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David Stockmans Contra Corner
Growth Stolen From The Future Ain’t “Growth”

Growth Stolen From The Future Ain’t “Growth”

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david stockman
Jun 03, 2024
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David Stockmans Contra Corner
Growth Stolen From The Future Ain’t “Growth”
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It is truly amazing that the Keynesian and statist fanboys (yes, we do repeat ourselves) at both ends of the Acela Corridor continue to believe that monetary and fiscal stimmies are effective when the evidence keeps on pouring in that they are not.

Yesterday came more proof—this time in the form of a wimpy 1.2% gain in Q1 real GDP. Of course, we prefer the real final sales of domestic product metric because is excludes short-term inventory fluctuations that have no bearing on the underlying trends. And once again, that figure came in at only 1.7% on an annualized basis, but, more importantly, posted at just 1.9% per annum for the entirety of the four years since Q4 2019, which was the eve of the pandemic/lockdown turmoil.

But here’s the thing. There has been a staggering total of nearly $11 trillion of combined fiscal and monetary stimmies since Q4 2019. Yet what we have to show for it is a real growth rate that is barely half of its historic 3.5% trend.

Annualized Real Final Sales Growth,  Q4 2019 to Q1 2024

For want of doubt, here is the increase in the public debt and the Fed’s balance sheet since Q4 2019. The market value of the public debt is up by +$7.3 trillion or 42% during that span and the Fed’s balance sheet is still +$3.5 trillion or 83% larger, notwithstanding the modest QT-driven shrinkage in recent quarters.

While these numbers are not strictly additive, the larger point is unassailable: None of the GDP account “spending” that was financed or stimulated by these massive government injections arose from new economic production in the here and now. To the contrary, their materialization in the reported GDP accounts simply represents economic resources stolen from the future and artificially pulled forward in time through the magic of government borrowing and money-printing.

Eventually, the public debt will be recouped in the form of interest payments as far as the eye can see. Likewise, the fiat credit printed by the Fed will end up as inflated financial assets and swollen goods and services prices. That is to say, the government has no magic wand that generates real economic wealth; only workers, entrepreneurs, consumers, savers, investors and speculators operating on the free market in pursuit of their own best interests can accomplish that.

Public Debt And Fed Balance Sheet Since Q4 2019

What is worse, however, is that even the tepid growth of the most recent quarters has been artificially boosted by the the carry-over impact of the massive stimmies injected into the economy during 2020-2021. That is to say, our Keynesian GDP accounts have been artificially inflated by deferred spending run-offs after Q2 2021 that flowed from the utterly abnormal build-up of household cash during Washington’s pandemic lockdowns and stimmy extravaganza.

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