The Biden Bounce

President Biden is damned if he does, and damned if he doesn’t.

Such is the Divided States of America.

Last Labor Day, September 7, approximately one third of small businesses in the US were on their knees, desperate for some form of fiscal aid.

Simultaneously, tent cities continued to grow due to job losses, mostly from small businesses.

Consequently, Mr Biden promised a stimulus injection of US$1.9 trillion if elected to power.

And if this occurs, it will take the total stimuli spend during COVID to circa, US$10 trillion.

The problem is jobless claims have continued to rise because each injection is having less effect.

It’s a bit like the coke addict who needs to take more coke to get the same hit.

And here’s the second problem.

The continuum of money pumped into the economy has created a massive wealth divide, which has only accentuated, an already gaping social divide.

Put simply, the stimulus received by the wealthy during COVID was stashed away because they didn’t need it (same happened in Oz). However, the money received by the poor was used for their survival, but it still wasn’t enough.

And this is where President Biden is damned either way.

If he can’t get the full US$1.9 trillion into the economy as promised, the poor get poorer and the insolvency crisis amongst small businesses accelerates.

But…

If he can get US$1.9 trillion into the economy, the rich get richer and then he’s faced with an and inflationary risk that’s already emerging.

And that means less spending power for the poor and the wealth divide widens, again.

But wait, there’s more…

If inflation takes off, it will have to be tempered by an increase in interest rates.