As markets rise to fresh highs, the worries of the past months, much less previous years, seem to have happily dissipated. Gone are concerns about lost consumer income, falling productivity from reshoring production, or the growing horde of highly indebted companies sustaining themselves despite rising interest rates.
With the addition of augmented unemployment benefits and direct federal payments, worries about household debt have almost evaporated. Meanwhile, that indebtedness has grown throughout the crisis. Average wages have remained flat after a bump in April 2020 as legions of low-wage workers became unemployed. Household incomes, which include government transfer payments, remain high on the back of continuing federal support. In other words, the consumer is being propped up by Washington.Continue reading “On Fragility and Avalanches”