The Covid Interlude: Free Lunches Were Enjoyed By One And All

We hope the geniuses in the Eccles Building are proud of themselves. One consequence of their absurdly low interest rates and bond-buying spree is that during the past year US households have picked up a cool $1 trillion of pocket money without doing a thing.

And we do mean downright sweat-free, effortless nothing. Thus, two new reports out recently show that:

• Since last February, households received $810 billion in added transfer payment above the level needed to replace every dime of reduced personal income owing to the Covid-Lockdowns;
• During 2020, households took out record mortgage refis but fully $150 billion of that was in excess of their old mortgage amounts, thereby constituting so-called “cash-out” refis.

Naturally, all the boys and girls on Wall Street, and Keynesian economists everywhere, are ecstatic about the implied tsunami of spending —some of which has already landed and more of which will continue to hit the cash registers in the months ahead as the temporarily backed-up level of cash savings is spent down.

Fine.