The FED believes that they are all knowing and that they can never be held accountable!

There is a growing consensus in Congress that the only way to fix the worst economic downturn in more than 75 years is by giving out more “bailout” free money to many who do not even need it.  From Placating Biden to Grandma “financial-elite-kiss-ass” Yellen, to most elitist members of Congress, there is a demand for more and more reckless and ill throughout “stimulus.”  They have failed repeatedly to understand the primary reason the previous bailout programs failed is that the stimulus does not lead to real sustained organic growth (just thoughtless consumption).

Let us assume that Congress capitulates and passes something close to Biden’s massive deficit/debt stimulus proposal of $1.9 trillion, that will boost the cumulative amount of fiscal stimulus in the past 12 months to ~$5.0 trillion, (in basically three tranches $2.2 trillion, $900 billion, and $1.9 trillion; hardly chump change as this will be NEW-Debt). As I have previously mentioned in the past year, nominal GDP totaled ~$21 trillion, so the cumulative injection of fiscal stimulus amounts to almost 25% of GDP [this does not even account for the FED’s massive Q/E etc.]. This is historic deficit/debt spending as nothing in modern times even comes close, especially during peace time.

This past March, as the economy was shut down “nasty knee jerk reaction” due to the Covid-19 pandemic, the Demigods / Financial-Supermen at the FED leaped into action and flooded the system with liquidity. At the same time, Congress passed a massive ad hoc ill-thought-through $2.2 trillion fiscal stimulus bill that significantly expanded unemployment benefits and sent massive “free” [never free as taxpayers are on the hook for the debt] checks directly to households. Then in December, the King Trump administration hit the economy with another $900 billion in easy money bailouts. Now, the Placating Biden administration is looking to enhance those massive “bailouts” with another $1.9 trillion. It does not take a formal degree in financial physics to understand that with such massive free-flowing money pouring into household’s (many freeloading young adults) it is not surprising the pro forma economy rebounded via GDP calculations etc. the surge in the 3^rd quarter, and surging stock market basically responded directly responded to both the fiscal and monetary stimulus supplied. The chart below adds the percentage change in yo massive historic Federal deficit/debt expenditures.

The massive spike in 2020/Q2 in Federal Expenditure was from the initial CARES Act massive expenditures. In 2020/Q1, the US Government spent about $4.9 trillion which was up ~$86 billion from 2019/Q4. Then bang in 2020/Q2, it increased significantly due to the passage of the CARES Act. As massive government spending for 2020/Q2 jumped to $9.1 trillion, which is a staggering ~$4.2 trillion increase over 2020/Q1. Now in 2020/Q3 and 2020/Q4, spending was still substantially well above normal levels running at $7.2 trillion and $6.0 trillion respectively...this is a massive increase in debt that taxpayers are on the hook for. 

The rate of change in deficit/debt spending is declining along with economic growth rates. That is the “nasty-derivative” effect of manipulative growth which is already undermining both fiscal and monetary stimulus. This is ultimately the problem with all debt-supported fiscal and monetary programs. The problem with monetary interventions, like direct checks to households, is that while it may provide a short-term romp-up in spending, it does not promote real economic confidence. The reason that stimulus payments do not improve real consumer confidence is due to the fact that such payments were a one-time bailout benefit. What increases economic prosperity and confidence is real decent “benefited” employment and real wage growth greater than real inflation. Such is the problem with this artificial band aid stimulus.

In a real expanding economic cycle individual must produce first before they can consume. While stimulus bypasses the “production” part of the equation creating short-term demand for consumption, such does not create the repeatable demand process necessary for businesses to increase employment.  If businesses especially small businesses were expecting a massive surge in “pent up” demand, they would be doing several things to prepare for it including planning to increase capital expenditures to meet the expected new demand. Unfortunately, these expectations had peaked in 2018 and are dropping again. The massive negative contagion as I see it with reckless stimulus is that it is based on increasing deficit/debt levels to provide the short-term “happy” feeling associated with it.  It is not economically feasible to use more and more deficit/debt spending to create so-called growth as the increase in debt required to fund and refund said pro forma growth also needs to increase and there is no historical precedent, that shows increased deficit/debt levels lead to more robust rates of economic growth or prosperity “just the opposite is true”. With economic growth rates now at the lowest levels on record, the massive surge and change in debt continues to divert more tax dollars away from real productive investments into the service of said massive debt and social welfare “bailout” programs...over the past several decades it has taken an increasing amount of new debt to generate each dollar of economic growth, and now for each $1.00 of debt we get about $0.60 of growth.  Such is why the idiots at the FED have found themselves in a massive “liquidity trap” as interest rates MUST remain at/near historic lows, and debt MUST grow faster than the real economy, just to keep the economy from stalling out. The Keynesian “BS” premise that “more money in people’s pockets” will drive up consumer spending (is only temporally a truth), with a short-term boost to GDP never a sustained one as that result, has never materialized and they have been consistently wrong in the longer-view! Given the massive scale of fiscal stimulus, we should normally expect the FED to be thinking of raising rates but not this FED who serves to brazenly enrich the elite/most-wealthy as the Powell Fed is using the same stupid playbook from the TBTF Banker led Great Financial Recession, providing unneeded stimulus to the red-hot housing market their economic and financial endgame is interesting as it is hard to see anything but another massive housing “boom-bust” scenario playing out and rising market interest rates in 2021 and early 2022, followed by an likely serious bust in late 2022 into 2023 when the massive fiscal stimulus/support dries up.