All.right there. Walmart says consumer spending dropped as soon as stimulus checks ran out. Oops
No worries more free money is comingggggggggggggggg.....fed to print more stimulus.
Walmart says consumer spending dropped as stimulus checks ran out
PUBLISHED TUE, AUG 18 202010:43 AM EDT
https://www.cnbc.com/2020/08/18/wal...nding-dropped-as-stimulus-checks-ran-out.html
You're seeing first hand what putting a large amount of outside money into the demand side of the economy can do in terms of lifting the most boats -- corporate and household. This money is needed right now to combat the rapid decrease in money velocity due to the pandemic. The same amount put primarily into the supply side would lift fewer boats but leave a few of those that it did on mountain tops.
As soon as the pandemic shows signs of waning, and money starts flowing normally again, the Central Bank will withdraw residual excess money and replace it with Treasury liabilities. A better approach in the long run, however, would be to selectively, and temporarily, raise corporate and personal taxes
before this becomes an imperative.
It would seem that constant accumulation of treasury liabilities (bonds) would eventually result in bond servicing that forces the treasury-central-bank to increase net outside money flow into the economy beyond what can be justified by population and GDP growth. The result of this should be inflation. But until that distant day, the Central bank should be fully capable of preventing inflation, so long as its hands are not tied.
The government can not simply buy back an excess of bonds using printed money -- once suggested by Donald Trump -- as that would exacerbate the problem. If the Treasury is called on to issue bonds without restraint, raising taxes could become an eventual imperative to control the amount of outside money that remains in circulation in the economy. All of this is, of course, something in addition to the normal credit cycle of inside money.
Another longer range concern is not so much a total loss of reserve status for the U.S. dollar, as it is a concern over significant weakening of that status, with the dollar sharing more of it's reserve role with other currencies. It's something I am already worry about. It is already afoot. Watch for acceleration of this phenomenon. As the volume of international trade carried out in currencies other than the dollar increases, Central banks will be able decrease their inventories of dollar denominated assets. They will have less incentive to support the dollar vis-à-vis other exchange currencies. The purchasing power of the dollar should decline along with the demand for dollars, perhaps precipitously.
