Did The Stimulus Work?

The Wall Street Journal has an excellent collection of charts available this morning.
http://www.marketwatch.com/story/in-charts-cpi-foreclosures-retail-sales-2010-11-19?pagenumber=1
Although I am very critical, and morally and philosophically opposed to the FED's intervention in our economy, I must admit, that their easy money policies appear to have affected the
unemployment rate.

Initial Claims

Declining Job Losses

As you can see, initial jobless claims have fallen dramatically, but they are not back to pre-recession levels. Even though a lot of people are still not finding work, companies are not laying a lot of people off either. This is evident in the "Declining Job Losses" chart.

We can conclude that hiring has not picked up dramatically, but the pace of layoffs has declined dramatically.

Needless to say, I am very surprised with the retail sales numbers. My guess is that they are reflecting the increase in CPI. Consumers are not really buying more stuff, they are just paying more for the stuff they buy. This shows up in the bottom line as increased profits, because the retailers have cut costs dramatically. Due to rising commodity prices, retailers are successfully passing on increased food and energy costs to the consumer. The consumer NEEDS to eat and drive.

Take a look at the CPI and CORE CPI chart:

Notice the big spike in CPI from the March 2009 bottom. Also, notice that CORE CPI, which excludes food and energy has been steadily declining since the beginning of the recession. CPI is actually heading back down again.

PPI is telling a different story. It has fallen off a cliff, again. Chart number 2 from the article shows it is below its worst level of the recession.

The FED has engineered a scenario where companies can profit handily. Their costs (PPI) are falling due to deflation. At the same time, they are successfully passing price increases on to the consumer, because the pace of layoffs has stabilized. This is unsustainable. Why?

Consumers simply have too much debt to be able to be absorb the rising food and energy cost for long. Corporations can only increase prices so much until the higher prices have a significant impact on aggregate demand.

When revenue decreases because deflation and falling demand take their toll, corporations will begin to cut jobs again. Our FED needs to let prices fall. Lower prices will stimulate demand.
Let the tide come in. It will clean off the beach and make room for real value to be created.

Let it be....or we very well might destroy our country, by bankrupting it.

So, did the stimulus work?

NO, it jus delayed the inevitable, while increasing the costs to the middle class along the way.