What Are Transfer Receipts?

Transfer receipts are government payments for which no services were performed.

Transfer receipts include food stamps, subsidized housing, Social Security, Medicare, Medicaid, child tax credits, and other government assistance.

Three rounds of massive fiscal stimulus during the Covid pandemic set off a huge wave of inflation that the Fed never saw coming.

The numbers are worse than they look above as the following chart shows.

With every recession, transfer receipts as a percentage of real personal income declines.

The three massive rounds of fiscal stimulus is unprecedented. A friend asked me today why the Fed could not see this coming.

I explained: These guys are not wizards; they have never called a recession in real time. Bernanke denied there was a recession even after it started. He denied there was a housing bubble. They all believe in models that don't work. And history suggests they always err on the side of being too loose. They will make the same mistakes over and over.

The Fed never saw the uptick in inflation because their models said otherwise. Their models now say inflation will return to normal.

I can see things models don't: Global wage arbitrage is over. Just in time manufacturing is over. Both Trump and Biden will increase tariffs. The energy needed for AI will soar. The energy needed for EVs will grow even if transition slows. Demographic changes are huge.