In the nearby column Jim Quinn debunks Wall Street’s latest claim that the American consumer is bounding back. He points out that on an inflation-adjusted basis retail sales are still barely higher than the were a year ago, and, for that matter, are only 4% higher in real terms than they were way back in November 2007.

That’s right. Nearly eight years and $3.5 trillion of Fed money printing later, yet the vaunted American consumer is struggling to stay above the flat line, not shopping up a storm.

And there is no mystery as to why. After a 40-year borrowing spree culminating in the final mortgage credit blow-off on the eve of the great financial crisis, the US household sector had reached peak debt. It was tapped out with $13 trillion of mortgages, credit cards, auto, student and other loans – a colossal financial burden that amounted to nearly 220% of wage and salary income or nearly triple the leverage ratio that had prevailed before 1971.

Household Leverage Ratio

So, as is evident from the graph above, we are now in a completely different economic ball game than the consumer debt binge cycle that culminated in 2008. Households are deleveraging out of necessity, and that means that consumer spending is tethered to the tepid growth of national output and wage income.

Yet sell side economists and the financial press are so desperate for factoids that confirm the Keynesian “recovery” narrative – that is, the false claim that the US economy has been successfully lifted out of a growth rut by mega-injections of fiscal and monetary “stimulus” – that they get just plain giddy about Washington’s seasonally maladjusted, endlessly revised monthly data squiggles.

Thus, in response to the 0.6% gain in July retail sales, The Wall Street Journal’s headline proclaimed, “In a Show of Confidence, Americans Boost Spending”.

Even that was fair and balanced compared to the typical economist’s fare. Opined Richard Moody of Regions Financial Corp:

“The July retail sales report should help allay any remaining concerns as to the state, and psyche, of U.S. consumers…… “U.S. consumers are just fine.”