The global economy continues to slow and stagnate as GDP numbers in the US, UK, Germany, and Japan all show ongoing economic weakness. …

Much of the narrative around this focuses on declines in international trade brought about by the Trump administration’s chaotic efforts to impose new taxes on imports into the United States. This is no doubt partly responsible for the economic slowdown, but the weakening economy has been in cards for years thanks to the immense burden placed on the private economy by years of runaway monetary inflation and government spending. . Thanks to the rapid rise in government spending that occurred during the covid panic and afterward, the amount of government debt has skyrocketed since 2020, crowding out private investment, and putting upward pressure on interest rates. Meanwhile, government has accelerated—with no sign of any change in trajectory under the Trump administration. This drives up prices for private businesses that are forced to compete with tax-funded government enterprises for resources, labor, and land. This all drives down private-sector productivity.

Unfortunately, much of the government spending—which is siphoning off resources from the private sector—is counted as GDP growth, thus papering over the slow-motion strangulation of the private sector by monetary inflation, deficits, and federal spending. In spite of the fact that federal spending is counted as GDP, economic growth cannot be sustained beyond the short term by economic policy that relies more and more on government activity as a replacement for private sector growth. (Note, for example, how half of June’s job growth was government jobs.)

This ultimately leads to a growing tax burden either in the form of normal taxation or in the form of the inflation tax. …

This is all avoidable, and the economic slowdown is not due to intractable forces inherent to developed economies as some economists, like Larry Summers, claim in many of their explanations of “secular stagnation.” Since the Great Recession, the US economy has been increasingly weak thanks to a transition to inflation-based growth, growing deficits, and a rising regulatory burden. Those quarters that do report higher than usual levels of growth are fueled by monetary inflation. These “high-growth” quarters—such as the post covid quarters of 2021—are then followed by rising price inflation and falling real wages.

Unless the current administration acts to reverse this ongoing period of easy-money fueled spending, deficits, and asset price inflation, we can expect to see ongoing problems with stubborn stagnation in the private sector.