Say’s Law and the Austrian Theory of the Business Cycle

By William L. Anderson

Abstract: Economists have tried to explain business cycles as well as fluctuations in the economy, but over the past two centuries, the explanations have fallen into two areas. The first area tries to explain business cycles as being the result of fluctuating aggregate demand; if overall demand for goods is strong (or to put it another way, consumers are confidently buying goods), then the economy is in a boom. However, if consumers choose not to spend, then the economy is in recession. The second area, as outlined by Sowell is that of seeing an economy as operating within internal proportions that are brought into imbalances. Say’s Law is found in this second category, and the Austrian theory of the business cycle (ATBC) also is a proportionality-based theory. However, most economists have failed to make the connection between Say’s Law and the ATBC.

    During the 1980 U.S. presidential campaign, many American voters for the first time were introduced to Say’s Law, and while the politicians debating it managed to mangle its concepts, nonetheless a staple of classical economics for a brief moment held center stage. Today, it seems that the zeitgeist of political economy is moving in another direction, as those in political power today are reaching back into the 1930s to the borrow-and-spend policies that marked what governments did in the United States and Europe.

Economists have tried to explain business cycles as well as fluctuations in the economy, but over the past two centuries, the explanations have fallen into two areas. The first tries to explain business cycles as being the result of fluctuating aggregate demand; if overall demand for goods is strong (or to put it another way, consumers are confidently buying goods), then the economy is in a boom. However, if consumers choose not to spend, then the economy is in recession.

The second area, as outlined by Sowell (1985) is that of seeing an economy as operating within internal proportions that are brought into imbalances. Say’s Law is found in this second category, and the Austrian theory of the business cycle (ATBC) also is a proportionality-based theory. However, most economists have failed to make the connection between Say’s Law and the ATBC, whether or not people are aware of the connection.

This article seeks to demonstrate how the ATBC and Say’s Law are interrelated, and to show that in his Treatise on Political Economy (1803, 1826) J.B. Say anticipated the ATBC and at the same time delivered a devastating critique against the Keynesian theories that dominate the political discussion today. The economic thought that Say introduced in his Treatise, while not explaining (or attempting to give) what one might call a business cycle theory, nonetheless lays an important foundation for the theory that Mises (1912, 1981) and other Austrian economists would develop.

The article is organized in the following way. I first explain what is meant by “Say’s Law” and how it was developed. In the next section, I briefly deal with the critics and supporters of Say’s Law. I then briefly explain the ATBC and show how Say’s Law explains a critical foundation of the ATBC, and afterward, I draw some conclusions.

    Traite’ d’Economie Politique or Treatise on Political Economy first appeared in 1803 as a general book on economic thought. Like Adam Smith (1776, 1982), Say wished to discredit the doctrines of “mercantilism,” or, as called in France, “Colbertism,” after J.B. Colbert, the finance minister for Louis XIV, who developed a Byzantine system of taxes, monopolies, and business regulations for France.

There is no specific “law” that Say pronounces in his book, but the concept of what we call Say’s Law is developed in book one, chapter 15, which begins (from the 1826 edition):

It is common to hear adventurers in the different channels of industry assert that their difficulty lies not in the production, but in the disposal of commodities; that products would always be abundant, if there were but a ready demand, or market for them.When the demand for their commodities is slow, difficult, and productive of little advantage, they pronounce money to be scarce; the grand object of their desire is a consumption brisk enough to quicken sales and keep up prices. (p. 132; emphasis added)

In other words, Say is describing something akin to a recession. In explaining this passage, Mises (1960) writes:

Whenever business was bad, the average merchant had two explanations at hand: the evil was caused by a scarcity of money and by general overproduction. Adam Smith, in a famous passage in The Wealth of Nations, exploded the first of these myths. Say devoted himself to a refutation of the second. (p. 315)

It is important to point out that in chapter 15, Say does not attempt to explain why the condition he is describing has happened. In other words, the chapter does not contain a business cycle theory itself. Instead, he explains why the scarcity of money or overproduction/under- consumption explanations are fallacious, but in so doing, he also explains a set of conditions that find their way into the ATBC.

The explanation that Say gives is based upon what Sowell (1994, pp. 39–41) writes are the following propositions:

“The total factor payments received for producing a given volume (or value) of output are necessarily sufficient to purchase that volume (or value) of output.”
“There is no loss of purchasing power anywhere in the economy.” (In other words, no Keynesian “leakages.”) “People save only to the extent of their desire to invest and do not hold money beyond their transactions need during the current period.”
“Investment is only an internal transfer, not a net reduction, of aggregate demand.”
“In real terms, supply equals demand ex ante, since each individual produces only because of, and to the extent of, his demand for other goods.”
“A higher rate of savings will cause a higher rate of subsequent growth in aggregate output.”
“Disequilibrium in the economy can exist only because the internal proportions of output differ from consumer’s preferred mix—not because output is excessive in the aggregate.”
As we shall see, the sixth proposition is important to understanding the ATBC. Not surprisingly, the sixth (and really the last three) propositions are the ones that are disputed among economists in debates about the causes (and “cures”) for problems related to business cycles.

The popular definition of Say’s Law is: Supply creates its own demand. In the next section, I briefly shall point out how critics have misinterpreted that statement, something that is common in economic and popular literature, but in this section I will explain what the phrase actually means.

First, and most important, nowhere in the chapter does Say make the “supply creates its own demand” statement. Instead, he applies economic logic to production and consumption and demonstrates that consumption and production are interrelated, as opposed to being two separate and random activities, as was proposed by economists like Thomas Malthus and later Karl Marx and even John Maynard Keynes.

As Benjamin Anderson (1949) writes in support of this concept:

The prevailing view among economists,…has long been that purchasing power grows out of production. The great producing countries are the great consuming countries. The twentieth-century world consumes vastly more than the eighteenth-century world because it produces vastly more. Supply and demand in the aggregate are thus not merely equal, but they are identical, since every commodity may be looked upon either as supply of its own kind or as demand for other things. But this doctrine is subject to the great qualification that the proportions must be right; that there must be equilibrium. (p. 390; emphasis added)

Second, as Hazlitt notes, the purpose of Say’s chapter is to lay out the logical case that general bouts of “overproduction” or “underconsumption” are impossible. In other words, an economic downturn cannot occur because an economy has produced too much of everything, or that consumers lack the will (Malthus) or the ability (Harrington) to purchase what has been produced. Writes Harrington (1981):

During the 1930s, there was a glut of consumer goods because workers lacked the purchasing power to buy back what they produced. That was why government began to play a role in the economy on behalf of middle- and low-income people during the period of Franklin Delano Roosevelt’s New Deal. (p. 31)

Again, we see in Harrington’s statement the belief that (1) production and consumption are unrelated, and (2) unless enough workers can find the means to “buy back the product,” then the overproduction/ underconsumption problem reappears. Hazlitt (1979), includes a chapter that attacks the “buy back the product” viewpoint, noting that a payment to a worker also is a cost to the employer, which means that the believers in the “buy back the product” view are saying that the way to increase consumption is to increase business costs, which is easily and logically refuted.

One also must keep in mind that Say is not declaring that business downturns or recessions are impossible, something that will be discussed at greater length in the next section. Instead, he simply is attempting to counter the argument that a business downturn is not the result of “general overproduction” of goods within the economy. Furthermore, “Say’s Law” is not a law in the sense of what economists consider a law like the Law of Scarcity, the Law of Demand, the Law of Opportunity Cost, or the Law of Supply. Instead, Say extrapolates the logic found in these other laws to point out the simple fact that production and demand are intricately related, as one cannot consume without someone producing that which is to be consumed, and that the more one produces, the more one can consume.

While not giving a business cycle theory in particular, nonetheless Say does outline some basic parameters from which to build a theory. Furthermore, these parameters are a necessary foundation for the ATBC and for understanding the boom and bust cycle in general (including the present economic troubles that exist at the writing of this article). This will be covered in more detail in the ATBC section, but I include the item here as well.

Say held that business downturns would be proportional in nature, that too many goods in one sector—more than would be able to be consumed, given the preferences and income of consumers—could be produced, at least temporarily, but that there would be a corresponding shortfall in the production of other goods. In other words, business downturns were a matter of proportional “malinvestments” (to use the Austrian term), not overall lack of consumption. As we shall see, this point is crucial to understanding the ATBC.

    Say was not without his critics then and now. As Sowell (1985) points out, the contemporary critics included Malthus, Sismondi, and Marx. The most important critic of the twentieth century was John Maynard Keynes (1937, 1953), whose “refutation” of Say’s Law will be examined in this section, as Keynes and the modern critics build on the earlier contemporary criticisms.

Sweezy (1947) declares about Keynes and his General Theory:

Historians fifty years from now may record that Keynes’ greatest achievement as the liberation of Anglo-American economics from a tyrannical dogma, and they may even conclude that this was essentially a work of negation unmatched by comparable positive achievements (p. 105).

However, Sweezy strikes a more ominous tone when he says that the “Keynesian attacks, though they appear to be directed against a variety of specific theories, all fall to the ground if the validity of Say’s Law is assumed” (p. 105). Thus, it was important that Keynes and his followers “discredit” Say’s Law.

As Hazlitt (1959) points out, Keynes “refuted” Say’s Law by taking a passage from Mill in which he states that

the means of payment for commodities is simply commodities…. Could we suddenly double the productive powers of the country, we should double the supply of commodities in every in every market; but we should, by the same stroke, double the purchasing power. (Quoted in Hazlitt, 1959, p. 34)

Keynes targets that passage as being false on its face because it allegedly declares that every good produced automatically will find a buyer and, thus, recessions are impossible, writing:

Thus Say’s Law, that the aggregate demand price of output as a whole is equal to its aggregate supply price for all volumes of output, is equivalent to the proposition that there is no obstacle to full employment. If, however, this is not the true law relating the aggregate demand and supply functions, there is a vitally important chapter of economic theory which remains to be written and without which all discussion concerning the volume of aggregate employment are futile. (p. 26 )

Harrington also makes a similar statement, declaring, “Say’s Law maintains that if business can produce products, it can sell them. The Great Depression discredited Say’s Law” (p. 31). Thus, the chapter that was written to explain what did not cause business recessions has been turned into something that was not written at all: that classical economists claimed “full employment” always was the norm.

Yet, as Hazlitt points out, Mill (1848, 1919) himself in the next passage explains the context of his previous statement in which he says, “It is probable, indeed, that there would now be a superfluity of certain things” (Hazlitt, 1959, p. 35). Sowell (1974, p. 43) quotes Mill (1844) elsewhere saying that “production is not excessive, but merely ill-assorted.” Likewise, on that same page, Sowell quotes Ricardo who says that “it is at all times the bad adaptation of the commodities produced to the wants of mankind which is the specific evil, and not the abundance of commodities.” Ricardo add, “Men err in their productions (but) there is no deficiency of demand.”

In other words, the same people who recognized and agreed with Say’s logic also recognized that business recessions were a possibility and that they themselves had observed them. As Hazlitt (1959) puts it:

If you had presented the classical economists with “the Keynesian case”—if you had asked them, in other words, what they thought would happen in the event of a fall in the price of commodities, if money wage-rates, as a result of union monopoly protected and insured by law, remained rigid or rising—they would have undoubtedly replied that sufficient markets could not be found for goods produced at such economically unjustified costs of production and that great and prolonged unemployment would result. (p. 36)

Thus, the critics of Say’s Law have claimed that it is absurd on its face, and that it denies something that has been observed many times in history: the business recession. Yet, as those who support Say’s Law might ask, “How could a chapter that acknowledges the presence of a business recession then deny that such a recession actually was taking place?” Indeed, Say’s Law is not about the denial of recessions or even a partial overproduction of goods relative to demand; it is about dealing with the claims that a recession occurs because of a general overproduction of goods.

    The details of the ATBC are explained in Mises (1912) and Rothbard (1975) and elsewhere and will not be expounded here. However, because this article relates Say’s Law directly to the ATBC, Rothbard’s explanation about the economic crisis being one of proportionality is vital to understanding the relationship.

In explaining how the boom-and-bust of the business cycle occurs, Rothbard writes that the problem is in what Austrian economists call the “cluster of errors” by entrepreneurs and business owners:

The explanation of depressions, then, will not be found by referring to specific or even general business fluctuations per se. The main problem that a theory of depression must explain is: why is there a sudden general cluster of business errors? This is the first question for any cycle theory. Business activity moves along nicely with most business firms making handsome profits. Suddenly, without warning, conditions change and the bulk of business firms are experiencing losses; they are suddenly revealed to have made grievous errors in forecasting. (p. 16)

The widest fluctuations, Rothbard notes, are not in the consumer goods industries, but rather in capital or producers’ goods. In other words, the downturn does not begin by consumers suddenly deciding to purchase fewer goods, but rather because economic conditions in certain industries suddenly turn sour.

Rothbard goes on to say that in a normal, free-market economy, there will be no cluster of errors by entrepreneurs, but rather that those errors will be distributed on a more random basis. However, the combination of fractional reserve banking and aggressive efforts by the central bank to expand the supply of money in the economy will distort the structure of production. Rothbard first points out that if people change their time preferences by consuming less in the present so they can consume more in the future, then the addition of savings they add to the system will signal entrepreneurs to lengthen the structure of production and invest in capital goods as opposed to consumer goods, which appeal to people who prefer to spend their resources at the present time.

However, he points out that if the money that is directed toward the capital goods sectors comes because governments and their banking allies expand credit without a similar expansion of real savings, then problems begin:

Now what happens when banks print new money (whether as bank notes or bank deposits) and lend it to business? The new money pours forth on the loan market and lowers the loan rate of interest. It looks as if the supply of saved funds for investment has increased, for the effect is the same: the supply of funds for investment apparently increases, and the interest rate is lowered. Businessmen, in short, are misled by the bank inflation into believing that the supply of saved funds is greater than it really is. (p. 18; emphasis Rothbard’s)

From there, the dislocations begin as investments are poured into lines of production that cannot be sustained. The new “investments” alter the structure of production into a direction and scope that will not reflect the actual desires and spending patterns of consumers. Rothbard adds:

people will rush to reestablish the old proportions, and demand will shift back from the higher to the lower orders. Capital goods industries will find that their investments have been in error: that what they thought profitable really fails for lack of demand by their entrepreneurial customers. Higher orders of production have turned out to be wasteful, and the malinvestment must be liquidated.

A favorite explanation of the crisis is that it stems from “underconsumption”—from a failure of consumer demand for goods at prices that could be profitable. But this runs contrary to the commonly known fact that it is capital goods, and not consumer goods, industries that really suffer in a depression. The failure is one of entrepreneurial demand for the higher order goods, and this in turn is caused by the shift of demand back to the old proportions. (pp. 18–19; emphasis Rothbard’s)

Rothbard continues:

The “boom,” then, is actually a period of wasteful misinvestment. It is the time when errors are made, due to bank credit’s tampering with the free market. The “crisis” arrives when the consumers come to reestablish their desired proportions. The “depression” is actually the process by which the economy adjusts to the wastes and errors of the boom, and reestablishes efficient service of consumer desires. The adjustment process consists in rapid liquidation of the wasteful investments. Some of these will be abandoned altogether (like the Western ghost towns constructed in the boom of 1816–1818 and deserted during the Panic of 1819); others will be shifted to other uses. (p. 19; emphasis Rothbard’s)

In other words, the problem with the economy is one of incorrect proportions of production, as opposed to being a general fall in consumption. This point is vital to understanding not only the ATBC, but also understanding how Say’s Law helps lay the foundations of that theory. Sowell (1985) writes:

Long before Engels and Marx came upon the scene, economists had divided into two main groups—(1) those who explained depressions by inadequate demand (the “general glut” theorists, let by Sismondi and Malthus) and (2) those who insisted that depressions were caused by internal disproportionalities in the composition of aggregate output—too much of A and too little of B—rather than by its total being excessive relative to aggregate demand. (pp. 92–93)

In speaking of proportionality, Say writes:

But it may be asked…how does it happen, that there is at times so great a glut of commodities in the market, and so much difficulty in finding vent for them? Why cannot one of the superabundant commodities be exchanged for another? I answer that the glut of a particular commodity arises from its having outrun the total demand for it in one or two ways; either because it has been produced in excessive abundance, or because the production of other commodities has fallen short.

It is because the production of some commodities has declined, that other commodities are superabundant. (p. 135; emphasis added)

To put it another way, the relative proportions are incorrect. If one accepts this proposition (as opposed to holding to an “underconsumption” theory), then the critical question is this: Why are the economic fundamentals out of kilter?

The reason, as outlined by Garrison (1984), is that the growth of new money also changes the relative prices within a structure of production. Classical, as well as Austrian, economists believed that while money served as a medium of exchange, nonetheless the real economy, that is, the relationships between real goods, was key to understanding what was occurring. For example, a barrel of oil and a meal at a good restaurant might both cost $50. While the prices are denominated in dollars, they are equal in real terms, at least in barter.

Yet, these relationships can change under certain circumstances. Assume that consumer preferences change over the long term and people are wishing to use more oil, thus making oil twice as valuable as a restaurant meal. Economically speaking, while it means there will be adjustments in the economy due to this change in preferences, but it does not cause dislocations. It is just that in real terms oil now is twice as valuable to consumers relative to meals at good restaurants, and consumer choices will adjust accordingly, as entrepreneurs will recognize the consumers’ change in preferences and direct more resources toward oil.

However, if there is a bout of inflation, the relationships also will change, but in a very different way. The typical classroom model that tracks changes in the money supply is MV = PY, where M equals the stock of money, V is its “velocity,” or how quickly it is dispersed through the economy, P is the “price level,” or a weighted average of all consumer prices, and Y is national “output.” If M were to double but V and Y remain unchanged, then P also would double.

Although this is a convenient model to show to students, nonetheless it does not accurately demonstrate what occurs during a period of inflation. Prices of consumer and producer goods do not rise equally in tandem; instead, inflation, which really is a situation in which the value of the marginal unit of money decreases relative to real goods, as pointed out by Mises (1912) and Rothbard (1993). This simple but important point often is missed by many mainstream economists who insist on defining inflation as a rise in a constructed and stylized average of consumer prices. (The government also has a Producer Price Index, but this, too, is a weighted average of selected prices, except they are prices for factors of production, not consumer goods.)

Although these statistics might provide interesting fodder for discussion, they do not explain what happens during an inflationary period. Prices for goods indeed rise, but they rise in a manner in which the relative prices change even though consumer preferences do not do likewise. For example, when money loses its value after its stock is expanded, the prices of commodities like oil and gold (and other such goods that are publicly traded in commodity exchanges) increase more quickly than do prices of services and some consumer items, not to mention labor prices, which often are set via contracts or other longer-term agreements.

This is not the only problem. As Rothbard earlier explained, the mechanism of injecting new money into the economy—the banking loan process—brings two dislocation problems. First, if central banking authorities hold interest rates below levels where they would naturally be due to the demand for and supply of loanable funds, then this process will favor producers’ goods over consumer goods, changing that relationship even if consumer preferences have not changed. Second, when the new money spreads throughout the economy, it reduces the value of money, further changing relative prices of goods.

Only someone who understands how such action disturbs the real relationships of goods to one another can understand why central-bank led booms are unsustainable. At some point, the relationships of goods in an economy undergoing such injections of credit become dysfunctional and break down on their own. Economists who insist on defining inflation as a situation in which all prices rise in tandem are not going to see how increases in the supply of money via government-sponsored bank credit injections can distort the inner workings of an economy.

Indeed, that is one of the things that separates the two groups of economists as outlined above by Sowell. Economists who believe that economic recessions are caused by a sudden fall in aggregate expenditures also are going to believe that a new injection of bank credit and government spending will set matters right. However, economists who agree with Say and the Austrians that booms disturb the fundamental proportions of goods within an economy also will recognize that government policies—and especially the kind advocated by Keynes and his followers—will cause further distortions, thus making the economic downturn even worse.

It is true that Say did not give reasons as to the cause of the disproportionalities (Rothbard writes that David Ricardo developed a prototype for what would be the ATBC), and it would be a century later before Mises formally developed a theory that encompassed not only the reasons for the distortions, but also explained how the central bank usually was the originator of the crisis. However, it is clear that he and his supporters were on the right track.

    Say’s Law, often misunderstood and certainly wrongly vilified, is an important part of the ATBC. This “law” is not sufficient, but it is necessary for the ATBC to be true. Despite the fact that the ATBC is an intricate and sophisticated economics theory (as opposed to the more crude notions of “aggregate demand” and “aggregate supply” that currently are in vogue), at its heart is the simple fact that monetary intervention by government authorities ultimately distorts the relationships of economic fundamentals and throws the economy out of balance.

This is why Austrians say that a recession is a necessary part of restoring the “proper” economic relationships that are seen in the fundamentals of the economy, with both consumer goods and the factors of production. Say’s Law provides the ATBC with a crucial reminder that there cannot be a recession without the fundamental economic relationships within an economy first being disturbed.

It is unfortunate that economists continue to misrepresent and even vilify Say’s Law. At its most simple point, it is an economic tautology: one cannot consume without first producing, and what one produces becomes a basis for determining what one consumes. Say did not “discover” this fact, but he highlighted it, and two centuries later, Say’s Law is as applicable as it was when Treatise first appeared in print.

Contact William L. Anderson

William L. Anderson is a professor of economics at Frostburg State University in Frostburg, Maryland.

Creative Commons Licence
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Mises, Ludwig von. 1981. The Theory of Money and Credit. Indianapolis, Ind.: Liberty Fund.

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——. 1950. “Stones Into Bread: The Keynesian Miracle.” The Freeman. October 30.

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——. 1975. America’s Great Depression. Kansas City: Sheed and Ward.

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Smith, Adam. 1982. An Inquiry into the Nature and Causes of the Wealth of Nations. Indianapolis, Ind.: Liberty Fund.

Sowell, Thomas. 1985. Marxism. New York: Basic Books.

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Sweezy, Paul M. 1947. Quoted in The New Economics. Ed. Seymour E. Harris. New York: Alfred Knopf. P. 10.

A Quarter Of All Household Income In The US Now Comes From The Government

By Tyler Durden

Following today’s release of the latest Personal Income and Spending data, Wall Street was predictably focused on the changes in these two key series, which showed a modest slowdown in personal spending (to be expected one month after the savings rate in the US hit a record), coupled with a modest decline in personal income (as government benefits and stimulus checks slowed substantially).

But while the change in the headline data was indeed notable, what was far more remarkable was less followed data showing just how reliant on the US government the population has become.

We are referring, of course, to Personal Current Transfer payments which are essentially government sourced income such as unemployment benefits, welfare checks, and so on. In May, this number was $4.9 trillion annualized, and while it is down from the record $6.6 trillion hit in April when the US government activated the money helicopters to avoid a total collapse of the US economy, it was nearly $2 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.

Even more striking, is that as of June when total Personal Income was just below $20 trillion annualized, the government remains responsible for over a quarter of all income.

Putting that number in perspective, in the 1950s and 1960s, transfer payment were around 7%. This number rose in the low teens starting in the mid-1970s (right after the Nixon Shock ended Bretton-Woods and closed the gold window). The number then jumped again after the financial crisis, spiking to the high teens.

And now, the coronavirus has officially sent this number into the mid-20% range, after hitting a record high 31% in April.

And that’s how creeping banana republic socialism comes at you: first slowly, then fast.

So for all those who claim that the Fed is now (and has been for the past decade) subsidizing the 1%, that’s true, but with every passing month, the government is also funding the daily life of an ever greater portion of America’s poorest social segments.

Who ends up paying for both?

Why the middle class of course, where the dollar debasement on one side, and the insane debt accumulation on the other, mean that millions of Americans content to work 9-5, pay their taxes, and generally keep their mouth shut as others are burning everything down and tearing down statues, are now doomed.

To read the complete article, with charts and graphs, click here…

China Didn’t Ban Bitcoin Entirely, Says Beijing Arbitration Commission

By Helen Partz

Bitcoin-related activities are not prohibited by the Chinese government as the cryptocurrency acts as a virtual commodity.

hina, one of the world’s most strict jurisdictions for cryptocurrency trading, has not completely banned Bitcoin (BTC), a local non-profit arbitration organization says.

According to a July 30 report published by the Beijing Arbitration Commission (BAC), China’s prohibition of Bitcoin is more nuanced than some have suggested.

Bitcoin does not constitute money in China
In the report, the BAC clarified China’s legal stance on cryptocurrencies like Bitcoin and outlined major crypto-related activities that are prohibited by the government.

According to the BAC, China prohibits token funding and trading platforms from engaging in exchanges between the legal tender and virtual currency or tokens.

The commission then states that the same law that bans cryptocurrency as money, recognizes it as a virtual commodity.

Furthermore, existing laws are, according to the BAC, not specific enough to regulate Bitcoin as virtual property:

“The “General Principles of Civil Law” do not make specific provisions on the extension and connotation of virtual property, but only stipulates that the protection of virtual property must be stipulated by law, and the specific protection measures of virtual property are entrusted to other laws. As the country currently has no laws on Bitcoin, it cannot be recognized as a virtual property.”

“In summary, the state does not prohibit Bitcoin’s activities as virtual commodities, except for the activities that Bitcoin is engaged in as legal tender,” the report adds.

Additionally, since Bitcoin does not constitute money in China — as the government has not approved Bitcoin as a legal tender — and since Bitcoin is not used as an alternative to the legal tender or fiat currency, it should not be associated with an illegal transaction, the BAC said:

“The prohibited transactions include those when Bitcoin is used as a currency. If Bitcoin does not engage in activities as a currency, it is not a transaction prohibited by the state. For example, in the equity transfer contract dispute decided by the Shenzhen International Arbitration Court, the two parties agreed on the return of Bitcoin. Bitcoin is only used as a general property. Therefore, the transaction does not violate relevant national regulations and should be valid.”

Mixed bag for Bitcon, but full steam ahead on blockchain tech
China has emerged as one of the most strict countries in terms of crypto after regulations on local cryptocurrency exchanges back in 2017. The world’s largest cryptocurrency exchange, Binance, which was originally established in China, had to leave the country due the regulations.

However, despite moving towards tighter regulation of Bitcoin, China has not prohibited the cryptocurrency outright. In November 2019, Chinese authorities reportedly said that Bitcoin mining will not be an illegal industry in the country.

The Chinese government is known for its “blockchain, not Bitcoin” approach as President Xi Jinping called on the country to prioritize blockchain development in late 2019.

Alongside aggressive blockchain developments like China’s national Blockchain Service Network, China’s central bank has been progressing with its central bank digital currency. In April 2020, China successfully piloted the project in four cities including Shenzhen, Chengdu, Suzhou and Xiongan.

Read more here…

Fed’s Assets Fall by $16 Billion, -$220 Billion Since June 10: Week 7 of Balance Sheet Shrinkage

Repos are gone. Dollar liquidity swaps dropped further. SPVs fell to lowest since June 17. MBS dropped by $37 billion. Treasuries rose.

By Wolf Richter for WOLF STREET.

Week seven since peak balance sheet: Total assets on the Fed’s balance sheet for the week ended July 29, released this afternoon, fell by $16 billion from the prior week, to $6.95 trillion. Since June 10, when they’d hit $7.17 trillion, they have declined by $220 billion…

See the charts here…

CDC Director Says There are More Suicides and Overdoses than COVID Deaths

By Micaela Burrow

Center for Disease Control Director Robert Redfield testified in a Buck Institute webinar that suicides and drug overdoses have surpassed the death rate for COVID-19. Redfield argued that lockdowns and lack of public schooling constituted a disproportionally negative impact on young peoples’ mental health.

“We’re seeing, sadly, far greater suicides now than we are deaths from COVID. We’re seeing far greater deaths from drug overdose that are above excess that we had as background than we are seeing the deaths from COVID,” he said.

Roughly 146,000 people have died from COVID or COVID-related causes in the U.S., according to CDC data.

The most recent publicized federal data records 48,000 deaths from suicide and at least 1.4 million attempts in 2018. In 2019, almost 71,000 people died from drug overdoses.

Where Redfield obtained his data is unknown, although a doctor at John Muir Medical Center in Walnut Creek, CA claimed the facility has “seen a year’s worth of suicide attempts in the last four weeks.” He did not say how many deaths occurred, or whether the statement was exaggerated for emphasis.

“What I have seen recently, I have never seen before,” Hansen said. “I have never seen so much intentional injury,” said a nurse from the same hospital.

And while health authorities will not have verified data regarding suicides and drug overdoses in 2020 for two more years, local reporting indicates that suicide fatalities have increased year-on-year.

According to the American Medical Association, “More than 35 states have reported increases in opioid-related mortality as well as ongoing concerns for those with a mental illness or substance use disorder in counties and other areas within the state.”

In Eagle County, Colorado, six suicides have been recorded, just one below the yearly average. Colorado on the whole recorded a 40 percent decrease in suicides in March and April, but the number of calls to Colorado Crisis Services increased 48 percent.

The Chicago Sun-Times looked specifically at black populations. In Cook County, Illinois, the number of suicide deaths is already higher than for all of 2019.

In Yakima County, Washington, the suicide rate has risen 30 percent, according to the county coroner.

Between March 15 and April 29, as many people commited suicide in Queens, New York than did between January 1 and April 29 the year prior.

The Pima County Health Department in Arizona has recorded an uptick in suicide rates as well.

Historical trends give reason to believe the suicide rate may rise due to extenuating circumstances caused by COVID-19, including unemployment and social isolation. For example, in the year after the Great Recession in 2008, the rate in America was 6.4 percent higher than expected. While the rate didn’t’ “skyrocket,” as some have predicted it will this year, the coronavirus pandemic and economic shutdown has dealt a worse blow to the U.S. psyche.

Thirty to 40 million jobs have been lost to the economic shutdown, compared to 2.6 million in 2008.

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Why Marxist Organizations Like BLM Seek to Dismantle the “Western Nuclear Family”

By Bradley Thomas

One of the most oft-cited and criticized goals of the Black Lives Matter organization is its stated desire to abolish the family as we know it. Specifically, BLM’s official website states:

We disrupt the Western-prescribed nuclear family structure requirement by supporting each other as extended families and “villages” that collectively care for one another, especially our children, to the degree that mothers, parents, and children are comfortable.

This idea isn’t unique to BLM, of course. “Disrupting” the “nuclear family” is a commonly stated goal among Maxist organizations. Given that BLM’s founders have specifically claimed to be “trained Marxists,” we should not be surprised that the organization’s leadership has embraced a Marxian view of the family.

But where does this hostility toward the family originate? Partly, it comes from the theories of Marx and Engels themselves, and their views that an earlier, matriarchal version of the family rejected private property as an organizing principle of society. It was only later that this older tribal model of the family gave way to the modern “patriarchal” family, which promotes and sustains private property.

Clearly, in the Marxian view, this “new” type of family must be opposed, since the destruction of this family model will make it easier to abolish private property as well.

Early Family Units in Tribal Life
Frederick Engels’s 1884 book The Origin of the Family, Private Property and the State provides a historical perspective of the Marxian view of the development of the modern Western family unit and its relation to property rights. (Engels, of course, was the longtime benefactor of and collaborator with Marx.)

In reconstructing the origins of the family within a Marxian framework, Engels traces back to the “savage” primeval stage of humanity that, according to his research, revealed a condition in which “unrestricted sexual intercourse existed within a tribe, so that every woman belonged to every man, and vice versa.”

Under such conditions, Engels explained, “it is uncertain who is the father of the child, but certain, who is its mother.” Only female lineage could be acknowledged. “[B]eing the only well known parents of younger generations,” Engels explained, women as mothers “received a high tribute of respect and deference, amounting to a complete women’s rule [gynaicocracy].”

Furthermore, Engels wrote, tribes were subdivided into smaller groups called “gentes,” a primitive form of an extended family of sorts.

These gens were consanguineous (i.e., included people descended from the same ancestor) on the mother’s side, within which intermarrying was strictly forbidden. “The men of certain ‘gens,’ therefore, could choose their wives within the tribe, and did so as a rule, but had to choose them outside of their ‘gens,’” Engels explained. And “marriage” at this stage was a “communal” affair, meaning that multiple partnerships between men and women was closer to the rule than the exception.

Because mothers were the only parents who could be determined with certainty, and the smaller gentes were arranged around the mother’s relatives, early family units were very maternal in nature and maternal law regarding rights and duties for childrearing and inheritance were the custom.

Transition to the “Pairing Family”
This was the state of affairs for thousands of years, according to Engels. Over time, however, there emerged what Engels referred to as the “pairing family,” in which “A man had his principal wife…among many women, and he was to her the principal husband among others.” This was in no small part due to the “gentes” within tribes developing more and more classes of relatives not allowed to marry one another. Due to these increasing restrictions, group marriage became increasingly impossible and ever more replaced by the pairing family structure.

Under this structure, however, the role of mothers was still dominant. Quoting Arthur Wright, a missionary among the Seneca Iroquois tribe, Engels notes, “The female part generally ruled the house….The women were the dominating power in the clans [gentes] and everywhere else.”

The fact that women all belonged to the same gens, while husbands came from separate gentes “was the cause and foundation of the general and widespread supremacy of women in primeval times,” Engels wrote.

“In the ancient communistic household comprising many married couples and their children, the administration of the household entrusted to women was just as much a public function, a socially necessary industry, as the procuring of food by men,” he added.

As society evolved, as Engels described it, from “savagery” to “barbarism,” an important evolution was man’s development of weapons and knowledge that enabled them to better domesticate and breed animals.

Cattle and livestock became a source of wealth, a store of milk and meat. “But who was the owner of this new wealth?” asked Engels. “Doubtless it was originally the gens,” he answered, referring to a collective, or group ownership over the sources of wealth. “However, private ownership of flocks must have had an early beginning.”

“Procuring the means of existence had always been the man’s business. The tools of production were manufactured and owned by him. The herds were the new tools of production, and their taming and tending was his work. Hence he owned the cattle and the commodities and slaves obtained in exchange for them,” Engels explained. This transition marked an early passage from “collective” property to “private” ownership over property—particularly property in productive resources.

Such a transformation, Engels noted, “brought about a revolution in the family.”

Part of that revolution involved a shift in the power dynamics of the household.

“All the surplus now resulting from production fell to the share of the man. The woman shared in its fruition, but she could not claim its ownership,” wrote Engels.

The domestic status of the woman in the house, which had previously involved control and distribution of the means of sustenance, had been reversed.

“Man’s advent to practical supremacy in the household marked the removal to his universal supremacy,” and further ushered in “the gradual transition from the pairing family to the monogamic family” (what we would consider the nuclear family).

With the superior status acquired, Engels wrote, men were able to overthrow the maternal right to inheritance, a move he described as “the historic defeat of the female sex.”

The family unit’s transition to a male-centered patriarchy was complete, according to Engels. Much of the blame for this can be attributed to the emergence of private property and men’s claim over it.

How to Overcome the Patriarchy?
In the Marxian view, therefore, the modern nuclear family runs counter to the ancient “communistic” household Engels had earlier described. It is patriarchal and centered on private property.

“In the great majority of cases the man has to earn a living and to support his family, at least among the possessing classes. He thereby obtains a superior position that has no need of any legal special privilege. In the family, he is the bourgeois, the woman represents the proletariat.” The family unit, rather than the collective tribe, had become the “industrial unit of society.”

The overthrow of this patriarchic dominance can only come, according to Engels, by abolishing private property in the means of production—which he and those steeped in Marxist ideology blame for the patriarchy.

“The impending [communist] revolution will reduce this whole care of inheritance to a minimum by changing at least the overwhelming part of permanent and inheritable wealth – the means of production – into social property,” he concluded.

What would this new social arrangement look like, according to Engels?

The care and education of children becomes a public matter. Society cares equally well for all children, legal or illegal. This removes the care about the “consequences” which now forms the essential social factor – moral and economic – hindering a girl to surrender unconditionally to the beloved man.

In this we see early echoes of the modern left’s current refrain attacking “patriarchy” and the nuclear family as essentially capitalist and private property–based institutions.

In this, BLM is no different from other Marxist groups. The organization’s goals extend far beyond police abuse and police brutality. The ultimate goal is the abolition of a society based upon private property in the means of production.

Read the rest here…

The Myth of the Failure of Capitalism

By Ludwig Von Mises

Capitalism allegedly has failed, has proven itself incapable of solving economic problems, and so mankind has no alternative, if it is to survive, than to make the transition to a planned economy, to socialism.

This is hardly a new idea. The socialists have always maintained that economic crises are the inevitable result of the capitalistic method of production and that there is no other means of eliminating economic crises than the transition to socialism. If these assertions are expressed more forcefully these days and evoke greater public response, it is not because the present crisis is greater or longer than its predecessors, but rather primarily because today public opinion is much more strongly influenced by socialist views than it was in previous decades.

When there was no economic theory, the belief was that whoever had power and was determined to use it could accomplish anything. In the interest of their spiritual welfare and with a view toward their reward in Heaven, rulers were admonished by their priests to exercise moderation in their use of power. Also, it was not a question of what limits the inherent conditions of human life and production set for this power, but rather that they were considered boundless and omnipotent in the sphere of social affairs.

The foundation of social sciences, the work of a large number of great intellects, of whom David Hume and Adam Smith are most outstanding, has destroyed this conception. One discovered that social power was a spiritual one and not (as was supposed) a material and, in the rough sense of the word, a real one. And there was the recognition of a necessary coherence within market phenomena which power is unable to destroy. There was also a realization that something was operative in social affairs that the powerful could not influence and to which they had to accommodate themselves, just as they had to adjust to the laws of nature. In the history of human thought and science there is no greater discovery.

If one proceeds from this recognition of the laws of the market, economic theory shows just what kind of situation arises from the interference of force and power in market processes. The isolated intervention cannot reach the end the authorities strive for in enacting it and must result in consequences which are undesirable from the standpoint of the authorities. Even from the point of view of the authorities themselves the intervention is pointless and harmful. Proceeding from this perception, if one wants to arrange market activity according to the conclusions of scientific thought—and we give thought to these matters not only because we are seeking knowledge for its own sake, but also because we want to arrange our actions such that we can reach the goals we aspire to—one then comes unavoidably to a rejection of such interventions as superfluous, unnecessary, and harmful, a notion which characterizes the liberal teaching. It is not that liberalism wants to carry standards of value over into science; it wants to take from science a compass for market actions. Liberalism uses the results of scientific research in order to construct society in such a way that it will be able to realize as effectively as possible the purposes it is intended to realize. The politico-economic parties do not differ on the end result for which they strive but on the means they should employ to achieve their common goal. The liberals are of the opinion that private property in the means of production is the only way to create wealth for everyone, because they consider socialism impractical and because they believe that the system of interventionism (which according to the view of its advocates is between capitalism and socialism) cannot achieve its proponents’ goals.

The liberal view has found bitter opposition. But the opponents of liberalism have not been successful in undermining its basic theory nor the practical application of this theory. They have not sought to defend themselves against the crushing criticism which the liberals have leveled against their plans by logical refutation; instead they have used evasions. The socialists considered themselves removed from this criticism, because Marxism has declared inquiry about the establishment and the efficacy of a socialist commonwealth heretical; they continued to cherish the socialist state of the future as heaven on earth, but refused to engage in a discussion of the details of their plan. The interventionists chose another path. They argued, on insufficient grounds, against the universal validity of economic theory. Not in a position to dispute economic theory logically, they could refer to nothing other than some “moral pathos,” of which they spoke in the invitation to the founding meeting of the Vereins für Sozialpolitik [Association for Social Policy] in Eisenach. Against logic they set moralism, against theory emotional prejudice, against argument the reference to the will of the state.

Economic theory predicted the effects of interventionism and state and municipal socialism exactly as they happened. All the warnings were ignored. For fifty or sixty years the politics of European countries has been anticapitalist and antiliberal. More than forty years ago Sidney Webb (Lord Passfield) wrote: “it can now fairly be claimed that the socialist philosophy of to-day is but the conscious and explicit assertion of principles of social organization which have been already in great part unconsciously adopted. The economic history of the century is an almost continuous record of the progress of Socialism.”2 That was at the beginning of this development and it was in England where liberalism was able for the longest time to hold off the anticapitalistic economic policies. Since then interventionist policies have made great strides. In general the view today is that we live in an age in which the “hampered economy” reigns—as the forerunner of the blessed socialist collective consciousness to come.

Now, because indeed that which economic theory predicted has happened, because the fruits of the anticapitalistic economic policies have come to light, a cry is heard from all sides: this is the decline of capitalism, the capitalistic system has failed!

Liberalism cannot be deemed responsible for any of the institutions which give today’s economic policies their character. It was against the nationalization and the bringing under municipal control of projects which now show themselves to be catastrophes for the public sector and a source of filthy corruption; it was against the denial of protection for those willing to work and against placing state power at the disposal of the trade unions, against unemployment compensation, which has made unemployment a permanent and universal phenomenon, against social insurance, which has made those insured into grumblers, malingers, and neurasthenics, against tariffs (and thereby implicitly against cartels), against the limitation of freedom to live, to travel, or study where one likes, against excessive taxation and against inflation, against armaments, against colonial acquisitions, against the oppression of minorities, against imperialism and against war. It put up stubborn resistance against the politics of capital consumption. And liberalism did not create the armed party troops who are just waiting for the convenient opportunity to start a civil war.

The line of argument that leads to blaming capitalism for at least some of these things is based on the notion that entrepreneurs and capitalists are no longer liberal but interventionist and statist. The fact is correct, but the conclusions people want to draw from it are wrong-headed. These deductions stem from the entirely untenable Marxist view that entrepreneurs and capitalists protected their special class interests through liberalism during the time when capitalism flourished but now, in the late and declining period of capitalism, protect them through interventionism. This is supposed to be proof that the “hampered economy” of interventionism is the historically necessary economics of the phase of capitalism in which we find ourselves today. But the concept of classical political economy and of liberalism as the ideology (in the Marxist sense of the word) of the bourgeoisie is one of the many distorted techniques of Marxism. If entrepreneurs and capitalists were liberal thinkers around 1800 in England and interventionist, statist, and socialist thinkers around 1930 in Germany, the reason is that entrepreneurs and capitalists were also captivated by the prevailing ideas of the times. In 1800 no less than in 1930 entrepreneurs had special interests which were protected by interventionism and hurt by liberalism.

Today the great entrepreneurs are often cited as “economic leaders.” Capitalistic society knows no “economic leaders.” Therein lies the characteristic difference between socialist economies on the one hand and capitalist economies on the other hand: in the latter, the entrepreneurs and the owners of the means of production follow no leadership save that of the market. The custom of citing initiators of great enterprises as economic leaders already gives some indication that these days it is not usually the case that one reaches these positions by economic successes but rather by other means.

In the interventionist state it is no longer of crucial importance for the success of an enterprise that operations be run in such a way that the needs of the consumer are satisfied in the best and least expensive way; it is much more important that one has “good relations” with the controlling political factions, that the interventions redound to the advantage and not the disadvantage of the enterprise. A few more Marks’ worth of tariff-protection for the output of the enterprise, a few Marks less tariff-protection for the inputs in the manufacturing process can help the enterprise more than the greatest prudence in the conduct of operations. An enterprise may be well run, but it will go under if it does not know how to protect its interests in the arrangement of tariff rates, in the wage negotiations before arbitration boards, and in governing bodies of cartels. It is much more important to have “connections” than to produce well and cheaply. Consequently the men who reach the top of such enterprises are not those who know how to organize operations and give production a direction which the market situation demands, but rather men who are in good standing both “above” and “below,” men who know how to get along with the press and with all political parties, especially with the radicals, such that their dealings cause no offense. This is that class of general directors who deal more with federal dignitaries and party leaders than with those from whom they buy or to whom they sell.

Because many ventures depend on political favors, those who undertake such ventures must repay the politicians with favors. There has been no big venture in recent years which has not had to expend considerable sums for transactions which from the outset were clearly unprofitable but which, despite expected losses, had to be concluded for political reasons. This is not to mention contributions to non-business concerns—election funds, public welfare institutions and the like.

Powers working toward the independence of the directors of the large banks, industrial concerns, and joint-stock companies from the stockholders are asserting themselves more strongly. This politically expedited “tendency for big businesses to socialize themselves,” that is, for letting interests other than the regard “for the highest possible yield for the stockholders” determine the management of the ventures, has been greeted by statist writers as a sign that we have already vanquished capitalism.3 In the course of the reform of German stock rights, even legal efforts have already been made to put the interest and well-being of the entrepreneur, namely “his economic, legal, and social self-worth and lasting value and his independence from the changing majority of changing stockholders,”4 above those of the shareholder.

With the influence of the state behind them and supported by a thoroughly interventionist public opinion, the leaders of big enterprises today feel so strong in relation to the stockholders that they believe they need not take their interests into account. In their conduct of the businesses of society in those countries in which statism has most strongly come to rule—for example in the successor states of the old Austro-Hungarian Empire—they are as unconcerned about profitability as the directors of public utilities. The result is ruin. The theory which has been advanced says that these ventures are too large to be run simply with a view toward profit. This concept is extraordinarily opportune whenever the result of conducting business while fundamentally renouncing profitability is the bankruptcy of the enterprise. It is opportune, because at this moment the same theory demands the intervention of the state for support of enterprises which are too big to be allowed to fail.

It is true that socialism and interventionism have not yet succeeded in completely eliminating capitalism. If they had, we Europeans, after centuries of prosperity, would rediscover the meaning of hunger on a massive scale. Capitalism is still prominent enough that new industries are coming into existence, and those already established are improving and expanding their equipment and operations. All the economic advances which have been and will be made stem from the persistant remnant of capitalism in our society. But capitalism is always harrassed by the intervention of the government and must pay as taxes a considerable part of its profits in order to defray the inferior productivity of public enterprise.

The crisis under which the world is presently suffering is the crisis of interventionism and of state and municipal socialism, in short the crisis of anticapitalist policies. Capitalist society is guided by the play of the market mechanism. On that issue there is no difference of opinion. The market prices bring supply and demand into congruence and determine the direction and extent of production. It is from the market that the capitalist economy receives its sense. If the function of the market as regulator of production is always thwarted by economic policies in so far as the latter try to determine prices, wages, and interest rates instead of letting the market determine them, then a crisis will surely develop.

Bastiat has not failed, but rather Marx and Schmoller.

1.[The translator wishes to gratefully acknowledge the comments and suggestions of Professor John T. Sanders, Rochester Institute of Technology, and Professor David R. Henderson, University of Rochester, in the preparation of the translation.]
2.Cf. Webb, Fabian Essays in Socialism….ed. by G. Bernard Shaw (American ed. edited by H.G. Wilshire. New York: The Humboldt Publishing Co., 1891), p. 4.
3.Cf. Keynes, “The End of Laisser-Faire,” 1926, see, Essays in Persuasion (New York: W.W. Norton & Co., Inc., 1932), pp. 314–15.
4.Cf. Passow, Der Strukturwandel der Aktiengesellcschaft im Lichte der Wirtschaftsenquente, (Jena 1939), S. 4.

A Tyranny of Health?

By Theodore Dalrymple

The dream of a society so perfect that no one will have to be good (as T.S. Eliot put it) is a beguiling one for intellectuals, perhaps because they think that they will be in charge of it, as a recent article in the Journal of the American Medical Association titled “The Moral Determinants of Health” well illustrates.

In this article, which has the merit of being clear and logical, no single instance of individual conduct is mentioned as being necessary for, or conducive, to health. In the healthy society envisaged by the author, who is a public health doctor in Massachusetts, no one will have to try to behave well—not drink or eat too much, refrain from smoking or taking drugs, not indulge in hazardous pastimes, take recommended but safe exercise and so forth—because everything will come as a matter of course to him. Living in a perfect society, he will behave perfectly. The author’s means of achieving these ends are entirely political, and wildly impractical examples of progressivism without practical wisdom—and as such, unremarkable.

More troublingly, in the author’s view, at least implicitly, health is the goal of goals to which all other considerations ought to be subordinate. It is perhaps natural for a doctor to think this, concerned as he is, day in, day out, with the health of others, but nevertheless this is a very reductive view of life.

It goes almost without saying that health is desirable; no one would actually prefer to be unhealthy than healthy, though a considerable number do prefer to claim to be unhealthy, or unhealthier than they are. But we should remember that a life is not well- or badly-lived according only to its length. Mozart died at thirty-six, but would anyone say that his life would have been better-lived had he survived to seventy-two but without having composed any of his music? People, moreover, sacrifice their lives for any number of reasons, from the noblest to the most ignoble. Would anyone say that Martin Luther King lived badly because he exposed himself to assassination, which a nice quiet life would not have done? As is known, assassination is bad for the health; we do not say, therefore, that people who tell the truth despite threats are bad because they betray the cause of health and thereby lower (albeit infinitesimally) life expectancy in their society.

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Money-Supply Growth Hits New High for Third Month in a Row

By Ryan McMaken

n June, for the third month in a row, money supply growth surged to an all-time high, following new all-time highs in both April and May that came in the wake of unprecedented quantitative easing, central bank asset purchases, and various stimulus packages.

The growth rate has never been higher, with the 1970s the only period that comes close. It was expected that money supply growth would surge in recent months. This usually happens in the wake of the early months of a recession or financial crisis. The magnitude of the growth rate, however, was unexpected.

During June 2020, year-over-year (YOY) growth in the money supply was at 34.5 percent. That’s up from May’s rate of 29.5 percent, and up from June 2019’s rate of 2.04 percent. Historically, this is a very large surge in growth, both month over month and year over year. It is also quite a reversal from the trend that only just ended in August of last year, when growth rates were nearly bottoming out around 2 percent. In August, the growth rate hit a 120-month low, falling to the lowest growth rates we’d seen since 2007.

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Recovery of Collapsed Air Passenger Traffic in the US Backtracks

Confirming early warnings by United and Delta of re-declining ticket sales. V-Recovery has to wait in line. Airline shares down 3.7% intraday.

By Wolf Richter

TSA checkpoint screenings, which track how many people enter into the security zones at US airports on a daily basis, were down -72.6% yesterday (Sunday) compared to Sunday in the same week last year, according to TSA data released this morning. This was a notch worse than Sunday last week (-71.7%). And this reversal has been playing out since early July.

The seven-day moving average, which irons out the day-to-day volatility particularly around the Independence Day weekend, has edged down to -74.5%, right back where it was on July 2. The peak, so to speak – the smallest decline from the same period last year – was on July 8.

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