It is obvious that the $1.9 trillion “COVID relief” bill just passed, the so-called American Rescue Act, is largely unrelated to needs for ending the pandemic, and instead aims to rescue unpayable debt in the U.S. economy. It is not a “Democratic wish list", as Republican leaders charge, but a wish list taken from the August 2019 “regime change” policy of the Jackson Hole bankers’ conference: Print money, hand it directly to institutions and households, and specify that it be spent on an emergency basis to create economic demand. Thus we find a $90 billion grant to pension funds in the bill; $230 billion to school systems which are still slowly spending funds from the last COVID relief bill; ditto for many states and cities whose tax revenues rose in 2020, etc., etc. There continues to be no Federal investment at all in productive employment or raising productivity, and therefore a lot of the “demand” created, simply spills into the stock and bond markets.
The resulting huge anomaly in the unchanging situation of collapsed American productive and overall employment, is that U.S. household income and disposable income have both risen during the year since last March. “Relief” spending has poured from the Federal government; interest rates of all kinds have been driven down by the Federal Reserve; and private bank deposits have risen dramatically in the “Big Six” Wall Street banks and the regional majors. This disposable income rise has been marked by the most profound inequality, as lower-income and informal workers have lost more income than they have gained from “relief” and unemployment benefits, and large consumer and financial companies have boomed along with their executives, white collar employees, etc. The booming stock market has added riches to the upper parts of the income spectrum.
Between March 2020 and March-April 2021, American households will have received $2.2 trillion in relief aid and supplemental unemployment, which is equal to the total annual spending on Social Security, Medicare, and Medicaid combined. That is aside from the $2.3 trillion in other kinds of relief aid to states and cities, hospital systems, schools, etc. And the Federal Reserve has added $2 trillion in that year to bank reserves, driving up the values of all speculative holdings.
Thus the situation now is explosive – inflation has begun to get serious, although official indices are just as serious about hiding it. In what is measured by various private firms as “the service sector” – most of the U.S. economy – inflation from February to February 2021 registered 7.6% according to the Markit analysis firm, with healthcare costs leading the way. Food price inflation has been at an annual 4% for six months, even though restaurant prices have been cut. The “shortage” commodities lumber, semiconductors, aluminum, etc. are now inflating rapidly in prices to producers and builders. Home prices are rising at a national average 8-10% annual rate, although homes are considered to be investments —if you can get one — rather than purchases.
And even the relatively ridiculous Consumer Price Index (CPI) rose by +0.7% in February after +0.4% in January – despite the Labor Department BLS admitting in its report for February that it had serious problems collecting its normal data. It appears to have simply made some of its report up out of whole cloth, as when it reported housing price inflation was very low!
