Marshalling a Big Bang

For not fully understood reasons, conditions for the Big Bang were met about 13.8 billion years ago.  This unfathomable event set off a series of reactions.  Evidence of the reaction’s aftermath is observable even today.  For instance, according to NASA, we can still see the heat that was there roughly 380,000 years after the expansion of the universe (13.42 billion years ago).  Science thinks the Big Bang set the framework for the universe’s structure and behavior that is true today.

While not as large as the Big Bang, the fiscal reactions from the Federal Government in response to Covid-19 were massive.  It wasn’t until a recent note from Torsten Slok, Chief Economist at Apollo, that it was put into perspective by comparison to another famous stimulus: the Marshall Plan.  The Marshall Plan was named after George Marshall, the man who developed it.  In short, it was a giant helping hand to post-WWII Europe which simultaneously helped American firms supplying the materials and equipment for the continent’s rebuilding.  According to Slok, the Marshall Plan was the equivalent of roughly five percent of America’s gross domestic product in 1947.  Amazingly, various fiscal stimuli America pushed through during and after the worst of the Covid-19 pandemic is equal to about 20 percent of last year’s gross domestic product.

Economic policies, especially those at the scale seen with Covid-19 stimulus measures, can have lasting impacts.  The full extent of them is likely unknowable yet.  So far, America has had a mostly strong economy.  There were a few quarters of negative output, back in 2022 but those weren’t enough to usher in a recession.  Jobs have been plentiful as well. 

Inflation is another matter, however.  In the briefest moments after the Big Bang, the universe expanded rapidly, an event astrophysicists refer to as inflation.  Similarly, our economy experienced rapid inflation starting in 2022.  Like the universe, the fastest expansion in American inflation seems to be behind us, but it still continues expanding.  We just need to look at this morning’s release of Income and Outlays from the Bureau of Economic Analysis to see the Federal Reserve’s preferred price proxy expanding once again.

Future economist will be watching distribution the way astrophysicists do.  Like the cosmic microwave background, the efficacy of stimulus was not uniform.  There are things to be learned here. Now, whether the lessons are learned and implemented differently is yet to be seen.  Of course, maybe it’s just better if our economy doesn’t need another Big Bang.