Deficit reaches 20 percent GDP as more and more money from thin air is printed
The US government deficit now stands at almost 20% of Gross Domestic Product (GDP). That is what gives you spectacular economic growth. At least in the short term.
You don’t have to be an Einstein for it: throw a huge bucket of money into an economy that is already recovering from some kind of meteorite impact and you get a spectacle of the wildest. The scene is the United States. The various stimulus packages of the previous and the new governments together form the bank with money.
When the crisis broke out last year, policy makers responded with the so-called CARES legislation. The amount of aid granted in this context exceeded US $2,000 billion. In December, another $900 billion package came and the new government pushed another $1,900 billion package through Congress earlier this year. The first graph shows how much that is.
American consumers received checks from the government last year under the CARES act. The December package again included checks for a lot of people at $ 600 per person. New checks of $ 1,400 for anyone who does not earn more than $ 75,000 a year are part of the latest incentive package. That’s a lot of people.
Retail turnover explosion
I do not know exactly how far the cheques are distributed, but they are issued: the retail turnover explodes. In March, it increased by 9.8% compared to February and by 27.7% compared to March 2020. Now the comparisons with a year earlier may be less meaningful, because last year’s spending took a hit.
So there is what is called a’ basic effect’. The biggest hit in retail sales was in April last year. If spending in April of this year is equal to that in March, there will be a year-on-year growth rate of 50%. However, this type of comparison says more about the impact last year than about the recovery now.