Mosler Economics

Manufacturing settling down to ‘neutral’ after peaking well before the rate hikes as post-Covid shortages are alleviated: Labor demand also peaked well before the rate hikes: Still no sign rate hikes have slowed lending ;) About Author by WARREN MOSLER

Growth overall remains sluggish as the economy becomes dependent on private sector credit expansion (private sector deficit spending) to offset the too tight post-Covid fiscal policy. Fed rate hikes add interest income to the economy as gov pays more interest on the $30+ trillion of public debt, which, if anything, supports rather than dampens demand or credit expansion, but it does contribute to higher prices which further reduces the real, inflation adjusted value of the...

The post-Covid fiscal deficit reduction continues to take its toll: Higher prices automatically result in a spike in tax receipts: Higher prices, now largely from energy prices pushing up costs, reduce the inflation adjusted value of the public debt, which acts like a tax on the economy: With the rate of CPI increase above the rate of deficit spending, the effect is that of a budget surplus: Spiking energy prices as Saudis set prices ever higher shift $ from consumers...

Leveling off at approximately pre-Covid levels. The growth rate slowed as deficit spending dropped: Still in expansion but it has come way down with the post-Covid war.Drop in deficit spending that has been driving the general deceleration: Not looking good. The parts shortage is largely over, so it is about a lack of demand as deficit spending falls and prices in general rise faster than incomes: Oil prices (not money supply, for example) continue to drive headline...

Pretty much back on the pre-Covid trend line: But income is on the decline: So consumers are spending more than their incomes, mainly through borrowing:

Employment is still growing. Wages aren’t keeping up with prices so people are taking jobs out of necessity and to get healthcare: No sign of recession yet:

Post-war collapse theme intact: Falling back to the pre-Covid war trend line: We’re back burning fuel with abandon:

Not growing when adjusted for inflation: Down but still high vs historical data: Trend still intact: Trend still intact:

2008 type of collapse: Lowest ever: Saudi OSPs are still at premiums to fair market value, and the price trend is still up. If it keeps going all heck breaks loose: The President threw the strategic petroleum reserve at it, and lots of other nations did the same, to no avail. And the calendar spreads in the futures market is indicating absolute spot shortages:

This is the automatic fiscal stabilizers doing their thing to slow things down during a recovery, and they keep increasing the pressure until growth goes negative. Additionally, with some $30 trillion of public debt, an 8% increase in prices means the value of the public debt- the net money supply in the economy- has contracted by about $2.4 trillion. This is a direct ‘removal of savings’ and functions the same as a tax on savings, thereby slowing the economy. It is...