CMP Associates Regulation Blog

Exchange Rate Fluctuations, 1.371 Million New Nonfarm Payroll Jobs in August and 1.027 Million New Private Payroll Jobs, Thirty-Five Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Unemployment Rate 8.4 Percent in Aug In the Global Recession, with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown of Economic Activity in the COVID-19 Event, Job Creation, Cyclically Stagnating Real Wages, Increase of Real Personal Consumption Expenditures of 1.6 Percent in Jul, Cyclically Stagnating Real Disposable Income Per Capita, Financial Repression, World Cyclical Slow Growth, and Government Intervention in Globalization: Part IV

Carlos M. Pelaez

I Thirty-Five Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

II Stagnating Real Disposable Income and Consumption Expenditures

IIB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

III World Financial Turbulence

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

I IB Stagnating Real Disposable Income and Consumption Expenditures. The emphasis is now shifting to the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. In the first wave, nominal personal income increased at 2.4 percent in Jan 2019 while nominal disposable personal income decreased at 1.2 percent. Nominal personal consumption expenditures increased at 8.7 percent. Real disposable income changed at 0.0 percent and real personal consumption expenditures increased at 8.7 percent. In the second wave, nominal personal income increased at 4.3 percent in Feb-Mar 2019 while nominal disposable personal income increased at 3.0 percent. Nominal personal consumption expenditures increased at 6.2 percent. Real disposable income increased at 0.6 percent and real personal consumption expenditures increased at 4.3 percent. In the third wave, nominal personal income increased at 2.0 percent in Apr-Jun 2019 while nominal disposable income increased at 1.6 percent. Nominal personal consumption expenditures increased at 4.9 percent. Real disposable income decreased at 1.2 percent and real personal consumption expenditures increased at 2.8 percent. In the fourth wave, nominal personal income increased at 1.2 percent annual equivalent in Jul 2019 while nominal disposable income increased at 3.7 percent. Nominal personal consumption increased at 4.9 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 2.4 percent. In the fifth wave, nominal personal income increased at 4.3 percent annual equivalent in Aug-Sep 2019 while nominal disposable income increased at 4.9 percent. Nominal personal consumption increased at 3.0 percent. Real disposable income increased at 3.7 percent and real personal consumption expenditures increased at 1.8 percent. In the sixth wave, nominal personal income increased at 3.7 percent annual equivalent in Oct-Dec 2019 while nominal disposable income increased at 2.8 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 0.8 percent and real personal consumption expenditures increased at 1.2 percent. In the seventh wave, nominal personal income increased at 10.7 percent annual equivalent in Jan-Feb 2020 while nominal disposable income increased at 10.0 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 8.1 percent and real personal consumption expenditures increased at 1.8 percent. In the eighth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 78.9 percent annual equivalent in Mar-Apr 2020 while nominal disposable income increased at 106.5 percent. Nominal personal consumption decreased at 71.2 percent. Real disposable income increased at 117.0 percent and real personal consumption expenditures decreased at 69.8 percent. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): “The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). In the ninth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 27.2 percent annual equivalent in May-Jun 2020 while nominal disposable income decreased at 31.2 percent. Nominal personal consumption increased at 135.4 percent. Real disposable income decreased at 33.7 percent and real personal consumption expenditures increased at 126.3 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.” The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf): “The decrease in personal income in June was more than accounted for by a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in May (table 3). For more

information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs? Partially offsetting the decrease in other government social benefits were increases in compensation of employees and proprietors’ income as portions of the economy continued to reopen in June.

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, also increased in June. For more information, see “How will the expansion of unemployment benefits in response to the COVID-19 pandemic be recorded

in the NIPAs?”.” In the ninth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 4.9 percent annual equivalent in Jul 2020 while nominal disposable income increased at 2.4 percent. Nominal personal consumption increased at 25.3percent. Real disposable income decreased at 1.2 percent and real personal consumption expenditures increased at 21.0 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

identified. For more information, see Effects of Selected Federal Pandemic Response Programs on Personal Income. The increase in personal income in July was more than accounted for by compensation of employees as portions of the economy continued to reopen (table 3). Proprietors’ income and rental income of persons also contributed to the increase. Partially offsetting these increases were decreases in government social benefits and income on assets.

Table IB-1, US, Percentage Change from Prior Month Seasonally Adjusted of Personal Income, Disposable Income and Personal Consumption Expenditures %

	NPI	NDPI	RDPI	NPCE	RPCE
Jul 2020	0.4	0.2	-0.1	1.9	1.6
AE ∆% Jul	4.9	2.4	-1.2	25.3	21.0
Jun	-1.0	-1.3	-1.8	6.2	5.7
May	-4.2	-4.8	-4.9	8.6	8.4
AE ∆% May-Jun	-27.2	-31.2	-33.7	135.4	126.3
Apr	12.2	14.8	15.4	-12.9	-12.4
Mar	-1.8	-1.7	-1.4	-6.7	-6.5
AE ∆% Mar-Apr	78.9	106.5	117.0	-71.2	-69.8
Feb	0.8	0.7	0.6	0.0	-0.1
Jan	0.9	0.9	0.7	0.6	0.4
AE ∆% Jan-Feb	10.7	10.0	8.1	3.7	1.8
Dec 2019	0.1	0.0	-0.2	0.3	0.0
Nov	0.5	0.5	0.4	0.2	0.1
Oct	0.3	0.2	0.0	0.4	0.2
AE ∆% Oct-Dec	3.7	2.8	0.8	3.7	1.2
Sep	0.2	0.2	0.1	0.2	0.1
Aug	0.5	0.6	0.5	0.3	0.2
AE ∆% Aug-Sep	4.3	4.9	3.7	3.0	1.8
Jul	0.1	0.3	0.1	0.4	0.2
AE ∆% Jul	1.2	3.7	1.2	4.9	2.4
Jun	0.2	0.2	0.1	0.4	0.3
May	0.1	0.1	-0.1	0.3	0.2
Apr	0.2	0.1	-0.3	0.5	0.2
AE ∆% Apr-Jun	2.0	1.6	-1.2	4.9	2.8
Mar	0.3	0.2	-0.1	0.9	0.7
Feb	0.4	0.3	0.2	0.1	0.0
AE ∆% Feb-Mar	4.3	3.0	0.6	6.2	4.3
Jan	0.2	-0.1	0.0	0.7	0.7
AE ∆% Jan	2.4	-1.2	0.0	8.7	8.7

Notes: *Excluding exceptional income gains in Nov and Dec 2012 because of anticipated tax increases in Jan 2013 ((page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). ^aExcluding employee contributions for government social insurance (pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf ) Excluding NPI: current dollars personal income; NDPI: current dollars disposable personal income; RDPI: chained (2005) dollars DPI; NPCE: current dollars personal consumption expenditures; RPCE: chained (2005) dollars PCE; AE: annual equivalent; IVQ2010: fourth quarter 2010; A: annual equivalent

Percentage change month to month seasonally adjusted

*∆% Dec 2011/Dec 2010 **∆% Dec 2010/Dec 2009 *** ∆% Dec 2012/Dec 2011

Source: US Bureau of Economic http://bea.gov/iTable/index_nipa.cfm

Real disposable income increased 8.4 percent in the 12 months ending in Jul 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, decreased in July. For more information, see “How will federal government responses to the COVID-19 pandemic affect unemployment insurance benefits?”.” RPCE growth decelerated sharply to minus 5.1 percent in Jun 2020 and minus 3.8 percent in Jul 2020. Subdued growth of RPCE could affect revenues of business. Growth rates of personal consumption have weakened in oscillations. Goods and especially durable goods have been driving growth of PCE as shown by the much higher 12-month rates of growth of real goods PCE (RPCEG) and durable goods real PCE (RPCEGD) than services real PCE (RPCES). Growth of consumption of goods and, in particular, of consumer durable goods drives the faster expansion of the economy while growth of consumption of services is much more moderate. In Jul 2020, RPCEG increased 7.2 percent in 12 months and RPCEGD increased 13.4 percent while RPCES decreased 8.6 percent. There are limits to sustained growth based on financial repression in an environment of weak labor markets and real labor remuneration.

Table IB-2, Real Disposable Personal Income and Real Personal Consumption Expenditures

Percentage Change from the Same Month a Year Earlier %

	RDPI	RPCE	RPCEG	RPCEGD	RPCES
2020
Jul	8.4	-3.8	7.2	13.4	-8.6
Jun	8.6	-5.1	6.0	11.2	-9.9
May	10.7	-9.9	0.7	3.2	-14.5
Apr	16.5	-16.7	-11.5	-18.7	-19.0
Mar	0.6	-4.7	1.6	-8.2	-7.5
Feb	2.0	2.6	3.9	6.8	2.0
Jan	1.5	2.7	3.8	7.5	2.2
2019
Dec	0.8	3.0	5.2	8.4	2.1
Nov	2.1	2.1	2.4	3.9	1.9
Oct	1.8	2.3	3.6	4.9	1.7
Sep	2.0	2.6	4.2	6.0	1.9
Aug	1.8	2.3	4.2	5.1	1.5
Jul	1.6	2.6	4.4	5.1	1.7
Jun	1.9	2.6	4.4	5.1	1.7
May	2.0	2.3	3.3	4.6	1.9
Apr	2.4	2.4	3.9	4.5	1.8
Mar	2.9	2.5	3.6	4.7	2.0
Feb	3.4	2.2	2.5	2.2	2.1
Jan	3.5	2.2	3.0	3.3	1.8

Notes: RDPI: real disposable personal income; RPCE: real personal consumption expenditures (PCE); RPCEG: real PCE goods; RPCEGD: RPCEG durable goods; RPCES: RPCE services

Numbers are percentage changes from the same month a year earlier

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-1 shows US real personal consumption expenditures (RPCE) between 2002 and 2020. There is an evident drop in RPCE during the global recession in 2007 to 2009 but the slope is flatter during the current recovery than in the period before 2007 with recent recovery. The final data point in IIQ2020 shows sharp drop in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Chart IB-1, US, Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 2002-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Percent changes from the prior period in seasonally adjusted annual equivalent quarterly rates (SAAR) of real personal consumption expenditures (RPCE) are in Chart IB-2 from 1995 to 2020. The average rate could be visualized as a horizontal line. Although there are not yet sufficient observations, it appears from Chart IB-2 that the average rate of growth of RPCE was higher before the recession than during the forty-one quarters of expansion that began in IIIQ2009. The final data point in IIQ2020 shows sharp contraction in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Chart IB-2, Percent Change from Prior Period in Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 1995-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Personal income and its disposition are in Table IB-3. The latest estimates and revisions have changed movements. (1) Increase in Jul 2020 of personal income by $70.5 billion or 0.4 percent and increase of disposable income of $39.9 billion or 0.2 percent with increase of wages and salaries of 1.4 percent in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Table IB-3, US, Personal Income and its Disposition, Seasonally Adjusted at Annual Rates USD Billions

	Personal Income	Wages & Salaries	Personal Taxes	DPI	Savings Rate %
Jul 2020	20,042.7	9,174.4	2,161.2	17,881.5	17.8
Jun 2020	19,972.2	9,048.9	2,130.5	17,841.6	19.2
Change Jul 2020/ Jun 2020	70.5 ∆% 0.4	125.5 ∆% 1.4	30.7 ∆% 1.4	39.9 ∆% 0.2
Dec 2019	18,800.5	9,456.5	2,232.7	16,567.8	7.2
Change Dec 2019/Dec 2018	537.8 ∆% 2.9	384.4 ∆% 4.2	135.9 ∆% 6.5	402.0 ∆% 2.5
Dec 2018	18,262.7	9,072.1	2,096.8	16,165.8	9.1

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-4 provides growth rates of real disposable income and real disposable income per capita in the long-term and selected periods. Real disposable income consists of after-tax income adjusted for inflation. Real disposable income per capita is income per person after taxes and inflation. There is remarkable long-term trend of growth of real disposable income of 3.2 percent per year on average from 1929 to 2019 and 2.0 percent in real disposable income per capita. Real disposable income increased at the average yearly rate of 3.7 percent from 1947 to 1999 and real disposable income per capita at 2.3 percent. These rates of increase broadly accompany rates of growth of GDP. Institutional arrangements in the United States provided the environment for growth of output and income after taxes, inflation and population growth. There is significant break of growth by much lower 2.5 percent for real disposable income on average from 1999 to 2019 and 1.7 percent in real disposable per capita income. Real disposable income grew at 3.5 percent from 1980 to 1989 and real disposable per capita income at 2.6 percent. In contrast, real disposable income grew at only 2.2 percent on average from 2006 to 2019 and real disposable income per capita at 1.4 percent. Real disposable income grew at 2.2 percent from 2007 to 2019 and real disposable income per capita at 1.4 percent. The United States has interrupted its long-term and cyclical dynamism of output, income and employment growth. Recovery of this dynamism could prove to be a major challenge. Cyclical uncommonly slow growth explains weakness in the current whole cycle instead of the allegation of secular stagnation.

Table IB-4, Average Annual Growth Rates of Real Disposable Income (RDPI) and Real Disposable Income per Capita (RDPIPC), Percent per Year

RDPI Average ∆%
1929-2019	3.2
1947-1999	3.7
1999-2019	2.5
1999-2006	3.2
1980-1989	3.5
2006-2019	2.2
2007-2019	2.2
RDPIPC Average ∆%
1929-2019	2.0
1947-1999	2.3
1999-2019	1.7
1999-2006	2.2
1980-1989	2.6
2006-2019	1.4
2007-2019	1.4

Source: Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-3 provides personal income in the US between 1980 and 1993. These data are not adjusted for inflation that was still high in the 1980s in the exit from the Great Inflation of the 1960s and 1970s (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). Personal income grew steadily during the 1980s after recovery from two recessions from Jan IQ1980 to Jul IIIQ1980 and from Jul IIIQ1981 to Nov IVQ1982. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-3, US, Personal Income, Billion Dollars, Quarterly Seasonally Adjusted at Annual Rates, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-4 provides personal income from 2007 to 2020. In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In IIQ2020, nominal personal income grew at 34.3 percent and decreased at 21.8 percent real excluding current transfers while nominal disposable income grew at 44.4 percent and real disposable income grew at 47.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf).

Chart IB-4, US, Personal Income, Current Billions of Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Real or inflation-adjusted disposable personal income is in Chart IB-5 from 1980 to 1993. Real disposable income after allowing for taxes and inflation grew steadily at high rates during the entire decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-5, US, Real Disposable Income, Billions of Chained 2009 Dollars, Quarterly Seasonally Adjusted at Annual Rates 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-6 provides real disposable income from 2007 to 2020. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). There are revisions since 1929 (Table 6 at https://www.bea.gov/newsreleases/national/pi/2017/pdf/pi1117.pdf).

In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

Chart IB-6, US, Real Disposable Income, Billions of Chained 2012 Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2020

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-7 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 1980 to 1993. Rates of changes were high during the decade with few negative changes. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-7, US, Real Disposable Income Percentage Change from Preceding Period at Quarterly Seasonally Adjusted Annual Rates, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-8 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 2007 to 2020. There has been a period of positive rates followed by decline of rates and then negative and low rates in 2011. Recovery in 2012 has not reproduced the dynamism of the brief early phase of expansion. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

Chart, IB-8, US, Real Disposable Income, Percentage Change from Preceding Period at Seasonally Adjusted Annual Rates, 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The Bureau of Economic Analysis (BEA) estimates US personal income in Jun 2020 at the seasonally adjusted annual rate of $20,042.7 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). The major portion of personal income is compensation of employees of $11,279.4 billion, or 56.3 percent of the total. Wages and salaries are $9,174.4 billion, of which $7,739.1 billion by private industries and supplements to wages and salaries of $2,105.0 billion (contributions to government social insurance are $657.4 billion). “Other government social benefits to persons” are $748.2 billion in Jul 2020 compared with $3,378.9 billion in Apr 2020 (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf). In Dec 1993 (at the comparable month after the 44^th quarter of cyclical expansion), US personal income was $5,899.1 billion at SAAR (https://apps.bea.gov/iTable/index_nipa.cfm). Compensation of employees was $4,021.0 billion, or 68.2 percent of the total. Wages and salaries were $3,266.6 billion of which $2,699.9 billion by private industries. Supplements to wages and salaries were $754.5 billion with employer contributions to pension and insurance funds of $507.6 billion and $246.8 billion to government social insurance. Chart IB-9 provides US wages and salaries by private industries in the 1980s and 1990-1993. Growth was robust after the interruption of the recessions. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-9, US, Wages and Salaries, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates Billions of Dollars, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-10, US, Wage and Salary Disbursement, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-11 provides finer detail with monthly wages and salaries of private industries from 2007 to 2020. Anticipations of income in late 2012 to avoid tax increases in 2013 cloud comparisons. There is sharp contraction in Mar-Apr 2020 with recovery in May-Jul 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Chart IB-11, US, Wages and Salaries, Private Industries, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-12 provides monthly real disposable personal income per capita from 1980 to 1993. This is the ultimate measure of wellbeing in receiving income by obtaining the value per inhabitant. The measure cannot adjust for the distribution of income. Real disposable income per capita grew rapidly during the expansion after 1983 and continued growing during the rest of the decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-12, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2009 Dollars 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-5 provides the comparison between the cycle of the 1980s and the current cycle. Real per capita disposable income (RDPI-PC) increased 29.3 percent from Dec 1979 to Aug 1993. In the comparable period in the current cycle from Dec 2007 to Feb 2020, real per capita disposable income increased 20.8 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). Real per capita disposable income (RDPI-PC) increased 29.9 percent from Dec 1979 to Jan 1994. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). In the comparable period in the current cycle from Dec 2007 to Jul 2020, real per capita disposable income increased 28.0 percent. The YOY increase of real per capita income in Mar 2020 of 0.1 percent, the increase of 15.9 percent in Apr 2020, the increase of 10.2 percent in May 2020, the increase of 8.1 percent in Jun 2020 and the increase of 7.9 percent in Jul 2020 reflect the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Table IB-5, Percentage Changes of Real Disposable Personal Income Per Capita

Month	RDPI-PC ∆% 12/79	RDPI-PC ∆% YOY	Month	RDPI-PC ∆% 12/07	RDPI-PC ∆% YOY
11/1982	2.7	0.6	6/2009	-0.6	-1.8
12/1982	3.1	1.2	9/2009	-1.4	-0.5
12/1983	8.2	5.0	6/2010	0.5	1.2
12/1987	20.6	2.8	6/2014	5.7	3.1
1/1988	20.8	2.6	7/2014	6.0	3.5
2/1988	21.4	2.7	8/2014	6.4	3.8
3/1988	21.9	3.0	9/2014	6.7	3.7
4/1988	22.2	7.4	10/2014	7.1	4.4
5/1988	22.3	3.3	11/2014	7.5	4.5
6/1988	22.6	3.8	12/2014	8.1	4.9
6/1989	24.5	1.6	12/2015	10.3	2.1
6/1990	26.9	1.9	12/2016	11.4	1.0
6/1991	25.7	-0.9	12/2017	14.6	2.8
6/1992	29.5	3.0	12/2018	18.9	3.8
7/1992	29.2	3.1	1/2019	18.9	3.0
8/1992	29.5	3.3	2/2019	19.0	2.9
9/1992	28.8	2.5	3/2019	18.9	2.4
10/1992	27.8	1.7	04/2019	18.6	1.9
11/1992	27.9	1.7	05/2019	18.5	1.6
12/1992	32.3	4.4	06/2019	18.5	1.4
1/1993	29.3	1.1	07/2019	18.6	1.1
2/1993	29.8	1.1	08/2019	19.1	1.3
3/1993	29.2	0.7	09/2019	19.2	1.5
4/1993	29.8	0.9	10/2019	19.2	1.3
5/1993	29.5	0.3	11/2019	19.6	1.6
6/1993	29.1	-0.3	12/2019	19.3	0.3
7/1993	29.2	0.0	1/2020	20.1	1.1
8/1993	29.3	-0.2	2/2020	20.8	1.5
9/1993	28.8	0.0	3/2020	19.1	0.1
10/1993	28.0	0.2	4/2020	37.4	15.9
11/1993	28.2	0.3	5/2020	30.5	10.2
12/1993	32.5	0.2	6/2020	28.1	8.1
1/1994	29.9	0.5	7/2020	28.0	7.9

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

Chart IB-13 provides monthly real disposable personal income per capita from 2007 to 2020. There was initial recovery from the drop during the global recession followed by relative cyclical weakness. The final data point is contraction of 0.1 in Jul 2020 in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, followed by sharp increase in Apr 2020. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Chart IB-13, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2012 Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-6 provides data for analysis of the current cycle. Real disposable income (RDPI) increased 31.4 percent from Dec 2007 to Feb 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 20.8 percent (column RDPI-PC ∆% 12/07). The annual equivalent rate of increase of real disposable income per capita is 1.6 percent, only a fraction of 2.0 percent on average from 1929 to 2019, and 2.3 percent for real disposable income, much lower than 3.2 percent on average from 1929 to 2019. Real disposable income (RDPI) increased 39.4 percent from Dec 2007 to Jul 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 28.0 percent (column RDPI-PC ∆% 12/07). The contraction of real disposable income of 0.1 percent in Jul 2020 and the contraction of 0.1 percent of real disposable income per capita occur in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Table IB-6, Percentage Changes of Real Disposable Personal Income and Real Disposable Personal Income Per Capita

Month	RDPI ∆% 12/07	RDPI ∆% Month	RDPI ∆% YOY	RDPI-PC ∆% 12/07	RDPI-PC ∆% Month	RDPI-PC ∆% YOY
6/09	0.7	-1.7	-0.9	-0.6	-1.7	-1.8
9/09	0.2	0.2	0.4	-1.4	0.1	-0.5
6/10	2.7	0.2	2.0	0.5	0.1	1.2
12/10	4.2	0.7	3.6	1.6	0.6	2.8
6/11	4.8	0.5	2.0	1.8	0.4	1.2
12/11	5.9	0.9	1.6	2.5	0.8	0.9
6/12	8.3	0.1	3.4	4.5	0.0	2.6
10/12	8.4	0.8	3.3	4.4	0.7	2.6
11/12	10.0	1.4	4.8	5.8	1.4	4.1
12/12	12.8	2.5	6.5	8.4	2.5	5.8
6/13	7.0	0.1	-1.2	2.6	0.0	-1.8
12/13	8.0	0.3	-4.2	3.1	0.3	-4.9
1/14	8.5	0.5	2.1	3.5	0.4	1.4
2/14	9.2	0.6	3.2	4.1	0.6	2.5
3/14	9.8	0.5	3.7	4.6	0.5	2.9
4/14	10.2	0.4	3.6	5.0	0.3	2.9
5/14	10.6	0.4	3.4	5.3	0.3	2.7
6/14	11.1	0.5	3.8	5.7	0.4	3.1
7/14	11.5	0.3	4.2	6.0	0.2	3.5
8/14	12.0	0.5	4.5	6.4	0.4	3.8
9/14	12.3	0.3	4.4	6.7	0.2	3.6
10/14	12.8	0.4	5.1	7.1	0.4	4.4
11/14	13.4	0.5	5.3	7.5	0.4	4.5
12/14	14.1	0.6	5.6	8.1	0.6	4.9
12/15	17.2	0.5	2.8	10.3	0.4	2.1
12/16	19.2	0.2	1.7	11.4	0.1	1.0
12/17	23.3	0.2	3.4	14.6	0.1	2.8
12/18	28.6	1.0	4.3	18.9	1.0	3.8
1/19	28.6	0.0	3.5	18.9	0.0	3.0
2/19	28.8	0.2	3.4	19.0	0.1	2.9
3/19	28.7	-0.1	2.9	18.9	-0.1	2.4
04/19	28.4	-0.3	2.4	18.6	-0.3	1.9
05/19	28.3	-0.1	2.0	18.5	-0.1	1.6
06/19	28.5	0.1	1.9	18.5	0.1	1.4
07/19	28.6	0.1	1.6	18.6	0.0	1.1
08/19	29.2	0.5	1.8	19.1	0.4	1.3
09/19	29.4	0.1	2.0	19.2	0.1	1.5
10/19	29.4	0.0	1.8	19.2	0.0	1.3
11/19	29.9	0.4	2.1	19.6	0.4	1.6
12/19	29.6	-0.2	0.8	19.3	-0.3	0.3
01/20	30.6	0.7	1.5	20.1	0.7	1.1
02/20	31.4	0.6	2.0	20.8	0.6	1.5
03/20	29.5	-1.4	0.6	19.1	-1.4	0.1
04/20	49.5	15.4	16.5	37.4	15.4	15.9
05/20	42.1	-4.9	10.7	30.5	-5.0	10.2
06/20	39.6	-1.8	8.6	28.1	-1.8	8.1
07/20	39.4	-0.1	8.4	28.0	-0.1	7.9

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

IA2 Financial Repression. McKinnon (1973) and Shaw (1974) argue that legal restrictions on financial institutions can be detrimental to economic development. “Financial repression” is the term used in the economic literature for these restrictions (see Pelaez and Pelaez, Globalization and the State, Vol. II (2008b), 81-6; for historical analysis see the landmark exhaustive research by Summerhill (2015) and earlier research by Pelaez (1975)). Theory and evidence support the role of financial institutions in efficiency and growth (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 22-6, Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 37-44). Excessive official regulation frustrates financial development required for growth (Haber 2011). Emphasis on disclosure can reduce bank fragility and corruption, empowering investors to enforce sound governance (Barth, Caprio and Levine 2006). Banking was important in facilitating economic growth in historical periods (Cameron 1961, 1967, 1972; Cameron et al. 1992). Banking is also important currently because small- and medium-size business may have no other form of financing than banks in contrast with many options for larger and more mature companies that have access to capital markets. Calomiris and Haber (2014) find that broad voting rights and institutions restricting coalitions of bankers and populists ensure stable banking systems and access to credit. Summerhill (2015) contributes momentous solid facts and analysis with an ideal method combining economic theory, econometrics, international comparisons, data reconstruction and exhaustive archival research. Summerhill (2015) finds that Brazil committed to service of sovereign foreign and internal debt. Contrary to conventional wisdom, Brazil generated primary fiscal surpluses during most of the Empire until 1889 (Summerhill 2015, 37-8, Figure 2.1). Econometric tests by Summerhill (2015, 19-44) show that Brazil’s sovereign debt was sustainable. Sovereign credibility in the North-Weingast (1989) sense spread to financial development that provided the capital for modernization in England and parts of Europe (see Cameron 1961, 1967). Summerhill (2015, 3,194-6, Figure 7.1) finds that “Brazil’s annual cost of capital in London fell from a peak of 13.9 percent in 1829 to only 5.12 percent in 1889. Average rates on secured loans in the private sector in Rio, however, remained well above 12 percent through 1850.” Financial development would have financed diversification of economic activities, increasing productivity and wages and ensuring economic growth. Brazil restricted creation of limited liability enterprises (Summerhill 2015, 151-82) that prevented raising capital with issue of stocks and corporate bonds. Cameron (1961) analyzed how the industrial revolution in England spread to France and then to the rest of Europe. The Société Générale de Crédit Mobilier of Émile and Isaac Péreire provided the “mobilization of credit” for the new economic activities (Cameron 1961). Summerhill (2015, 151-9) provides facts and analysis demonstrating that regulation prevented the creation of a similar vehicle for financing modernization by Irineu Evangelista de Souza, the legendary Visconde de Mauá. Regulation also prevented the use of negotiable bearing notes of the Caisse Générale of Jacques Lafitte (Cameron 1961, 118-9). The government also restricted establishment and independent operation of banks (Summerhill 2015, 183-214). Summerhill (2015, 198-9) measures concentration in banking that provided economic rents or a social loss. The facts and analysis of Summerhill (2015) provide convincing evidence in support of the economic theory of regulation, which postulates that regulated entities capture the process of regulation to promote their self-interest. There appears to be a case that excessively centralized government can result in regulation favoring private instead of public interests with adverse effects on economic activity. The contribution of Summerhill (2015) explains why Brazil did not benefit from trade as an engine of growth—as did regions of recent settlement in the vision of nineteenth-century trade and development of Ragnar Nurkse (1959)—partly because of restrictions on financing and incorporation. Interest rate ceilings on deposits and loans have been commonly used. Professor Rondo E. Cameron, in his memorable A Concise Economic History of the World (Cameron 1989, 307-8), finds that “from a broad spectrum of possible forms of interaction between the financial sector and other sectors of the economy that requires its services, one can isolate three type-cases: (1) that in which the financial sector plays a positive, growth-inducing role; (2) that in which the financial sector is essentially neutral or merely permissive; and (3) that in which inadequate finance restricts or hinders industrial and commercial development.” Summerhill (1985) proves exhaustively that Brazil failed to modernize earlier because of the restrictions of an inadequate institutional financial arrangement plagued by regulatory capture for self-interest. The Banking Act of 1933 imposed prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q.

Most regulatory actions trigger compensatory measures by the private sector that result in outcomes that are different from those intended by regulation (Kydland and Prescott 1977). Banks offered services to their customers and loans at rates lower than market rates to compensate for the prohibition to pay interest on demand deposits (Friedman 1970, 24). The prohibition of interest on demand deposits was eventually lifted in recent times. In the second half of the 1960s, already in the beginning of the Great Inflation (DeLong 1997), market rates rose above the ceilings of Regulation Q because of higher inflation. Nobody desires savings allocated to time or savings deposits that pay less than expected inflation. This is a fact currently with near zero nominal interest rates, 0 to ¼ percent, and consumer price inflation of 0.3 percent in the 12 months ending in Apr 2020 (https://www.bls.gov/cpi/) but rising during waves of carry trades from zero interest rates to commodity futures exposures (). Funding problems motivated compensatory measures by banks. Money-center banks developed the large certificate of deposit (CD) to accommodate increasing volumes of loan demand by customers. As Friedman (1970, 25) finds:

“Large negotiable CD’s were particularly hard hit by the interest rate ceiling because they are deposits of financially sophisticated individuals and institutions who have many alternatives. As already noted, they declined from a peak of $24 billion in mid-December, 1968, to less than $12 billion in early October, 1969.”

Banks created different liabilities to compensate for the decline in CDs. As Friedman (1970, 25; 1969) explains:

“The most important single replacement was almost surely ‘liabilities of US banks to foreign branches.’ Prevented from paying a market interest rate on liabilities of home offices in the United States (except to foreign official institutions that are exempt from Regulation Q), the major US banks discovered that they could do so by using the Euro-dollar market. Their European branches could accept time deposits, either on book account or as negotiable CD’s at whatever rate was required to attract them and match them on the asset side of their balance sheet with ‘due from head office.’ The head office could substitute the liability ‘due to foreign branches’ for the liability ‘due on CDs.”

Friedman (1970, 26-7) predicted the future:

“The banks have been forced into costly structural readjustments, the European banking system has been given an unnecessary competitive advantage, and London has been artificially strengthened as a financial center at the expense of New York.”

In short, Depression regulation exported the US financial system to London and offshore centers. What is vividly relevant currently from this experience is the argument by Friedman (1970, 27) that the controls affected the most people with lower incomes and wealth who were forced into accepting controlled-rates on their savings that were lower than those that would be obtained under freer markets. As Friedman (1970, 27) argues:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.”

Chart IB-14 of the Bureau of Economic Analysis (BEA) provides quarterly savings as percent of disposable income or the US savings rate from 1980 to 2020. There was a long-term downward sloping trend from 12 percent in the early 1980s to 2.2 percent in Jul 2005. The savings rate then rose during the contraction and in the expansion. In 2011 and into 2012 the savings rate declined as consumption is financed with savings in part because of the disincentive or frustration of receiving a few pennies for every $10,000 of deposits in a bank. The savings rate increased in the final segment of Chart IB-14 in 2012 because of the “fiscal cliff” episode followed by another decline because of the pain of the opportunity cost of zero remuneration for hard-earned savings. There are multiple recent oscillations during expectations of increase or “liftoff” of the fed funds rate in the United States followed by “shallow” or uncertain monetary policy with increase in policy interest rates and reduction of the balance sheet of the Fed. The savings rate increased in the final segment with the annual revisions of 2019 and 2020. The savings rate jumped in the lockdown of economic activity of the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Chart IB-14, US, Personal Savings as a Percentage of Disposable Personal Income, Quarterly, 1980-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-14A provides the US personal savings rate, or personal savings as percent of disposable personal income, on an annual basis from 1929 to 2019. The US savings rate shows decline from around 10 percent in the 1960s to around 8 percent currently.

Chart IB-14A, US, Personal Savings as a Percentage of Disposable Personal Income, Annual, 1929-2019

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-7 provides personal savings as percent of disposable income and annual change of real disposable personal income in selected years since 1930. Savings fell from 4.5 percent of disposable personal income in 1930 to minus 0.7 percent in 1933 while real disposable income contracted 6.3 percent in 1930 and 2.9 percent in 1933. Savings as percent of disposable personal income swelled during World War II to 27.9 percent in 1944 with increase of real disposable income of 3.1 percent. Savings as percent of personal disposable income fell steadily over decades from 12.0 percent in 1982 to 3.1 percent in 2005. Savings as percent of disposable personal income was 6.4 percent in 2013 while real disposable income fell 1.3 percent. The savings rate was 7.4 percent of GDP in 2014 with growth of real disposable income of 4.1 percent. The savings rate was 7.5 percent in 2015 with growth of real disposable income at 4.2 percent. The savings rate stood at 6.9 percent in 2016 with growth of real disposable income at 2.0 percent. The savings rate reached 7.2 percent in 2017 with growth of real disposable income at 3.1 percent. The savings rate stood at 7.8 percent in 2018 with growth of real disposable income at 3.6 percent. The savings rate stood at 7.5 percent in 2019 with growth of real disposable income at 2.2 percent.

Table IB-7, US, Personal Savings as Percent of Disposable Personal Income, Annual, Selected Years 1929-2019

	Personal Savings as Percent of Disposable Personal Income	Annual Change of Real Disposable Personal Income
1930	4.5	-6.3
1933	-0.7	-2.9
1944	27.9	3.1
1947	6.3	-4.1
1954	10.3	1.4
1958	11.4	1.0
1960	10.1	2.6
1970	12.8	4.6
1975	13.4	2.5
1982	12.0	2.2
1989	8.4	2.9
1993	7.9	1.7
2002	5.8	3.0
2003	5.5	2.7
2004	5.1	3.3
2005	3.1	1.6
2006	3.8	4.0
2007	3.7	2.3
2008	5.0	1.0
2009	6.1	-0.2
2010	6.5	2.0
2011	7.2	2.3
2012	8.9	3.3
2013	6.4	-1.3
2014	7.4	4.1
2015	7.5	4.2
2016	6.9	2.0
2017	7.2	3.1
2018	7.8	3.6
2019	7.5	2.2
Average Savings Ratio
1980-1989	9.9
2007-2019	6.2
Average Yearly ∆% Real Disposable Income
1980-1989		3.1
2007-2018		2.4

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-15 of the US Bureau of Economic Analysis provides personal savings as percent of personal disposable income, or savings ratio, from Jan 2007 to Jun 2020. The savings rate jumped to 12.9 percent in Mar 2020 and 33.7 percent in Apr 2020, decreasing to 24.6 percent in May 2020, 19.2 percent in Jun 2020 and 17.8 percent in Jul 2020, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

Chart IB-15, US, Personal Savings as a Percentage of Disposable Income, Monthly 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The uncertainties caused by the global recession resulted in sharp increase in the savings ratio that peaked at 7.8 percent in May 2008 (https://apps.bea.gov/iTable/index_nipa.cfm), as shown in Table IB-8. The second peak occurred at 8.2 percent in May 2009. There was another rising trend until 6.9 percent in Jun 2010 and then steady downward trend until 6.9 percent in Nov 2011. This was followed by an upward trend with 9.1 percent in Jun 2012 but decline to 7.9 percent in Aug 2012 followed by jump to 12.0 percent in Dec 2012. Swelling realization of income in Oct-Dec 2012 in anticipation of tax increases in Jan 2013 caused the jump of the savings rate to 12.0 percent in Dec 2012. The BEA explains as “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). There was a reverse effect in Jan 2013 with decline of the savings rate to 6.3 percent. Real disposable personal income fell 5.8 percent and real disposable per capita income fell from $41,281 in Dec 2012 to $38,886 in Jan 2013 or by 5.8 percent (http://www.bea.gov/iTable/index_nipa.cfm), which is explained by the Bureau of Economic Analysis as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.9 billion to January. Employer contributions were boosted $5.9 billion in January, which reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rates paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty. The total contribution of special factors to the January change in contributions for government social insurance was $132.9 billion.”

Table IB-8, US, Savings Ratio and Real Disposable Income, % and ∆%

	Personal Saving as % Disposable Income	RDPI ∆% 12/07	RDPI ∆% Month	RDPI ∆% YOY
May 2008	7.8	4.4	4.8	4.8
May 2009	8.2	2.4	1.7	-1.9
Jun 2010	6.9	2.7	0.2	2.0
Nov 2011	6.9	4.9	0.0	1.4
Jun 2012	9.1	8.3	0.1	3.4
Aug 2012	7.9	7.1	-0.4	2.1
Dec 2012	12.0	12.8	2.5	6.5
Jan 2013	6.3	6.3	-5.8	-0.4
Feb 2013	5.8	5.7	-0.5	-1.5
Mar 2013	5.9	5.9	0.2	-1.7
Apr 2013	6.4	6.3	0.4	-1.6
May 2013	6.7	6.9	0.6	-1.2
Jun 2013	6.8	7.0	0.1	-1.2
Jul 2013	6.6	6.9	-0.1	-0.6
Aug 2013	6.7	7.2	0.2	0.1
Sep 2013	6.8	7.6	0.4	0.0
Oct 2013	6.2	7.3	-0.3	-1.0
Nov 2013	6.1	7.7	0.3	-2.1
Dec 2013	6.4	8.0	0.3	-4.2
Dec 2014	7.7	14.1	0.6	5.6
Dec 2015	7.3	17.2	0.5	2.8
Dec 2016	6.4	19.2	0.2	1.7
Dec 2017	6.6	23.3	0.2	3.4
Dec 2018	9.1	28.6	1.0	4.3
Dec 2019	7.2	29.6	-0.2	0.8
Jan 2020	7.6	30.6	0.7	1.5
Feb 2020	8.3	31.4	0.6	2.0
Mar 2020	12.9	29.5	-1.4	0.6
Apr 2020	33.7	49.5	15.4	16.5
May 2020	24.6	42.1	-4.9	10.7
Jun 2020	19.2	39.6	-1.8	8.6
Jul 2020	17.8	39.4	-0.1	8.4

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

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