The stocks continue to climb up as we continue to print more money into the system without resource backing or economic output. Since the beginning of the pandemic, over 40% of all the printed money that has existed since the beginning of the dollar in 1913 has been printed. In a little over a year’s time, running upwards to almost half the money that exists within our system has been printed into it. This alone should be a massive red flag for any thinking individual. Still, this is not the only sign that the future of the entire economy may be headed into the wrong direction.
The stock market has been on a steadily increasing rally due to the mass printing and spending, with 87% of companies in the S&P 500 reporting better than expected results, according to an article in Yahoo Finance. The concern here, with covid rates rising, a potential housing crisis, inflation rates increasing, product and labor shortages across the globe, and consumer spending showing signs of slowing down, is that quarterly expectations have remained too high. Is all of the growth we have seen during the pandemic been but an illusion?
Karolina Noculak, investment director at Aberdeen Standard Investments, told Yahoo Finance that, “Investors have now got quite accustomed to companies beating analysts’ projections.” The question now is, will growth continue to skyrocket despite concerns of apparent truths seen across the economy? Has the growth we have seen already passed its peak potential?
Mark Zandi, chief economist at Moody’s Analytics, told Fortune that, “We fell into a deep dark hole early on, we have dug ourselves halfway out roughly, and that’s where we’ll stay until we’re back on the other side of this pandemic. The risk is we slide back into the hole if we don’t get continued, additional support from policy makers.”
So the answer to debt is adding on more debt with more printing? If the economic output doesn’t match the economic input, at some point the entire system could hit a breaking point. But based on Modern Economic Theory, maybe this is the only feasible solution, especially looking at the ever growing mountain of debt we have accumulated.
Zandi continued, “At some point the job gains in these frontline industries is going to come to an end, it might already have. Can’t count on those jobs to continue to drive the economy forward.”
With states, schools and businesses all showing signs of returning to shut down mentality around how to handle the pandemic, it is possible that potential job growth has peaked over the summer and will fall into a slump into the fall and coming winter.
As of now, unemployment sits around 10%, improving from its former peak at 14.7%. But with unemployment extra benefits being disconnected and eviction protection being taken away, more expenses are coming back into play without the resources from the producing side of the economy to balance them out. Even all the help that has caused the growth of the past year, again, has come from printed money and policy, not true economic growth by production.
High frequency credit and debit card data, tracking real time spending, has recently shown that consumer spending is beginning to level off. A Bankrate survey recently released shows that the number of Americans claiming to have even less emergency savings than before the pandemic has increased three fold.
Many economists believe the only answer to a potential fall is to print more and for more legislation to be written by the government to provide for those in need. Zandi continued to tell Fortune, “Some in Congress are concluding the coast is clear much too prematurely. It would be a grievous mistake to conclude this economy is off and running and they don’t need to provide additional support.”
Without support from the government, Zandi believes, “We’re going back into the economic darkness, we’re going back into recession.”
Even still, hope that the government will be able to save the day from any potential future is just as uncertain as everything else mentioned above. Director of US economic research at Bloomberg Economics David Wilcox says, “Regardless of what the forecast was at the time that the bill was enacted (former stimulus packages), the real world wasn’t going to unfold that way. For the labor market to heal entirely, a lot of things have to come into place. It’s not enough for just a couple things to fall in place correctly.”
Seems like everyone, even in the highest places of the economy, are lost merely focusing on the moment rather than looking at the implications of what decisions are doing to the future potential of the dollar power. Can we really expect to print growth into infinity? With shortages around the globe and the pandemic continuing, with vaccines not properly working for the population and estimates of immunity timelines ever increasing, with some saying this virus may just be with us from now on, how can anyone retain a scope of economic confidence for the foreseeable future? Looks like a make money and run scenario, but what happens if that money isn’t worth what it once was? Not only that, but we’ve seen history show before that you can’t eat money. If you can’t buy the goods you need, what’s the value of a printed dollar? Take a look at Lebanon right now. Or for that matter, just take a look at history. Hyperinflation has happened before, and it can happen again.
I’m not trying to fear monger here, I am just concerned that all we see is printing without addressing that as the chief reason for economic growth.
On the bright side, maybe Modern Economic Theory will just work. Maybe we can print our way to continual success. Frankly, I doubt this is actually possible without real world production. Only time will tell.