Expect a Surge in Spending as Personal Income Jumps on Covid Stimulus Free Money

Mish

Personal income jumped a whopping 10% in January on another round of free money.

Personal Income Jumps 10% In January

The Bea's Personal Income and Outlays Report for January 2021 notes that personal income increased $1,954.7 billion (10.0 percent) in January.

Disposable personal income (DPI) increased $1,963.2 billion (11.4 percent) and personal consumption expenditures (PCE) increased $340.9 billion (2.4 percent).

Rise Due to Transfer Payments

The 10% jump in January is due to a jump in transfer payments, notably covid stimulus payments.

Transfer payments are free money or money equivalents from the Federal government. 

The category includes food stamps, a relatively stable transfer payment, and Covid stimulus items (one time and ongoing).

There was a "one time" leap in March of 2020 and another "one time" jump in January of 2021. Democrats are angling for another "one time" jump, with some Republicans in agreement. 

Personal Income and Outlays Detail

PCE, Personal Income, personal PCTR 2021-01A

Personal Income minus Transfer Payments (Red Line) is about where it was before the Covid Pandemic hit. 

Spending plunged (Light Green Line), then recovered on the first stimulus package. 

Free Money

PCTR Other (Yellow Line), shows another huge surge, mostly unwarranted because it was a shotgun payment to nearly everyone as opposed to being targeted to only those genuinely affected by Covid.

PCTR Other led to the jump in Personal Income (Blue Line). Another spending surge is highly likely. 

Not Just Congress

It's not just Congress that is loose with money. On February 23, I commented The Fed Soothes the Market Today With More Easy Money Talk

Also note that Powell Disses Inflation and Ignores Questions From Congress About Leverage

Finally, please note Mitt Romney's accurate blast at Biden's stimulus plan. For details, please see Biden’s Stimulus Bill Is a $1.9 Trillion Clunker

Yes, the Democrats are angling for yet another round of "one time" stimulus free money for all. 

Mish 

Comments (43)
No. 1-16
Mish
Mish

Editor

@Realist - Regarding Me Allegedly Changing Goalposts (last thread).

Please point to what goalposts I have moved. I would like to know.

When did I give a timeline on gold, on a stock market crash, or on a currency crisis? If I did it was a mistake, and likely years ago.

And unlike Fauci, I do not believe you can find me changing my tune on any of that as time progressed. So, where is my moving goalpost?

If you cannot provide evidence of the above, then I expect an apology.

Eddie_T
Eddie_T

I’m affected by COVID, and I got my last check in June 2020. I am now making payments on the EIDL, so I have more going out the door, not more coming in.

I applied twice for the 2nd PPP. I got the first one in some weeks back....and have heard nothing, so I applied again this week when Biden changed the goalposts again for that. Hopefully one of them gets processed....

I’m not worried by these transfer payments, I think they probably do more good than harm in a pandemic. Spending will go up....it should go up.

I am noticing that the people I call my patients....since the freeze last week, are not spending....at least not with me. I think they’re pretty tapped out.I hope they all get another check.

Mish
Mish

Editor

@Casual_Observer asked in the last post "Did Mish go to medical school and study epidemiology and infectious diseases?"

He knew the answer to his "ad hominem" sideswipe when he asked it.

Nor did I get a degree or study economics, airplanes, finance, or almost any topic I write about.

For the record, my degree was in Environmental Engineering. That did not stop me from being one of the best mainframe computer consultants in the country (my opinion).
Nor did it stop me from then developing one of the most widely read economic blogs in the world (statement of fact).

Lacy Hunt, manager of one of the largest bond funds in the world, once commented that he had to unlearn everything he learned in school about economics.

When someone asked Lacy about me, and he has confirmed this story I heard third-hand, Lacy commented that I was a damn fine "economist". I would not make that same claim. I am not an economist. Rather, Lacy simply meant to give me a compliment that I do appreciate.

Unlike him, I did not have to unlearn mountains of Keynesian claptrap.

Mish

8 Replies

Doug78
Doug78

We hired people from the hard sciences specifically because they didn't have to unlearn economics.

Eddie_T
Eddie_T

I have learned from reading your stuff....for a long time....since 2012 for sure, maybe before that. I’ve always found that you make excellent arguments for whatever point you’re trying to make. Obviously I sometimes disagree with you, but I’ve never found you to be anything but a lucid and informative source.....who often makes me have to stop and think.....and reconsider my own biases.

I think understanding wise investing is very important. I consider it the ticket to a better life, for people who start near the bottom, as I did. It's a game and I like to see people win.

For years I’ve wanted to write a book about it.....I probably won’t ever get it done....but I like to get schooled by my betters when I can. It’s how I learn. I come here primarily to learn.

And....understanding investments starts with understanding money and economics....I remember when I first read you on inflation...it completely changed the way I was looking at it.

I like forums like this one because it attracts lots of smart people from various fields who share these common interests...I know many people in the financial services world show up here....including very successful retired execs....who often drop great comments..people I would NEVER get to know in the real world.

Anyway, thanks for what you do here and thanks for putting up with my OT comments. I just enjoy discussing markets and making armchair prognostications. I don’t claim expertise...but I love to study this stuff and talk about it. My goal is to make the existing system work for me...instead of beating my head against it..and I would like to think maybe every once in a while I share something somebody else can use to become more financially free.

I

Casual_Observer
Casual_Observer

You can become a lot of things without an education but you can't put M.D. after your name unless you went to medical school. Stop comparing dumb fields like economics to medical science.

Casual_Observer
Casual_Observer

You can become a lot of things without an education but you can't put M.D. after your name unless you went to medical school. Stop comparing dumb fields like economics to medical science.

Casual_Observer
Casual_Observer

Sorry Eddie. This was for Mish.

Casual_Observer
Casual_Observer

Exactly. I haven't seen any internet bloggers become practicing medical doctors or epidemiologists.

Casual_Observer
Casual_Observer

Your posts work for most fields but they don't work virology, epidemiology, and other medicine where you actually need to go to school for a long time to know what you are doing and practicing. I use to think like you until I married a doctor and saw their lives firsthand, Some of your posts on pandemic are no better than what a Trump supporter uses for science.

Realist
Realist

I appreciate the chance to discuss various topics here as well. Regarding different topics, such as economics, hard science, medicine etc, everyone here has a different level of expertise. Some know a lot. Some know very little. Some think they know everything, which means that you will never be able to teach them anything. Those are the cultists and conspiracy believers.

I come here to learn and to inform. I have some expertise in some areas where I believe I can make a contribution. I believe that Mish knows more economics than I do. He likes the micro, bottoms up stuff, and spends a lot of time on it. I appreciate that as I simply don’t have the time. Also, my economic focus is macro. Mish helps to fill in the rest.

Regarding medicine and the pandemic, I think Mish has done a decent job covering it. His criticism of Fauci yesterday, is an area where I spoke up. Mish “is fed up with Fauci.” I suspect that’s because Mish, like everyone, would like the pandemic to end, so the economy can get going again. Well, we all want the pandemic to end.

Fauci is merely doing his job. He looks at the data, and makes recommendations. He has data that shows the vaccines reduce or eliminate hospitalizations and deaths, but he has no data yet that proves the vaccines prevent transmission of the virus. As such, he recommends caution for a bit longer, until more people get vaccinated.

I do not fault him for that. Apparently, Mish does.

Dr. Fauci is not an economist. He is not opining on the economy. He knows the economy is suffering. But the economy is not his job. His job is trying to slow or stop the pandemic.

nzyank
nzyank

Hmmm.....my own take is it isn't that the goalposts have moved, but that they are wrong.... I do agree we are all always learning and unlearning, so there is hope.

Markab
Markab

"Yes, the Democrats are angling for yet another round of "one time" stimulus free money for all. "

Not exactly for all. Specifically 20% of single people make more than the $75k where this begins to phase out; only roughly 8% of married couples make more than the $150k where this begins to phase out.

Of course, as all the previous stimulus checks, they are highly discriminatory against single professionals. They phase out individually at $100k (or $87k on the last one) which is not at all rich in most cities---but for married folks (w/o kids), it is $200k. The cost of living for a couple is certainly not twice that of a single...more like 1.4x approximately since the cost of mortgage/rent, many utilities, etc is only marginally higher. And for those with kids, they hit the jackpot no matter what the salary. No means testing whatsoever for these people (they can have $10M in assets & $500k salary but we still issue a check for the kids).

As a single professional, I'm already paying the highest marginal tax rate per dollar of income of any group; I also pay plenty of property taxes, sales taxes, etc to support their kids in the schools/free lunches, the elderly, the disabled, etc. I only hope when I'm in one of those situations someday that the free money gusher is aimed towards me and I become one of these protected classes.

Frilton Miedman
Frilton Miedman

Putting on foil hat....is it coincidence that right as stimulus is approved, after commodities surge to an extreme, and suddenly at just the right time T's sell off?

numike
numike

when do I get my check??

RonJ
RonJ

@Casual_Observer asked in the last post "Did Mish go to medical school and study epidemiology and infectious diseases?"

It wouldn't matter if Mish did go to medical school. Doctors and scientists that have not been parroting the official narrative have been smeared, no matter what their credentials.

Banking expert: “You will never see another financial crisis in your lifetime.” -Janet Yellen, spring 2018

“I do worry that we could have another financial crisis." -Janet Yellen, fall 2018

This expert is now Secretary of the Treasury.

truthseeker
truthseeker

Hey Mish I sincerely hope you and your wife are getting started on a great weekend especially just the 2 of you together leaving behind all the work you are doing all the time to encourage all of us deadbeats all week long to understand and embrace economic and political truth.

blackswan
blackswan

Hi Mish, I just wanted to stay I read your blog from time to time since exactly 2005 mate. Actually a lot of what you write makes a lot of sense in the sense that your explanations are usually very simple, logical, consistent, sometimes audaciously different. I do not like when you talk about politics for sure (you are an extreme libertarian and I like moderation or mixes...) but I respect your opinion. To me it is obvious you are very bright individual (coming from a 40 yo math uni professor so I think I qualify as a bright individual lol). In 2005, I remember your articles about Californian real estate that was gold. There was no other bear I was aware of back then... cheers.

Casual_Observer
Casual_Observer

Fauci never changed the goalposts. In your world economists change their forecasts all the time when data changes. Fauci is saying the same thing. I'm sure you have changed a forecast at least once in your blog purely based on the data changing. That is what scientific people do. If you call that Fauci changing the goalposts then so have you.

Realist
Realist

I posted this reply to Casual, up above but decided to place it here as well, as it seems to fit in with the discussion.

I appreciate the chance to discuss various topics here as well. Regarding different topics, such as economics, hard science, medicine etc, everyone here has a different level of expertise. Some know a lot. Some know very little. Some think they know everything, which means that you will never be able to teach them anything. Those are the cultists and conspiracy believers.

I come here to learn and to inform. I have some expertise in some areas where I believe I can make a contribution. I believe that Mish knows more economics than I do. He likes the micro, bottoms up stuff, and spends a lot of time on it. I appreciate that as I simply don’t have the time. Also, my economic focus is macro. Mish helps to fill in the rest.

Regarding medicine and the pandemic, I think Mish has done a decent job covering it. His criticism of Fauci yesterday, is an area where I spoke up. Mish “is fed up with Fauci.” I suspect that’s because Mish, like everyone, would like the pandemic to end, so the economy can get going again. Well, we all want the pandemic to end.

Fauci is merely doing his job. He looks at the data, and makes recommendations. He has data that shows the vaccines reduce or eliminate hospitalizations and deaths, but he has no data yet that proves the vaccines prevent transmission of the virus. As such, he recommends caution for a bit longer, until more people get vaccinated.

I do not fault him for that. Apparently, Mish does.

Dr. Fauci is not an economist. He is not opining on the economy. He knows the economy is suffering. But the economy is not his job. His job is trying to slow or stop the pandemic.

JoeJohnson
JoeJohnson

One thing Biden and Trump have in common is they both believe in unlimited spending.

Realist
Realist

I am not a fan of political discussion since the discussion often devolves into one cult vs the other cult, with no hope of resolution. But as an outside observer it appears to me that Democrats are the party of tax and spend, while Republicans are the party of borrow and spend. In addition their spending priorities are slightly different.

So Democrats want to spend your money now. Republicans want to spend your children’s money now.

Realist
Realist

Addendum: since Democrats appear to be getting into the borrowing mood, let me rephrase my previous comment.

Democrats want to spend your money and your children’s money now.

Republicans want to spend your children’s money and your grandchildren’s money now.

FromBrussels
FromBrussels

JEEZ ! Your exceptional nation really IS throwing (printed) money down the crapper, ain't it ? Might even ve send you a couple of bucks more if puppet Joe had refrained from picking up and complying with the Obama Syria bombing administration ! The US is BACK indeed, its obsolete and by now unjustified reserve currency status allowing it to indulge into outright INSANE but nevertheless desperate giveaway policy.... Unless of course you think that bombing capacity is ALL it takes !


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