Economic loss of control: Failed stimulus programs and roads to nowhere.
While the Biden administration has not just delivered a $1.9 trillion stimulus payment plan, they are trying to push through a $2 trillion plus infrastructure proposal, all the while with stock markets booming and yields on government debt pointing towards inflationary pressures. To which the former President Donald Trump attuned to his right wing populism laid a claim, in its delusion, that he was responsible for the current greed train. The problem facing not just America, but the whole world in the wake of COVID-19, yet the pandemic has still not abated – with dispositional vaccination programs via the wealthiest countries of the world, will be the ire of hyper inflation. Mostly on essential items, such as food and energy costs. Massive stimulus plans only exasperate the problem.
As discussed in Central Banks loss of control: Coffee prices spike. Is it indicative to looming hyperinflation on foods?, coffee prices will start to climb from a $10 billion price tag to cafes due to stockpiles and backlogs, as distributors pass on rising costs. These are early signs that prices on everyday items will start to bite, from month to month increases, that very well could lead to week on week price spikes, speculative at this point (although all eyes on toilet paper) with the American economy now running solely on a super cycle of debt and monetary expansion of its Central Bank expectations. And this is something that is missed by academics within economics, that companies still have to make profits, with forward projections such as an over stimulated stock market setting overvalued benchmarks, the price of products, what ever it might be, say, video games via the bloated company like GameStock will become more expensive. So it was correctly short selled via Hedge Funds, yet was toyed with by an immature billionaire, with a bizarre vendetta against these funds on Twitter to rustle legions of the gullible. The Hedge Funds who did get squeezed out of their short positions, were correct in light of GameStop's 2020-2021 earnings. The company revealed a $215 million dollar loss in 2020, with its profits sinking to $1.25 billion year on year from 1.9 billion in 2019. Pandemic or not, the question now with stock valuations going through the roof; Is how would a company like this survive? Away from the fantasy of millions of app 'libertarian' crusading activists and the harsh reality of stock price volatility in a rising inflationary environment. The simple answer is, they will cut staff and raise prices.
Biden's 2+ Trillion dollar infrastructure plan was actually former President Trump's stimulus bill which was offered to Congress in 2020, both he and Biden, despite both of them being monetarists, one being a conspiracy believing far right politico the other a career politician. This lazy and potentially economically damaging policy of public infrastructure stimulus spending, should be seen only as a populism sweetener, even with its grandiose scale, the concept doesn't work. And one of the greatest lessons in economics and finance of failed stimulus programs, usually instigated by Governments and Central Banks, can be seen in Japan to this day, the roads that were built to nowhere and what is now been deemed as their “Lost Decade” from 1991 to 2001, after the Japanese asset price collapse. But, with COVID-19 causing incredible amount of damage to their economy and it has revealed how nonfunctional economies have become globally. Japan is an economic basket case that could be seen with an extra 20 years added to its lost decade, offering a total of 30yrs of dysfunction due to extremely low interest rates, their central bank buying company stocks and a government stuck on ad infinitum of issuing government bonds.
Yet, they still want to build
roads and bridges to nowhere.
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