Meanwhile, the Biden administration and Congress have kept government spending much higher than pre-pandemic levels.
As a result of these policies, the inflation rate has dropped, but not enough to deflate prices. Most consumer goods and services, as well as rent and housing prices, remain much higher than they were before the pandemic started.
Incredibly, however, the money supply – the amount of cash, checkable deposits and bank savings accounts – has substantially decreased. That means even though prices are still going up, the amount of money available is continuing to drop, putting an unprecedented strain on American families.
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Sandbox Financial Partners Director of Investments and VP Blake Millard provides insight on the recession countdown clock on ‘Making Money.’
The latest economic data shows the annual M2 money supply growth rate has been negative for the past three quarters, meaning the amount of money available is shrinking rapidly.
In the past 110 years, the only other time Americans have seen the money supply drop this sharply was in the early 1930s, during the height of the Great Depression.
There is a significant difference this time around, however. In the 1930s, when the money supply annual rate turned negative, prices dropped as well. In our current situation, prices are still going up despite the collapse in the money supply. To the extent we’re seeing it today, this has never occurred before.
Panelists Carol Roth and Nancy Tengler provide insight on the state of the U.S. economy on ‘The Evening Edit.’
Household Savings
The reduced availability of money caused by the Fed’s policies and the Biden administration’s inflationary spending has created a dire situation for American families. Increasingly more people are eating into their savings and going into debt to cover basic living expenses, like food, utilities and housing.
Survey data from the Federal Reserve shows the bottom 80% of income earners, representing the vast majority of Americans, now have less in real household savings than they did prior to the pandemic. And savings for top income earners will likely fall below pre-2020 levels within the next 12 months.
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The combination of higher prices and reduced availability of money has caused people to depend on credit cards and other forms of consumer debt at higher numbers than we’ve ever seen. In the spring, Americans’ collective credit card debt topped $1 trillion for the first time in history.
Circle Squared Alternative Investments founder Jeff Sica explains why consumer spending will dramatically decline before the holidays on ‘Varney & Co.’
Higher prices, more government spending and debt, and lower levels of household savings – that’s what Bidenomics actually looks like.
Congress and the Biden administration are currently in the midst of a battle over spending. If a deal isn’t completed soon, the government could shut down temporarily. Now is the time to reduce spending and bring fiscal sanity back to Washington, D.C. – before it’s too late.
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The U.S. economy is walking on thin ice. If prices and inflation don’t come down soon, something that can only occur if Congress and the White House reduce spending, then the United States is soon going to find itself in yet another massive economic crisis.
If that occurs, I hope Americans remember who deserves the blame.
