Inflation: Return of a Plague



Experience has once again verified Friedman’s and Lucas’s theories, reducing to nothing the naïve propositions of Modern Monetary Theory, a recent delusion of the American Left. According to this unscientific, ahistorical theory, legislatures can control the production of money and distribute it in a way that satisfies all needs, with no destructive consequences from expanding the money supply. The question of reimbursing a gigantic public debt is not supposed to arise, because no one can force the government to pay what it owes. But this magical solution, adopted in part by Joe Biden, ignores the fact that public debt produces inflation and that a debt that is not repaid, as in the case of Argentina, eventually ruins the currency. All this was well known, at least by economists, so it is surprising that governments in America and Europe had not taken it into account of late. They have short memories. From the 1980s until recently, inflation had been constrained thanks to public policies inspired by Friedman—but policymakers had forgotten its threatening presence, as if it belonged only to the past. We can liken inflation with pathogens: smallpox has disappeared, but vaccination is what made it disappear; stop vaccinating, and the evil can return. In the 1980s, central banks helmed by Friedman’s disciples, such as Paul Volcker in the United States or Jean-Claude Trichet in Europe, raised interest rates and defeated inflation by reducing the money supply. Today, economic policymakers will need to apply the same remedy as in 1980. Central banks are working on this, but their conversion comes late; they have waited for inflation to establish itself before responding, a delay that will make the remedy more painful.

Author(s): Guy Sorman

Publication Date: 14 Jun 2022

Publication Site: City Journal

How Much Free Money Stimulus Still Hasn’t Been Spent?




The question is not as straight forward as it looks. The gap between spending and income isn’t constant. 

Free money that goes to bottom rung households tends to immediately get spent. The higher the rung, the more the savings. This is complicated by the fact that most of the money was supposed to go to lower tiers, and further complicated by corporate fraud, especially in round one. 

More importantly, personal spending does not count mortgage paydowns, stock market or Bitcoin purchases, capital expenses for businesses, drug money, other illegal uses, or money sent to relatives overseas. 


The Peterson Foundation reports direct checks were $292 billion in round one, $164 billion in round two, and $411 billion in round three.

There was $850 billion of direct payments to taxpayers with the biggest and most unwarranted round the last.

Spending data suggests free money, at least most of direct payments, already did enter the economy. 

However, that does not factor in unpaid rent via eviction moratoriums or SNAP (Supplemental Nutrition Assistance Program), formerly Food Stamps, which I will address in a separate post. 

So yes, there still could be a pile of unspent stimulus savings, possibly much higher than my $2 trillion summation estimate, again with my caveats on investments, sending money overseas, etc.  

Author(s): Mike Shedlock

Publication Date: 22 Apr 2022

Publication Site: Mish Talk

Lamont will ask lawmakers to resist the urge to spend big in next CT budget



That doesn’t mean there’s nothing important in the budget. Connecticut is in the midst of a two-year plan to put nearly $6 billion in federal coronavirus aid to work to bolster its schools, health care system, economy, and state and local governments.

While the plan is generating big surpluses in state finances, the jury is still out on the overall Connecticut comeback. And since the state will invariably face a fiscal shock in 2024 — when $6 billion in federal aid has expired — Lamont is cautious about tackling anything more ambitious right now.


The state has the legal maximum in its rainy day fund, $3.1 billion or 15% of annual operating expenses, and already made a supplemental $1.6 billion payment last fall to reduce pension debt.

But with a nearly $2.5 billion surplus projected for the current fiscal year, the state can keep its reserves full, reduce more pension debt and help do more for those hardest hit by the pandemic, Walker said. 

Author(s): Keith Phaneuf

Publication Date: 8 Feb 2022

Publication Site: CT Mirror

Census Figures Show Americans’ Incomes Fell in 2020



Americans last year saw their first significant decline in household income in nearly a decade, government data showed, with economic pain from the Covid-19 pandemic prompting government aid that helped keep millions from falling into poverty.

An annual assessment of the nation’s financial well-being, released Tuesday by the Census Bureau, offered insight into how households fared during the pandemic’s first year. It arrives as Washington debates how much more to spend to bolster the economy during the worst public-health crisis in a century.

Median household income was about $67,500 in 2020, down 2.9% from the prior year, when it hit an inflation-adjusted historical high. It came as the U.S. last year saw millions lose their jobs and national unemployment soar from a 50-year low to a high of 14.8%.

The last time median household income fell significantly was 2011, in the aftermath of the 2007-09 recession.

The Census Bureau’s topline income figure includes unemployment benefits but doesn’t account for income and payroll taxes nor stimulus checks or other noncash benefits like federal food programs. If those had been counted, the median household income would have risen 4% to $62,773.

Author(s): John McCormick, Paul Overberg

Publication Date: 14 Sept 2021

Publication Site: Wall Street Journal

The national debt is big and getting bigger. Does it matter?




The clock currently reads $28 trillion, give or take, and will grow rapidly in the coming years. The coronavirus pandemic has cost the U.S. economy $16 trillion, give or take, and Congress appropriated more than $3 trillion in aid in 2020.


The United States has had an up-and-down relationship with debt. One of Congress’s first actions was to assume states’ Revolutionary War debt in exchange for moving the country’s permanent capital to Washington, D.C. Alexander Hamilton saw collective debt as a way to build the nation — and its international credit — and bind the several states together in common cause.


“I believe it a national curse,” Jackson said in 1824. “My vow shall be to pay the national debt, to prevent a monied aristocracy from growing up around our administration that must bend it to its views, and ultimately destroy the liberty of our country.”

Jackson followed through on his promise, vetoing virtually every spending bill and using federal funds to pay down the debt until it was fully paid off in 1837 — right before a six-year economic depression that pumped it back up again.

World War II ballooned the debt as the nation ratcheted up defense spending to finance the war, causing the country’s debt to rise to more than 100% of gross domestic product. (Debt is usually measured as a percentage of GDP to make it comparable across different periods of time.)

Author(s): Hannah Lang

Publication Date: 3 March 2021

Publication Site: American Banker

Treasury Rescue Won’t Bail Out Chicago, New Jersey From Debt



(Bloomberg) — The U.S. Treasury Department is sending a message to states and cities that the billions in aid from the American Rescue Plan should provide relief to residents, not their governments’ debt burdens.

The department on Monday released guidance on how state and local governments can use $350 billion in funding from President Joe Biden’s $1.9 trillion rescue package. The funds are intended to help states and local governments make up for lost revenue, curb the pandemic, bolster economic recoveries, and support industries hit by Covid-19 restrictions. In a surprise to some, these funds can’t be used for debt payments, a potential complication for fiscally stressed governments that had already etched out plans to pay off loans.


Illinois Governor J.B. Pritzker had suggested using some of the state’s $8.1 billion in aid to repay the outstanding $3.2 billion in debt from the Federal Reserve’s emergency lending facility and to reduce unpaid bills. Illinois was the only state to borrow from the Fed last year, tapping it twice. On Tuesday, Jordan Abudayyeh, a Pritzker spokesperson, said the administration is “seeking clarification” from the Treasury on whether Illinois can use the aid to pay back the loan from the Fed.


The rule could also affect New Jersey, which sold nearly $3.7 billion of bonds last year to cover its shortfall during the pandemic. Assembly Republican Leader Jon Bramnick, a Republican, in April had called for Governor Phil Murphy, a Democrat, to use some of the federal aid to pay down the state’s debt.

Author(s): Shruti Date Singh, Amanda Albright

Publication Date: 11 May 2021

Publication Site: Yahoo Finance

States, cities to receive first chunk of $350 billion in aid this week from COVID stimulus passed in March



State, city and county governments this week will receive their first infusion of direct aid from $350 billion in emergency funds approved in the American Rescue Plan, two months after President Joe Biden signed the COVID-19 relief package into law. 

The Biden administration launched an online portal Monday that will allow local and state governments to access their share of funds from the Treasury Department. The amount allocated for each state and municipality was determined by unemployment data.

Most will receive money in two tranches – one this year, the second in 12 months – but states that have seen their unemployment rates increase by 2% or more since February will receive funds in a single payment. Payments will begin within days. Money must be spent by the end of 2024.


The Treasury Department also provided long-awaited guidelines on how funds can be used. State governments and territories are prohibited from using funds to offset tax cuts that were enacted after March 3, limitations that have already prompted the Republican attorney general from Ohio to sue the Biden administration. In addition, recipients cannot use funds to make a deposit to a pension fund or pad reserves.

Author(s): Joey Garrison

Publication Date: 10 May 2021

Publication Site: USA Today

Households including most U.S. children to get monthly stimulus payment



A poverty-fighting measure included in the COVID-19 relief bill passed this year will deliver monthly payments to households including 88% of children in the United States, starting in July, Biden administration officials said on Monday.

The Democratic-backed American Rescue Plan, signed into law by President Joe Biden in March as a response to the coronavirus pandemic, expanded a tax credit available to most parents.

Those people will get up to $3,000 per child, or $3,600 for each child under the age of 6, in 2021, subject to income restrictions. The benefit will reach 39 million households, many automatically and by direct deposit every month, starting on July 15.

Publication Date: 17 May 2021

Publication Site: Reuters

Days Ahead Of First Federal Stimulus Payments, Local Governments Still Don’t Know How—And In Some Cases If—They’ll Spend The Money



The first round of aid for state and local governments is set to go out next week, but with no guidance yet on the spending rules, leaders are becoming increasingly frustrated.

The American Rescue Plan Act (ARPA) included $350 billion in direct aid to states and localities and the law requires the U.S. Department of Treasury to distribute the first tranche by May 10. Since it passed on March 11, the department has been developing guidance on the spending rules with input from government organizations. The ARPA law says governments can use the money for public health crisis expenses and for budget deficits, but more specifics are needed because governments are required to track and report on their spending.

Now, with just days to go until the first round of aid is to be delivered, the rules still aren’t out and frustrations are mounting. This is particularly true for those governments who are receiving direct federal aid for the first time since the pandemic began.

Author(s): Liz Farmer

Publication Date: 6 May 2021

Publication Site: Forbes

U.S. Household Income Surged by Record 21.1% in March



Household income rose at a record pace of 21.1% in March as federal stimulus checks helped fuel an economic revival.

The March surge in income was the largest monthly increase for government records tracing back to 1959, largely reflecting $1,400 stimulus checks included in President Biden’s fiscal relief package signed into law in March. The stimulus payments accounted for $3.948 trillion of the overall seasonally adjusted $4.213 trillion rise in March personal income.

Spending was also up sharply, increasing 4.2%, the Commerce Department said, the steepest month-over-month increase since last summer.

Consumers shelled out more on goods, particularly big-ticket items such as autos and furniture, compared with services in March. Economists expect that to change in the coming months due to widespread vaccinations and broader reopening of the economy.

Author(s): Sarah Chaney Cambon

Publication Date: 30 April 2021

Publication Site: Wall Street Journal

Applications for New Businesses Have a Double-WTF Moment



I don’t remember anything that has ever drawn so much fraud to itself, like an industrial magnet attracting ferrous scrap metal, as the federal government programs to support the unemployed and struggling businesses.

When it comes to this twin-spike in business applications, the forgivable Payroll Protection Program (PPP) loans and Economic Injury Disaster loans come to mind immediately – especially since the spike into July, and then the renewed spike this year, are timed with the two PPP generations.

Businesses that applied for the PPP loans had to submit documentation of wages paid over specified periods. The first-generation PPP program ended on August 8, 2020. The second-generation PPP program started this year and remains open.

The dates were structured so that it would be impossible by honest people to create a business entity after the announcement, pay wages for long enough to qualify for a PPP loan, and then apply for a PPP loan. Applicants had to submit historical wage documentation to the lenders whose job it was to check all this out.

Author(s): Wolf Richter

Publication Date: 16 April 2021

Publication Site: Wolf Street

How much will your city get from Illinois’ share of the Biden stimulus and how will they spend it? – Wirepoints



There’s little doubt that Illinois politicians are salivating over the $13.7 billion windfall they’re about to spend. Those billions are Illinois’ share of the $350 billion in aid dedicated to state and local governments, a key part of President Biden’s $1.9 trillion stimulus package passed earlier this year. The state of Illinois itself will get $7.75 billion and the remaining $6 billion will go directly to counties and cities.

The numbers are big. Take the city of Berwyn, Illinois, which is set to receive $32 million in stimulus dollars, according to a data release from the Illinois Municipal League. The city’s take is equal to a whopping 81 percent of its 2019 general budget. Peoria expects $46 million, or nearly half of its $100 million budget. And the city of Chicago will get nearly $2 billion, worth 60 percent of its general budget, based on financial data from the Illinois Comptroller. 

Even the state, which nearly broke even in revenues in 2020 compared to 2019, will get more than $7.75 billion, nearly a fifth of its budget.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 13 April 2021

Publication Site: Wirepoints