Biden Puts America’s Economy Into The Worst Situation

Stagflation is back. The term “stagflation” refers to a situation in which economic growth slows down and prices rise faster than they should. We’ve got this in the first quarter of 2022 now.

The economy did not just crawl along at a sluggish pace. On an annual basis, it shrank. Imports, which are subtractions from GDP, increased dramatically, while exports decreased. Consumer spending fell short of expectations, suggesting that consumers were unwilling to pay such high prices. Inventories dropped, taking away from GDP.

Our economy is extremely exposed to trade imbalances as a result of our nation’s trade policy. Because our leaders refuse to put in place adequate trade safety-measures, whenever the U.S. economy grows faster than those of other nations, American earnings leak out to foreign manufacturers. As a result, Americans were paid less and produced less. The goods deficit grew to an all-time high in March and February. The trade deficit shaved 3.2 percentage points from first-quarter GDP growth.

After a large buildup at the end of next year, inventories were quite low. I’ve already mentioned that retailers were misled into thinking that sales would be good after early holiday shopping was better than expected last year. That early purchasing was simply because prices had been increasing and people were afraid of shortages, resulting in unwanted goods that had to be sold off at the beginning of the year.

Personal consumption expenditures were anticipated to rise at an annual rate of 3.4 percent—largely as a result of many households being flush with cash, incomes are increasing (before adjusting for inflation), and employment is still strong. Personal consumption instead increased by only 2.5 percent, the same as it did at the end of last year. This is very probably a consequence of people engaging in some defensive saving against anticipated higher costs and refusing to pay excessive prices that they are seeing right now.

Relatively speaking, personal disposable income went up—but this boost was overwhelmed by inflation. Disposable income dropped two percent after adjusting for inflation.