The Scourge Of Washington’s Yo-Yo Economics
There is a tale embedded in December’s inflation-adjusted retail sales figures which reminds us that the US economy is far from healthy, and that Washington’s capacity for wreaking economic mayhem apparently knows no bounds.
In the first place, the almighty American consumer had not been so almighty after the Great Recession. Between the pre-crisis peak in November 2007 and the pre-Covid peak in February 2020, real retail sales grew by just 9.2%. That’s a sickly per annum gain of just +0.58%.
Then Dr. Fauci and the Virus Patrol hammered the economy like never before through a combination of Lockdowns and mass hysteria about the Covid. Consequently, inflation-adjusted retail sale plunged by -17% in just two months. There is nothing close to that magnitude within a 60-day period in the entire history of retail spending stats.
Then, Donald Trump and the Washington spenders brigade went into a Covid bailout frenzy, attempting to compensate for the supply-side catastrophe they had ordered by means of a staggering $6 trillion infusion of stimmies, relief and free stuff. In turn, the shutdown of the bar, restaurant, hotel, movie and other social congregation sectors in combination with Washington’s massive demand stimulus caused real retail sales of merchandise goods to go literally vertical.
After the $2 trillion Biden installment of the stimmy in March 2021, real retail sales posted at +44% from the April 2020 bottom and +19% from the pre-Covid level of February 2020. That means that the inflation-adjusted spending gain during those 13-months of maniacal stimmies was equal to more than double the gain during the prior 13 years!
Alas, its been payback time ever since. The figure for December 2022 reported yesterday was 6.3% below its March 2021 peak. And, more importantly, it reflects a mere 1.33% per annum growth rate since the pre-crisis peak way back in November 2007.
In short, notwithstanding an explosion of Washington largesse in the form of Welfare State transfer payments and Covid stimmies, inflation-adjusted retail sales have been languid over the past 15 years on a trend basis. And in the interim periods they have been yo-yo’d in a manner that would never occur on the free market.
Real Retail Sales, November 2007 to December 2022
The December industrial production report embodied the same yo-yo to nowhere pattern. Compared to the November 2007 peak, the figure for December was down nearly -6% for the manufacturing sector (yellow line) and up barely +1% for industrial production as a whole (purple line)—notwithstanding the positive contribution of energy production and utility output over that period.
Again, the yo-yo evident in the chart was not free market economics at work, but Washington politics via its central banking, regulatory and fiscal branches. Thus, both the overall industrial production index and the manufacturing component peaked on an interim basis in August 2018 and then hit the skids through the Lockdown Bottom in April 2020.
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