Thursday, February 27, 2014

We just had a $100 billion "helicopter drop" and the inflationista's say nothing

Why aren't all the inflation nuts screaming, "money printing, hyperinflation?"


The Just Gatekeeper said...

Great video Mike, I had been missing 'em! Here are some notes I've been taking on this whole refund thing, looks like we are right about on track as years previous:

1) IRS opens tax season (end of January this year)

2) People file for their returns
Are people filing earlier the lower income folks who really need the money, and are thus more likely to spend more of it, and faster?

3) Treasury starts sending out checks after taking a few days in Feb to process returns
Several billion in cash starts flowing into the economy in the second week of Feb

In 2013:
Feb =$106 billion in refunds
April =$46
May =$9

IN 2012:
F =$120
M= $50

In 2011:

In 2010:

In 2009:

So clearly the bulge in refund checks comes right at the beginning of filing season in Feb- very stimulative?

It would be interesting to see how quickly these transfers show up in retail data , consumer credit, mortgage apps, car sales, etc. especially due to timing with Presidents’ day Sales/promotions

mike norman said...

As of 2/26 (just looked at the DTS) it's $125B for the month now.

Unknown said...

Fabulous video Mike, thanks.

Why did the chicken cross the road?

Well, that's what they did last year.

Matt Franko said...

So now we know... EMPIRICALLY.... that a JG/BIG of $100B+ per month will NOT foment f**king "inflation" so-called or any other monetarist metaphorical fictions...


Matt Franko said...

Good point Justin.... you dont want to be laying off the staff that works the sales floor in Feb. just because you had a weak January "due to the weather..."


PS thanks for the historic perspective on this flow....

The Rombach Report said...

This discussion makes me wonder what the economy would look like now if everyone receiving tax refund checks now got to keep that money in the first place.

The Just Gatekeeper said...

The only other unknown variable here is propensity to spend...if these checks are just going to the wealthy and straight into savings accounts its one thing.

But if most of it is going to people who consume most of their income, do some deferred maintenance/purchases etc, I'd expect some better retail #'s to come out of Feb/March.

Matt Franko said...


I dont think it would be much different than what we see here in Feb. Mar. Apr,.... which imo is STILL 'muddle thru' type economy.... we wont get some sort of "boom" out of this but rather the folks who receive these funds who have the propensity to spend them will just be able to dig out of the hole a bit for a month or two here.... still FAR from optimal economic results...

This Tax Refund fiscal injection imo is not portending some big "recovery" here in the next few months but rather is instructive as to how deficient current flows are towards getting us back to full employment/output...

Whether you look at this normal yearly Tax policy or even the $165B special $650 'Tax Rebate' Bush/Cheney did on top of this back in May/June 2008 (+80B/mo.) the result was "not a blip"... these experiments/observations are manifest EVIDENCE of how deficient existing 'normal' flows are....

unless one does not believe one's own eyes and instead is rationalizing some alternative reality... hmmmmm what can we term people who exhibit that behavior?????


Malmo's Ghost said...

Velocity of the refund is uneven, however. Thirty percent plan to save the refund, while 8% plan to invest. Also a good chunk will go to pay down existing debt. Only 8% plan on splurging with it. Still, all in all, there will be a stimulative effect, albeit somewhat truncated by the above facts.

Malmo's Ghost said...

Oops. Forgot link:

The Rombach Report said...

Mike - I confess to making a comment earlier before I even watched your video and I just have to say that I'm really glad I went back and watched. Very good pedagogy! My compliments to the chef! I noticed from the post by Just Gatekeeper that there is a common pattern of net refunds every year for the years he provided examples. For starters, maybe it would be a good idea for someone in Congress to advance legislation to cut aggregate taxes by at least that much on average going back for 5 or 6 years.

John Zelnicker said...

I have been doing taxes professionally for over ten years and I work as a Tax Advice Specialist for TurboTax customers. The early filers have a 100% propensity to consume. They are almost all the low income folks who are receiving the Earned Income Tax Credit and retirees. For many of them, receiving a $4,000 to $8,000 refund amounts to anywhere from 20% to 40% or even 50% of their annual income. They spend every penny on food, shelter and other basics. There is no ability to save in this cohort; they are struggling just to keep themselves and their children fed and clothed. And some of those paying down debt have incurred that debt for basic necessities.

The wealthy are not early filers. They have complex returns and have to wait until late March or early April just to get all the reporting forms like 1099's and K-1's to complete their returns. And very few of them, I would bet, are getting any refund at all. More likely, they'll be writing a check to the IRS.