Dear Reader,
Mr. Michael Lebovitz of Real Investment Advice:
- China, Britain, Europe, and other countries and regions are experiencing sluggish economic growth and, in some cases, contraction. At the same time, the US continues its strong post-pandemic growth pace. Has the US economy diverged from the global economy, or are a lot of economic canaries in coal mines keeling over and warning the US is soon to catch down?
That is the question hagriding my mind this Friday evening.
Has the US economy diverged from the global economy, or are a lot of economic canaries in coal mines keeling over and warning the US is soon to catch down?
I wager on option #2. I do not subscribe to the divergence theory. I subscribe instead to the canary theory.
That is because I believe the United States economy goes along largely under false steam.
It has been pushed along by the gimmicks and tricks of the fiscal and monetary authorities.
More Costly Than the New Deal and World War II Combined
Other nations of the world have resorted to their own gimmicks and tricks.
Yet they are nothing against the gimmicks and tricks of the United States.
Let us consider the monetary fiscal deliriums of the pandemic. Mr. Lebovitz:
- One large differentiator between paltry European growth and growth in the US is in the fiscal response to the pandemic. The US flooded its economy with stimulus during and well after the initial sting of the pandemic. Consumers were provided with funds and many other financial benefits… While the European Union and its nations also stimulated economic activity, the amounts were much less.
Here the fellow cites The Atlantic:
- The UK and Germany spent more than $500 billion. France spent $235 billion, Italy $216 billion. But the United States was in a league of its own, spending an astonishing $5 trillion on pandemic relief. That’s more, even in today’s dollars, than America spent on the New Deal and World War II combined — and, crucially, it’s more than double what most European countries spent on pandemic relief relative to the sizes of their respective economies.
More than America spent on the New Deal and World War II combined — even in today’s dollars!
How do you like it?
High Water Is Receding
Yet fiscal policy runs to lags.
You may open the fiscal sluice gates. Yet the waters do not instantly wash over the crannies and nooks of an entire economy.
The flooding requires time. And high water recedes ultimately.
I believe high water has already registered. And it is receding.
One indication — in my telling — is receding savings.
Americans have run through their pandemic savings. They presently forage beneath sofa pillows for strayed coins.
I recently cited Statista. Today I cite Statista again:
- American households accumulated $2.1 trillion in excess savings between March 2020 and August 2021…
- Three inflation-plagued years later, Americans have burned through those excess savings, and then some.
- At the end of September 2024, Americans had collectively saved $291 billion less since March 2020 than they would have been projected to if the pandemic had never happened.
Record Credit Card Debt
Thus we learn that United States credit card balances swelled $24 billion in 2024’s third quarter — 8.1% above 2023’s third quarter.
Meantime, United States credit card debt presently exceeds $1.17 trillion. That figure, incidentally, registers a record.
That record figure will very likely expand. Are you aware the average interest rate on credit cards runs to 20.35%?
Well friend, it does.
Here is a question, somewhat related:
If the economic apparatus was purring along at full hum… why did the nation beg off a Kamala Harris presidency?
After all, a throbbing economy favors the incumbent party. Yet the nation yanked a collective lever for the challenger.
Macroeconomist Peter Schiff:
- If consumers were in the greatest shape ever… they would have voted for Kamala. They wouldn’t have tried to get rid of her because things are supposedly so awful, and they’re hoping that Trump would change things…
- It’s like you’re lying in a hospital bed, plugged into all kinds of artificial life support, tubes in your mouth, tubes in your nose, blood going intravenously into your body, and you ask the doctor, ‘What’s going on?’
- ‘You’re in great shape, absolutely perfectly healthy, except if we unplug anything you’re going to drop dead.’
The Bill
Some time later your insurance company mails you your medical bill.
You open the envelope, glance at the figure… and plunge instantly into cardiac arrest.
You are on the floor in a heap.
The American taxpayer will pay an extravagant price for the $5 trillion Uncle Samuel so kindly shoveled out during the plague.
He too will plunge into cardiac arrest.
The free lunch has no existence, after all.
Uncle Samuel did not merely spend $5 trillion during the plague — again, more than he shoveled out for the New Deal and World War II combined — even in today’s dollars.
He heavily borrowed it. Thus the deadbeat old rake plummeted even deeper into debt.
That debt requires servicing.
For the first occasion in United States history… 2024 interest payments on its debt will exceed $1 trillion.
And at current settings, its economy cannot hold pace.
Hope
Perhaps a President Trump can get his shoe on the economic accelerator.
Is it hope you seek? Then hope you will have.
United States Leading Economic Indicators run positive for the first occasion in two years.
They no longer indicate recession — despite the savings and credit card data listed above.
There is your hope. Yet I am fond to cite Herr Nietzsche:
“Hope in reality is the worst of all evils because it prolongs the torments of man.”
And my torments are unenduringly prolonged.
Regards,
Brian Maher
for Freedom Financial News
