When it comes to the U.S. economy there are a lot of opinions. Many of those opinions have motivations behind them that tend to skew their analysis. So, who should you listen to about the economy? Well, you could do a lot worse than the Chairman of the Federal Reserve.
The Economy Is Weak
The U.S. recovery is weak, very weak. Although jobs are recovering, they are still lower than they were when the pandemic started. The opinion of the Fed Chairman is that the economy needs more help in the form of government stimulus. Of course, the politicians in Washington care more about Dems vs. Repubs than they do about America, so we are caught in petty fights while the economy sputters.
Why The Economy Needs Help
While politicians, especially the President, love to point to the stock market as proof the economy is doing well, most investors are very skittish right now. Any bad news at all, and they’ll turn into sellers, and take the market with it.
Stimulus in the form of extra unemployment benefits has proven particularly helpful to the economy.
Because people on unemployment spend that money, and that stimulates the economy.
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The direct stimulus payments to Americans helped too. Even Americans who weren’t hurting much during the downturn spent that money, further stimulating the U.S. economy.
But, all of that is starting to wear off. The direct payment to Americans is a distant memory long since spent, or sent off to reside in savings. In addition, those unemployment benefits have run out leaving those receiving them to cut back on spending, just when businesses are starting to reopen and hire back workers.
Politicians Play Games Rather Than Helping Americans
The Fed has done its part, cutting interest rates to zero percent. Now, it’s up to Congress, and that’s a pity.
Somewhere in the last few decades Congress became about hating the other side. As a result the only thing that matters to politicians is beating the other politicians, not helping Americans. So, each side adds to the necessary, agreed upon stimulus measures, additional things that they know the other side will not agree to. The stimulus package fails, and each side blames the other.
No one wins other than petty politicians who feel like they came out “ahead” somehow. Meanwhile the economy teeters on the brink of rolling over into a recession that will be much harder to climb out of than stimulating the economy now would be.
Unfortunately, even that reality isn’t enough to break through the my side versus their side mentality. A terrible recession will hurt Americans, but the Senators and Congresspersons in Washington won’t feel it. They’ll continue to collect their government paychecks, big campaign contributions, speaking fees, and other payments. Then, they will blame the other side for the recession.
Someday, somehow, America will hopefully break out of this paradigm. But, for now, watch Washington.
No stimulus = recession
Some stimulus = continued weak economy
Big stimulus = economic growth
Update: Well, that was fast –> https://www.cnn.com/2020/10/07/investing/premarket-stocks-trading/index.html