Thursday , June 4 2020
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Not your grandfather’s depression

Summary:
Follow-up to my previous post: Suppose that in 2019 I had told you that during the spring of 2020 America would plunge into the deepest depression since the 1930s. Would you have expected to see this news story in late May? Walmart said “unprecedented demand” for essential products during the pandemic had caused its sales to spike as the world’s biggest retailer disclosed it had taken on 235,000 workers in the US to cope with the surge.Sales of toilet rolls, surface cleaners and grocery staples helped Walmart’s like-for-like revenues in the US, its largest market, jump 10 per cent in the last quarter from a year ago.Doug McMillon, chief executive, said on a results briefing call that Walmart had been selling in two or three hours what it would normally sell over two or

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Follow-up to my previous post:

Suppose that in 2019 I had told you that during the spring of 2020 America would plunge into the deepest depression since the 1930s. Would you have expected to see this news story in late May?

Walmart said “unprecedented demand” for essential products during the pandemic had caused its sales to spike as the world’s biggest retailer disclosed it had taken on 235,000 workers in the US to cope with the surge.

Sales of toilet rolls, surface cleaners and grocery staples helped Walmart’s like-for-like revenues in the US, its largest market, jump 10 per cent in the last quarter from a year ago.

Doug McMillon, chief executive, said on a results briefing call that Walmart had been selling in two or three hours what it would normally sell over two or three days.

After the initial rush to stockpile essentials, customers in lockdown later spent heavily on entertainment, education and exercise products, Mr McMillon said. Categories to perform especially well included video games and bicycles. Sewing machine sales also picked up as customers took to making their own face masks.

Don’t get me wrong, it’s a horrific depression. But it’s also an extremely unusual one. The term “unique” is overused, but it actually does seem to apply to this business cycle.

The DYI face masks made me recall the story of the Texas factory for making face masks that still has one assembly line shut down. Aren’t anti-price gouging laws (and norms) wonderful?


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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