Keynesian policies are damaging what they were intended to support. No example is more evident than the United States. A few years ago, in 2021, I had a conversation with Judy Shelton where she said that the recovery would be much stronger without the stimulus package, and she was right. Massive government spending and currency printing have left a much weaker labor market and poorer citizens.

In June, nonfarm payrolls increased by 209,000, the smallest advance since the end of 2020, after two consecutive downward revisions in the prior months, according to the Bureau of Labor Statistics (BLS). If we look at employment statistics beyond the headline unemployment rate, we can see that the labor force participation rate was 62.6 percent for the fourth consecutive month, and the employment-population ratio, at 60.3 percent, was unchanged over the month, according to the BLS. Both measures remain below pre-pandemic levels (63.3% and 61.1%, respectively) after years of enormous entitlement and spending programs.

Estimates of United States growth have improved but remain massively below the Federal Reserve projections.

After the largest monetary and fiscal stimulus in recent years, growth remains well below trend and debt is significantly higher. It is interesting to hear Janet Yellen say that “trickle-down economics did not work” when this is the failed trickle down: massive government deficit spending leads to negative real wage growth and weaker GDP.

Current consensus real GDP growth for 4Q23 stands at 0.2%, significantly lower than the median projection of 1% in the FOMC’s June Summary of Economic Projections.

The latest figure, for example, shows the evidence of headline strength hiding weakness in the details. New durable-goods orders surged in May, but this headline growth disguised that core capital-goods orders were revised down again.

Allow me to explain why we have not seen a recession yet despite the collapse in base money supply. We are witnessing the stealth nationalization of the economy. What does this mean?

The entire burden of the monetary collapse and rate hikes is falling on the shoulders of families and small businesses, while large corporations and governments are virtually unaffected.

Thus, when an agent like the state, which weighs 40 to 60 percent of GDP in most economies, continues to consume wealth and spend, gross domestic product does not show a recession even though consumption and private investment in real terms is declining. Bloated government spending is disguising a private sector recession and the decline in real disposable income, real wages, and margins of SMEs (small and medium enterprises). Furthermore, the accidental and exogenous factor of widespread weaker commodities is boosting the external contribution of gross domestic product.

Investor sentiment is clearly bullish. The CNN Fear and Greed Index for June 18th, 2023, stood at 82, which signals “extreme greed”. This is a drastic optimistic move after closing at “greed” (56 over 100) a month before and “extreme fear” (17 over 100) only one year ago. However, in the same period, the Citi global economic surprise index has declined twelve points, with the euro area component collapsing 123 points. The US economic surprise index has also declined by thirteen points.

The disastrous performance of the euro area, which fell into recession in the first quarter, is also happening while this economic region enjoys significant tailwinds: Declining energy and commodity prices have supported the euro area’s GDP, boosting the external component thanks to meaningfully lower imports. Furthermore, the euro area should benefit from the expected positive impact of the massive EU Next Generation stimulus plan. None of those effects have helped, which proves yet again that massive government stimulus plans hardly boost growth and productivity and are often directed to politically favored sectors with little real impact on jobs or growth.