The Chicago PMI last week and the ISM this morning confirmed that the manufacturing sector has stopped growing. The effect of monetary and fiscal stimulus has worn off as the economy has become adapted to them. Like a junky on coke, ever larger doses are needed as time goes by to achieve the high. Peter Schiff did a piece on this addiction a few days ago:

But for now most people feel that the transition is underway to a healthy economy. The prevailing debate is when and how the Fed will let the economy fly on its own. Many of the top market analysts have great faith that Ben Bernanke can pull the monetary tablecloth off the table without disturbing the dishes. Those who hold this view fail to understand that the United States is caught in a stimulus trap from which there is no easy exit. How can the Fed wean the economy from stimulus when stimulus IS the economy? In truth, the trick Bernanke must actually perform is to pull the table out from beneath the cloth, leaving both the cloth and the dishes suspended in air.

Bernanke has encouraged consumption at the expense of investment, and enabled government to become a larger and larger share of the economy. Now everything comes from China, it seems, as entitlement spending sustains wealthy government retirees and a legion of unemployed and unemployable. This won’t last.

Think it can’t happen here? Think again.

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