By Noel T. Braymer
In the 1970’s while I was in college I took Economics 101. I even got a decent grade for the class . I had already read some books by famous economists so I had a general grasp of supply and demand as well as the multiplier effect from spending money. Basically as people spend more money, they create more money. An example of this is construction using taxpayers money. This idea is being used by Metrolink to improve its equipment and trackage which will lead to more revenue as more people are able to travel by Metrolink. The end result of this is by roughly 2028 Metrolink is planning to operate most of its trains 2 to 4 times per hour up to 7 days a week with multiple connections to other services and as well as Metrolink’s other lines.
Just before I went to college a future Nobel Prize winning Economist, Dr Milton Friedman wrote an article in the form of a parable about dropping money from helicopters to illustrate monetary expansion. I hope you are still awake. “Helicopter money” continues through today when an economy is in a “liquidity trap”. Basically when the economy goes into a slump most people are short on money. This slows down the economy more so. What we are seeing currently are “stimulus checks” going to taxpayers to spend more money to reboot the economy. This has been done before in other Presidential Administrations with varying degrees of success.
A major problem is that over the last 20 to 30 years many taxpayers are now heavily in debt compared in the past. Which means many people lack money to spend on things which would stimulate the economy. Recently the Gross Domestic Product of this Country has experienced one of the biggest declines in its history. With this are attempts by some members of Congress to roll back stimulus packages to many of the people who recently lost their jobs due to the spread of the COVID-19 virus.
The following is from a recent article by Aljazeera.
“The US economy plunged a staggering 32.9 percent from April through June on an annualised basis, the Bureau of Economic Analysis reported – by far the worst contraction on record. In the first quarter of this year, when the US officially entered recession in February, the economy shrank 5 percent from the same period a year ago. Before coronavirus lockdowns swept the nation in March, the worst reading on US gross domestic product (GDP) – which measures the value of all the goods and services produced in the economy – was recorded in 1950, when the US economy shrank 10 percent in the first quarter.” (What was happening in 1950? The start of the Korean War.)
“A sharp contraction in consumer spending was the main driver pushing the economy into its second-quarter chasm. Before the pandemic, consumer spending drove two-thirds of US economic activity. A plunge in exports, inventories, business and residential investment, as well as state and local government spending, also contributed to the historic weakness. “
“Federal Reserve Chairman Jerome Powell noted during a press conference on Wednesday that the rise in joblessness has been “especially severe for lower-wage workers, for women, and for African Americans and Hispanics”.
The Fed chair also said that data is showing that on balance, the pace of the recovery appears to be slowing and that whatever path the economy takes will depend “to a very high extent on the course of the virus”.
The election this November is going to be interesting.