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Fiscal and monetary degradation in the USA


The monetary and fiscal orgy of 2020-2021 has led to a pronounced degradation at all levels, including in the US labor market.

Unlimited emission and fiscal doping created structural distortions in the workforce, with the low-income strata addicted to welfare services, and the middle class engaged in gambling in trading terminals, trying to hatch newly minted Buffetts on a market bubble trajectory (in 2021 there was a record influx of individuals into the US market).


This has resulted in the working-age population that is not included in the labor force skyrocketing by almost 10 million in the early months of COVID (now plus 5 million as of March 2020). Those lazy American asses gave up looking for a job because welfarers were cutting off their core income, and gamblers were looking for the grail in Reddit conferences. As a result, now they are cutting one and the other ... at the same time.

Unemployment has fallen to a minimum (but do not forget that 4-5 million are sitting in the “not included in the labor force” category), but open vacancies are at their maximum and growing.

Open vacancies in the labor market continue to grow and are almost twice as high as the number of unemployed - a ratio never seen in history. During disruptions in business cycles or during an economic crisis, vacancies usually decrease as a response to a drop in demand. Now everything is different.

The growth of open vacancies is a clear sign of a structural imbalance between supply and demand for goods and services, on the one hand, and the degradation of labor resources, on the other hand. Demand is growing (business is looking for employees), while the supply of labor resources is far behind, including due to the loss of skills of employees and demotivation to work.


Demand did not arise out of thin air, but from 6 trillion in state support through the state budget deficit over two years and another almost 5 trillion QE from the Fed. In order to correct these imbalances in the labor market, businesses are forced to increase wages at a faster rate, which increases inflationary pressure. Now nominal national salaries are growing by 10% y / y - the same as in the 70-80s, while real ones are only 1.5-2%

The degree of irresponsibility of the US political leadership is well manifested in the dynamics of the money supply, and not in nominal terms, but taking into account inflation. In two years, the money supply grew by 4.6 trillion, taking into account inflation, until February 2020, an increase of 4.6 trillion occurred in 8 years (from 2012 to 2020). Accordingly, the growth rate increased by 4 times.


The resource, the basis for the growth of the money supply, was not loans, but fiscal and monetary incentives. Helicopter money led to an unsecured promotion of demand in the economy with a shortage of labor resources. Everyone wanted to eat, but no one wanted to work - this was manifested in a record number of vacancies in the labor market.

In order to utilize the excess money overhang, inflation will continue until the rate of growth of the money supply smooths out to historical norms. From 2012 to 2020, the average inflation was 1.6%, respectively, the medium-term inflation this time will not be lower than 6.4% (1.6 * 4) - monetary inflation. Given the structural imbalances, there will be an above average 6.4% for many years.

About bubbles in the stock market:

Bubble architecture in the stock market. Almost $7 trillion ( has been stock buybacks since January 2009. The buyback minus share offerings (IPO+SPOs) was $4.6 trillion for all public U.S. publicly traded companies, according to my calculations from the Fed.


If dividends are justified, as a natural process of returning money to shareholders. With a buyback, the question is, especially in a similar volume. Now the main intrigue. At whose expense is all this corporate atrocity?

It turns out that all the accumulated growth in debt (especially in bonds) was exactly in line with the buybacks (left chart), literally dollar for dollar. The accumulated increase in debt (bonds + loans) since January 2009 amounted to 4.78 trillion, the accumulated buyback minus placements was 4.65 trillion (right graph).

This means that all buybacks were made exclusively for debts for 13 years! For dividends and capital expenditures, the business had its own resources, while the asset bubble went under debt.