The U.S. Economy versus the American Economy

When someone tells you, “The economy is better,” ask them which one.

The Wall Street Journal said in February 2024 that Americans were “down on a strong economy”. But which one were they down on? The real one or the other one?

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One economy is the production and exchange of goods and services as the decentralized voluntary interaction of the American people. The other one is the government.

It’s a very different way to think about the economy than the way we are told to think about it, but what if this way is truer?

Can the government be the economy? Not really, but the government regulators and economists will tell you that it can. They will tell you that it can be a “command” economy. Like the USSR had. Where government regulators control the production and distribution of goods. But that isn’t really an economy, it’s just government. Government control.

Is the economy that we have now in the U.S. a real economy, or has it become more of a “command economy”, i.e. government? It seems to be both, actually. For the time being. Let’s look.

‘Stunning’ US Jobs Growth of 353,000 Far Outstrips Estimates

Investors rein in expectations of interest rate cuts after January payrolls come in at almost double economists’ forecasts.

Tom Simons, an economist at Jefferies, described the figures as “stunning numbers”, that left him, “near speechless”.” Financial Times (2024).

If economists report that thousands of new jobs were created by the economy last month, it will probably cause stocks to drop. Why? Why would good economic news like that cause the stock market to fall?

Because more growth in the real economy makes it less likely that the Fed will take action and change interest rates. The stock market has learned that the government “economy” is now bigger than the real economy. The stock market has learned, “Don’t fight the Fed.” Because the so-called “economy” is now mostly government control and not real economic activity.

When the Wall Street Journal says, “Markets reacted harshly to January inflation reading, but the economic backdrop remains positive” what exactly was this “economic backdrop” that they spoke of? Why is it “positive”? Is the “economic backdrop” something different from the economy?

No, it is the real economy. And it “acts” in a different way than the government “economy”. And the stock market knows that and knows the difference. The stock market knows that now, in the 21^st century, the government is more impactful than what is left of the real economy.

Changing the interest rates is one so-called “tool” that the Fed uses to “control the economy”. When the Fed cuts interest rates, that causes economic growth, we are told. But growth in which economy? The real one or the government?

The answer is mostly the government. Lower interest rates mean that the government will pay less to service its gargantuan debt. And even if the GDP seems to go up as a result of what government regulators do, that only proves the point that the government is growing, not the economy.

That’s because the GDP is really a measure of spending not productivity, as we discuss in our 2021 piece GDP: Leftist Untruth #9.

 The GDP is spending, including government spending, which is, of course, huge. So when the government borrows more and spends more and the GDP goes up, it’s really the government that grows, not the real economy. Essentially everything the government and the Fed do — from creating huge federal deficits, and spending on pointless and immensely expensive foreign wars, to the tidal wave of overregulation — hurts the growth of the real economy. In the end, what the government does only helps the government to grow.

America’s economy proved surprisingly resilient to the biggest rise in interest rates in 40 years... Depending on the explanation you prefer for the unusual strength, you should be piling into stocks, worrying about government debt or fearing recession. …no one—including the Federal Reserve—seems to be able to settle on a single story about what’s going on. Unquote.

James Mackintosh, "The Confusingly Strong Economy Told in Three Stories" Wall Street Journal (2024)

Essentially everything the Fed does hurts the real economy. But the government regulators can use mass media to claim the opposite:

 ○ When the real economy produces growth and a better standard of living, the government regulators say that’s because their interventions worked.

 ○ When their interventions do harm, the government regulators claim that the harm is the result of not enough government regulation.

That way, they always win and, essentially, you and freedom always lose.

And of course, in the first place, the “pandemic dislocations” were the result of the lockdowns and other actions by the government regulators.

It’s hard to think about the economy this way, because it isn’t the way that the government regulators and the mass media want us to think about it. In reality, the U.S. government regulators are gradually taking control of what remains of the voluntary, free-enterprise ‘private sector’ economy. It is shrinking, as the government “command economy” grows.

When government has taken control of production and distribution, that is, like it or not, literally the definition of communism. No wonder the government regulators and media keep conflating terms and confusing their terminology and stories about what is really happening to “the economy”.  There aren’t really “two economies”. There is the economy and government control; the former is shrinking and soon all that will be left is the latter.

Especially since the creation of the Fed in 1913, U.S. government control of the financial system, the money system, and of all economic interaction has increased greatly. But isn’t that control a good thing? It prevents financial crises, except that it hasn’t. It prevents inflation, except that it hasn’t. What it has certainly done is to give government regulators an immense amount of control. And they use that control for wealth redistribution. They are redistributing the wealth earned by productive Americans to people who didn’t earn it. They are using their control to distribute $trillions to the mega-rich leftist parasites atop the big corporations, and to themselves, the government regulators. And to leftist NGOs.

The Wall Street Journal article that we quoted, "The Confusingly Strong Economy Told in Three Stories", includes this quote from a person interviewed for the story. “‘The politicians seem to be making out really good and then everybody else is struggling,’ said Funck, who is 52 and an independent voter who backed Biden in 2020…”

You wonder how politicians gain personal fortunes of hundreds of millions of dollars without ever working at a productive job? You wonder what is really causing massive wealth inequality in the 21^st century? It isn’t capitalism. It isn’t the real private sector economy. It is control by government parasites.

Maybe you don’t believe that, but if you give us a chance, we have other pieces that pretty much prove it’s true.