Biden’s Attempt To Fool American Public About His Bad Policies Is Backfiring

Joe Biden has made a lot of effort to sound upbeat about the American economy. He has assured the American people that their economy is performing better than most others. He is correct, but most Americans don’t really care. They reside here, not in some other economy, after all. They are also aware that the U.S. economy is doing better than other developed nations’, yet they still experience inflation and can spot clear indications of economic instability. The consensus among experts and the common person is that this economy, if it isn’t already, will soon be in a recession, notwithstanding the third quarter’s GDP’s slight gain. The impact on household finances is unmistakable.

The fact that people’s spending has started to outpace their income growth is particularly alarming. High levels of consumption typically indicate economic prosperity, but not when they endanger household financial security, as they do right now. It is simple to comprehend why people are spending more quickly than they could otherwise. Everyone is strongly encouraged to purchase before costs increase once again by the close to 40-year high inflation rate.


Even with groceries, you may feel the pressure. Householders are only rational to stock up on nonperishables and to pack their freezers as full as they can given these prices’ annual increase of more than 11%. With new car prices rising at about 9.5 percent annually, stretching to buy a year earlier than you might is almost like receiving a 10 percent discount on the price you are likely to pay if you wait. The incentive is even stronger when it comes to big-ticket items like cars, appliances, and what the government statisticians refer to as “durable goods.”

However, even if the want to spend is sensible, it is nonetheless detrimental. Consumer spending has increased since January at a rate of about 8% annually, but personal incomes have only increased at a rate of 5.5 percent, according to the Bureau of Economic Analysis of the Commerce Department. Such a distinction cannot last for very long.

There are already clear indications of financial stress. The Federal Reserve reports that household levels of revolving credit—mostly from credit cards—have greatly increased. In August, the most recent month for which data are available, this debt load climbed at a pace of 18.1 percent annually, a significant increase over the 8 percent rates of advance seen at this time last year. The Commerce Department reveals a significant slowdown in household saving rates when measuring the same issue from a different angle. The amount of money going into savings has decreased by 25% since the start of this year. Savings flows have decreased from 4.7 percent of after-tax income in January of this year to just 3.5 percent in August, the most recent month for which data are available. It is true that funds are still going into savings. The wealthy always have extra money to invest in their wealth, but the noticeable slowdown suggests that many middle-class and lower-income Americans have already stopped saving money.

Consumer spending is already growing faster than income, thus future reductions in consumption are all but guaranteed. The ability to spend will be further limited by the rising debt burden and the lack of sufficient savings. Cutbacks in consumer spending will inevitably result in layoffs, and the resulting loss of those incomes will further restrain consumption. With consumer expenditure accounting for around 70% of the U.S. economy, these reductions all but guarantee a significant recessionary push in the upcoming months and quarters.

These issues bring up a second, more important worry. High household debt levels will put businesses in a competitive position for the finance they require to invest in new facilities, increasing the economy’s overall capacity for production. The issue will worsen if household savings flows slow down. The financial system will rely more on household savings than usual to provide businesses with the financing they require for expansion, especially in light of the Federal Reserve’s anti-inflation campaign’s restrictions on the rate of new money creation. It appears that the money won’t be available.

The two quarters of real losses in the country’s GDP during the first half of this year indicate that the economy is already in a recession, albeit the modest third-quarter increase somewhat clouds the picture. If some choose to ignore these obvious warning signs, the status of household finances strongly suggests that a recession will soon hit the economy. And if the first half’s negative news does, in fact, indicate that a recession has already started, then the scenario presented here strongly predicts that the recession will last until 2023. The term “stagflation” may very well apply to the upcoming year given the ongoing inflationary trend.

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