It takes two to tango
The US Government and the central planners. What is left after this dance? Stan Druckenmiller calls it crony capitalism.
The cost of money has been bastardized as Government spending hits record levels and stimulus checks flow into a nonproductive, stay-at-home workforce.
There is no such thing as free-market capitalism when a government is flooded with an economic deficit and massive policy responses.
According to Druckenmiller’s perspective, the future doesn’t look bright for the US. And according to George, the US government is nothing but centrally planned, crony capitalism that's trying to micromanage a forever-growing welfare state.
The pandemic has triggered the political elite into extending lockdowns across the US, causing unemployment rates to rise up to economic depression levels.
Although the US unemployment rate has increased, incomes also escalated simultaneously due to the Fed’s stimulus checks.
According to the Bureau of Economic Analysis, incomes increased in every state of the US, ranging from 15.3% in Washington DC to 76.3% in Massachusetts in the second quarter of 2020.
George thinks the American people will have to pay for the Government’s deficit spending and stimulus, not necessarily with taxes but with the distortions in the economy, malinvestment, and misallocation of resources.
The Fed’s balance sheet has skyrocketed as well.
Their treasuries went from approximately $2 billion to $4.7 plus trillion. Corporate debt and bond prices have also increased, whereas yield prices have decreased.
This is the complete opposite of what typically happens during a recession.
The US Government’s response to the pandemic includes the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This bill also contains increased unemployment benefits and Stimulus checks.
George thinks there are fewer skills in general due to these checks. He states people are no longer incentivized to learn new skills to produce more goods and services when they are told to stay home and get their “Stimmy” check delivered to their mailbox.
That stimulus check money – also propelled by social media platforms like Reddit, TikTok, or Instagram- ends up going to the stock market and creating malinvestment.
George believes the unintended consequences of central planning and increasing welfare are clear: Wealth has been concentrated at the upper end of the economic totem pole. The rich are getting richer and the poor are getting poorer.
The increasing delta between rich and poor is not a sole consequence of Covid-19. The Minimum Wage Law instituted by the US Government, poor education, low marketable skills, and more obstacles to enter the job market are to blame as well.
Other subsidiary programs like food stamps reduce the difference between working and not working. The intention may be enabling individuals to rise faster, but that is far from reality. The path set by welfare economic policies will make US citizens equal but not in a prosperous manner.
Make sure to click on the video above for more insights on the American dystopian economic future, shocking data on the US unemployment rate, and the Fed’s balance sheet.