Joe’s economy still healthy: GDP expands +2.9%

Stimulus checks had a non-zero effect on demand, but to say people are buying cars and houses with their stimulus checks is cray.

 

It wasn’t just the stimulus to individuals. Where do you think the Trillions poured into the economy went?

 

And yet you still ignore the Trillions dumped into the economy, where did that go? To act is if it no effect is baffling. Like I said it wasn’t just direct payments to individuals, there was PPP, there was extended and boosted UE for long periods of time. There was rent and student loan pausing.
I know numerous landlords who’s tenants stopped paying rent even though they didn’t lose a job, all those people had a lot more money in their pockets and most spent it.

We didn’t suddenly have a huge number of people appear in the US to jack up demand.

Consider the people on SS who got stimulus that increased their income and they spent it.

Once the market bottomed in march of 2020 it went on a tear in part fueled by free and cheap money, people had a lot of returns. Much wealth was created and it was in large part due to Fed policy of easy money. The dominos got lined up and pushed over.



For example there were large boosts in the demand of things like computers and TVs. Many of those companies saw their earnings soar only to have them fallback as the typical buying of those items surged during the pandemic. Now people have stopped buying them as they have all new models and aren’t buying at the typical clip.

Typically when large parts of the economy is shuttered GDP should complete crash and stay down and not just for a few months. That didn’t happen because the GOV did it want it to. (not saying the were wrong) but they created this issue.

 

The trillions the government pumped replaced the trillions that were lost when millions lost their jobs globally, and things stopped being produced. Not to say the stimulus had zero effect on inflation, and maybe we spent too much. But compare US inflation on an international scale, and we came in right in the middle. And many countries that had lower inflation, like China and Japan, artificially keep inflation low.

 

Healthcare workers and people who could work from home or didn’t lose income had “excess savings” from the pandemic, just skipping that annual vacation or not dining out put an extra $10k or $20k in people’s accounts and that phenomenon had zilch to do with stimulus. It had to do with changing lifestyles.

Overall most of the stimulus was to replace lost income as others pointed to above, I suppose if someone had a somewhat high income but came in just under the income limit for stimulus, that’s the window where it was a legit (but only incremental) driver of inflation due to it essentially causing even more excess savings for that group, but that’s just a slice of the population right under an arbitrary cutoff. The guy that used that PPP money to buy himself a yacht? That’s called fraud. It’s definitely out there, but in the big picture I can’t see fraud being an actual driver of overall inflation.

 

Yikes: GDP Showing Ominous Warning Sign Not Seen Since the Great Depression

Disposable income dropping through the floor ...

 

The most recent version of the same graph in Tweet.

The drop occurred in late 2021 and early 2022 as the result of inflation and has since stabilized and is actually starting to increase.

 

Huh ... that's weird ... it doesn't look anything like what @duggers_dad posted, and has been on an uptick for the last half of the year since inflation cooled ...

FRED must be lying ...

 

Agreed.

That’s why I’m saying to ignore those Trillions is silly.

To be clear I’m not saying the Gov shouldn’t have done s anything but there was plenty of money spent on non essential items that supported demand and made the supply chain issues worse.

And yes we didn’t do too bad compared to many industrialized nations, they spent like mad also.

 

Ju

Just curious does the sales of existing homes add to GDP or is GDP only based on production of new items?

Just looking at GDP isn’t really fair.
Much of the entertainment sector vanished, travel, movies, eating out etc.

You can’t claim there wasn’t cheap money as the fed went to near zero for over a year if I’m not mistaken. That helped the price of homes through the roof(2.5% on a 30 year fixed), people putting in pools like mad and doing renovations. Every pool builder I know had contracts piling in because people could borrow super cheap.
Labor shortages pushed the price of labor up and there was plenty of demand to keep it up.

I know plenty of businesses in Florida that never closed and got PPP, if they used it for payroll they didn’t have to pay it back, it just ended up on their bottom line in the plus column.

 

Many healthcare workers got huge raises and bonuses to help travel and treat covid patients. That forced hospitals everywhere to raise their wages to keep their staff.
I’m talking tens of thousands of nurses getting paid double or more than what they make normally in addition to not taking the vacations that you speak of.

When I’m talking stimulus I’m not just talking about the $1800 people got, I talking about all the extra money the Gov doled out to deal with the pandemic on multiple fronts.

 

Go back and look at the data regarding new home starts, it went nuts. Yes supply issues with lumber helped jack those prices through the roof, but record low mortgage rates helped fuel many of those sales and starts.
Every realtor I know was selling as fast as they could, in large part because rates were low and people could pay more without affecting their monthly payment. Add to that the corporations buying up tons of properties (because the rates were ultra low) and now you have a huge demand spike.
Fiscal stimulus lead to this. Do you really think during a pandemic with people out of work and unsure if they were going to be able to work most people would do that?

Many builders I know passed those higher costs onto people because they knew people were going to pay the extra money.

You may have been in a a low rate but many were not, many did cash out refis to lower their rates and took money out to remodel, and buy other stuff.

Cheap money (although not a direct payment) fuels spending and demand.

If people don’t have money they aren’t buying new houses, putting in pools or buying new cars.

 

I agree with this. The republicans don’t want to spend less money they just want to excessively overspend different that the democrats.

 

It went from under 1000 to over 1500 in the blink of an eye, during the midst of a pandemic. I’ll bet the bump matched the fed going to near zero on rates.
Like it or not that’s still fiscal stimulus.

 

I’d like them to return to the budget numbers pre pandemic across the board. Fat chance of that happening.