All The Reasons Trump Should Fire The Fed's Powell

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Somehow, Americans have managed to increase“real personal consumption expenditures” (the calculation of consumption in the gross national product series) without buying anything.

Real retail sales, as reported by the Census Bureau, have been falling since 2021, while personal consumption keeps rising. The gap that opened between the real retail sales report and the personal consumption estimate is the widest on record.

The likeliest explanation, and the one that corresponds to the experience of most American households, is that the US economy is much weaker than government statisticians claim. Inflation is much higher and inflation-adjusted personal consumption is much lower.

The Biden administration may thus have left Trump with a recession as a going-away present. And the Federal Reserve is the gift that keeps on taking.

Unlike the inflation of the 1970s, the present inflation is NOT caused by excess credit creation. Total credit outstanding to the US private sector has fallen during the past several years, according to the Bank for International Settlements, which reports quarterly data through March 2024.

This inflation stemmed from Biden's attempt to bribe voters with enormous subsidies.

Graphic: Asia Times

Barack Obama's Treasury Secretary and former Harvard University president Lawrence Summers calculated earlier this year that inflation peaked at 18% in 2022 and remains above 8% when the cost of higher interest payments to American households is added in.

Graphic: Asia Times

Credit card debt outstanding exploded after Covid, rising from about $800 billion to nearly $1.1 trillion. But the real kicker came from higher interest rates. The average interest rate banks charge on revolving credit jumped from 14% to 22% between 2021 and 2023.

Graphic: Asia Times

Multiplying the interest rate on revolving credit by the outstanding balance shows that household interest payments on credit cards rose from slightly over $100 billion a year in 2020 to about $225 billion in 2023.

The New York Federal Reserve's survey of consumer credit shows that past-due credit card balances now exceed 11% of the total, the highest level in 10 years, while delinquent auto loans are almost 5% of the total.

Graphic: Asia Times