Inflationary Money-Printing in U.S.; China’s Policy Contrast
March 15 , 2021 (EIRNS)—Various economic commentators, the best known being Lawrence Summers, have been calculating the increase in disposable income “printed” into American households during the past year, and have concluded that it has roughly doubled household spending—if stock market speculation is included as spending. This means of forced inflation was called for in the “regime change” proposals from BlackRock, Inc. executives and other bankers at the Jackson Hole, Wyoming, Federal Reserve annual meeting in August 2019; ironically, Summers at the time strongly backed it in Twitter postings although not attending that conference. It is worth contrasting to China’s monetary and fiscal policy over the same period.
The latest calculation of this kind is by David Stockman on March 13. Stockman’s given figures may be imprecise but two things are clear. First, the replacement of household income by government grants and credits will have been much larger than—between two and three times—the loss of wages and salaries in the 2020 economic collapse triggered by the pandemic, which totaled roughly $300 billion. Second—and this is the inflationary trigger—a large part of these “emergency relief” funds will have gone to households which did not lose wage and salary income, since that loss was concentrated among lower-income households. Under zero interest rate conditions, forced by nearly $3 trillion in new excess bank reserves created by the Federal Reserve during the same period, these printed funds were largely spent—on extra purchases and on speculative investments. The inflationary results are now showing, from the price of motor vehicles and houses, to the price of stocks.
This is, literally, the “regime change” formula from Jackson Hole.
The Chinese government, which is now sounding the inflationary alarm over the latest, $1.9 trillion U.S. “COVID relief” bill, took a different course. Prime Minister Li Keqiang recently said,
“In the face of unprecedented severe shocks last year ... [we] did not flood China’s economy with massive liquidity. The increased fiscal funds totaling 2 trillion yuan [about $300 billion] were mostly used to support market entities and people’s well-being by making tax and fee cuts and meeting basic living needs.... I was asked by a journalist whether the scale and intensity of our policy support was too modest. We believe that for fertilizer to work, it must go all the way to the root of plants. Hence we decided to act where policies were most needed and they proved to be effective and efficient.”
China’s economy has recovered strongly but with holes in that recovery; one of those is youth employment. The unemployment rate among Chinese 16-24 years of age was 13.1% in February, unchanged in a year (the overall national rate is 5.5%), according to the National Bureau of Statistics. The number of new urban jobs created annually, which had run at about 13.5 million before 2020, fell below 12 million that year, and is targeted at 11.5 million in 2021. But the economic growth pace has further accelerated in 2021, remaining the highest among major economies, raising the prospects for those young workers. This job creation is the government’s largest challenge, but it will not attempt to meet it with the “Jackson Hole formula.