U.S. Stock Market Is Starting to Price in Dire State of the Economy
Shocking economic data shows the U.S. economy has sunk, and real inflation has shot up. The U.S. stock market may be beginning to price in the terrible state of the real economy.
Yelp released a damning report on Wednesday, revealing business closures across the U.S. have soared because of the pandemic.
Meanwhile, the ‘Cantillon Effect’ has gripped the U.S. economy. Because of the Federal Reserve’s monetary policy, money injected into the economy has benefited the wealthy and boosted wealth inequality.
Yelp Reports Damning Numbers on State of the Real Economy
On Wednesday, Yelp released its latest Economic Impact Report revealing a flurry of business closures across the country.
According to the report, 163,735 U.S. businesses have closed down since the beginning of the pandemic, as of August 31. This number jumped a staggering 23% since July 10.
To make matters worse, 60% of these business closures are permanent.
Among these businesses, restaurants have been the hardest hit.
The ‘Cantillon Effect’ Has Gripped the U.S. Economy
While permanent business closures and job losses continue to soar, inflation is the worst thing that can affect the average consumer.
Thanks to the Federal Reserve’s dovish stance on monetary policy, the ‘Cantillon Effect’ is already beginning to surface. Watch this video to know more:
This thread explains the effect even better. According to Richard Cantillon’s book ‘Essay on the Nature of Commerce in General,’ early recipients of new money entering the economy will enjoy a much better standard of living than those who get it later. In other words, by the time newly created cash trickles down to the last person who receives it, it has lost a lot of purchasing power.
The Cantillon Effect has started surfacing in the form of inflation in different states. While the U.S. stock market has undergone a rally since March, global food prices have risen, painting a picture of how the Federal Reserve’s liquidity operations hurt the average consumer.
The Fed wants inflation to “run hot” above its 2% inflation target. However, the consumer price index does not reflect the reality on the ground regarding how much the average American is spending.
According to the website, “methodological shifts in government reporting have depressed reported inflation.”
These 1990 calculation method-based numbers show that real inflation rates are hovering around 8-9% mark.
The Federal Reserve is already hell-bent on letting inflation run wild, and when it does, it will be a disaster for Main Street. The U.S. stock market is finally reacting to the state of the real economy, and there could be more downside in the coming days.
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