4.50 while the price of oil contracts on the futures exchange, which price skyrocketed for a few days, causing the whole price increase of gasoline, has since fallen back to the previous level while the price of gasoline has dropped a penny.

          I resist thinking it’s all that Fed liquidity, sitting in the reserves of the criminal banks who operate under the strict rules of the USG and would never run a scam that would generate excess profits.

          To think they would even use that fallow money to take grandma’s money is despicable.

  29. Phil says:

    I’ve noticed that the people who refer to Biden as sleepy Joe have detached from reality pretty severely over the last year, on a broad range of topics including the value of vaccines, science, immunology, legitimate political discourse, how elections work, American and world history, etc etc etc. It’s quite possible economic theory is just another realm where they are losing the plot.

  30. unamused says:

    I find it interesting that Americans would go hog wild buying up stuff and then buy plane tickets to get away from all the stuff they just bought.

    US suburbanites are notorious for storing their junk in the garage and parking the Lexus on the street, which if you think about it is exactly backwards.

    • 91B20 1stCav (AUS) says:

      dammit, una!-once again a WS comment has resulted in the massive expectoration of my cuppa…

      may we all find a better day.

  31. dang says:

    I agree with most of your analysis of the data as presented by you.

    Therefore, I reaffirmed my sense that the cause of inflation is the excess liquidity in the economy by a continuing discretionary Federal Reserve policy that promotes the interests of a private industry that sets excess prices on a huge majority of citizens.

    • dang says:

      The PR and corporate media, suggest that people should just com down about the inflation that is ravaging their dreams for the future of our country, the kids. The $1 dolla increase in your 8.25 per hour job at 62 hours per week is highway robbery, causing inflation.

      You have saved 3 weeks of your paycheck while it used to be zero, which is inflation.

      A five or six million slush fund in the reserve accounts of the criminal banks whose gambling debts exceeded their gambling winnings and trained their regulator, the Fed, that zero percent interest rates were intelligent policy just like AAA mbs way back in 08. Not inflationary and the very suggestion it might be is uncouth and loutish, not to mention ill bred,

      • dang says:

        Sorry, should read “five or six trillion dollar slush fund” rather million. Dr. made a similar mistake while negotiating with the world leaders about the total destruction of the earth.

    • dang says:

      Wait a minute, isn’t Federal Reserve like the go to gold standard of impeccable probity, like the FBI ?

      Well Officer Timmy, sometimes the world seems crazy and confusing. Remember, the adults always have your best interests at heart and will always make the right decisions that will ensure that your service to the country will be respected and rewarded.

      Well, why do the kids on Pacific Avenue and Park Place always have so much money than me living on the purple street.

      Well, Jimmy, it’s simple economics, as determined by the people whose life experience is much greater than yours. They’ve earned it the old fashioned way.

      Hard work.

      • dang says:

        Well, my mom got a ticket the other day so we couldn’t have bologni for a few days to pay the ticket.

        Well, Billy, the police officer that ticketed your mother, speeding after she dropped you off, like all of the speeders, claimed she was trying to get to work on time, so she didn’t get fired for being late, was absolutely right in making sure that lawlessness doesn’t grip this country.

        The law is sacrosanct, the very foundation of the common effort that sets our country above other countries. Just like our prohibition against of directed distribution of public funds to politically potent self interested groups, Hallelujah.

      • 91B20 1stCav (AUS) says:

        dang-you missed ‘…and inheritance…’ after ‘Hard work’. (yeah, i know. ‘/s’ button is always engaged).

        may we all find a better day.

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