Another Roaring Twenties?

 Financial FAQs

BEA.gov

The advance estimate of third quarter U.S. economic growth was 2.8 percent, slightly less than the 3 percent growth in Q2 but is showing few signs the post-pandemic recovery is slowing. It has defied the odds of a Federal Reserve engineered slowdown that made the cost of borrowing higher, jacking up the Prime Rate to an 8.5 percent high.

The manufacturing sector slowed down, but that hasn’t slow overall economic growth because consumers kept spending on consumer goods, dining out, travel and other leisure activities.

This has all the signs of another Roaring ‘20s that occurred after the Spanish Flu pandemic in the 1920s. I don’t mean it literally, of course, because the first Roaring Twenties of jazz and the Flapper era for women occurred after World War I. Yet the recovery from WWI and the Spanish Flu pandemic that killed an estimated 650,000 Americans also unleashed a spending and investment spree that is happening after the COVID-19 pandemic.

I’m using the analogy because this roaring 2020s could also last a decade due to the pent-up demand from government spending that is seeding so much private investment, with the U.S. economy still fully employed infrastructure and technology investments just beginning to kick in

Consumer spending surged 3.7 percent, and domestic investment grew 11 percent in the Bureau of Economic Analysis (BEA) report. This was mainly because consumer spending was holding up for the holidays and consumers had extra savings. The personal savings rate is holding at 4.8 percent.

Inflation also continues to decline. The price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 2.4 percent in the second quarter (table 4). The personal consumption expenditures (PCE) price index increased 1.5 percent, compared with an increase of 2.5 percent. Excluding food and energy prices, the PCE price index increased 2.2 percent, compared with an increase of 2.8 percent.

Now that inflation is back to the Fed’s target rate of 2 percent, Fed officials can concentrate on continuing to bring down their short-term Fed Funds rate, which will bring down the Prime Rate further, causing consumers to be even more confident about their future.

That is why, “Consumer confidence recorded the strongest monthly gain since March 2021, but still did not break free of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board.

“In October’s reading, all five components of the Index improved. Consumers’ assessments of current business conditions turned positive. Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data. Compared to last month, consumers were substantially more optimistic about future business conditions and remained positive about future income,” said Peterson.

ConferenceBoard

Much will depend on Friday’s official U.S. unemployment report but the independent ADP’s private-sector jobs report showed businesses added 233,000 new jobs in October, the biggest gain in 15 months. The report is not as accurate as the government’s nonfarm payrolls report, which comes out on Friday.

The Trade/Transportation, Education/Health sectors added 104,000 jobs, construction added 37,000 jobs (infrastructure), while manufacturing lost 19,000 jobs in the ADP report.

One historian wrote that after the devastation of World War I and the Spanish Flu pandemic, “Incredibly, the dire post-war economic predictions didn’t come true. At least not immediately. American consumers, who had patriotically scrimped and saved during wartime, began to live it up. Europeans also joined in, purchasing $8 billion in exports from America. Inflation ticked upward, and so did prices, but consumers were willing to pay anything for a taste of freedom.”

Sound familiar? Only this time the Fed’s inflation fight didn’t cause a recession, on the contrary—at least not yet. It’s a good place to be, just in case there might be other surprises in the future.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Does Bidenomics Work?

 Financial FAQs

FREDrealgdp

Elon Musk told a cheering crowd at Sunday’s MAGA rally in New York that if Donald Trump puts him in charge of government efficiency, as planned, he can cut “at least $2 trillion” from the current federal budget.

This would cause an almost immediate recession. Such is the blindness of the world’s richest Oligarch, who has made no bones about his dislike of government regulations and taxes in the way of his dream of reaching Mars.

MarketWatch’s Brent Arends tells us what would happen. “Either Donald Trump and Elon Musk are planning to cut 85% of all spending on highways, disaster relief, federal bank-deposit insurance and the departments of Agriculture, Homeland Security and Justice; close all U.S. embassies; and abolish the Environmental Protection Agency, the Small Business Administration, NASA and nearly all welfare, income-support, food-stamp and childhood-nutrition programs.”

“Or, they are planning on cutting Social Security and Medicare — despite Donald Trump’s protests to the contrary,” said Arends

That is what is behind Republicans’ dislike of Democrats economic policies since President Biden’s election that has created more than 15 million jobs and 3 percent economic growth as we recovered from the COVID-19 pandemic.

It takes government investments to spur private investments; not just in new technologies (the CHIPS Act) but healthcare and the environment (Inflation Reduction Act), and in modernizing our infrastructure (Infrastructure Act) so that Americans will feel more secure from hurricanes and illness and therefore produce more.

That is the real definition of efficiency, not cutting benefits so that Billionaires can keep more of their wealth.

President Obama was the first to turn the tide on President Reagan’s 40- years of trickle-down economic policies after the Great Recession (2008-09) that had transferred $50 trillion in wealth from working Americans to the owners of capital living off their corporate profits, according to a RAND Corporation working paper.

He did it by creating Obamacare (the Affordable Care Act) and making government the protector of people, not of profits, as President Reagan had done. This resulted in economic growth accelerating to 4 percent during the Obama years continuing into Trump’s years, even with a Republican-engineered shutdown. It was the longest economic recovery since World War Two, and the reason Trump could brag that growth has been so good just prior to COVID-19.

The economy unfortunately shrank -7.5 percent in 2020 as businesses shut down due to the pandemic. It roared back to life in the second quarter of 2021 as congress acted quickly to put money back into Americans’ pockets.

In fact, the U.S. economy will continue to provide most of the thrust for global growth through the balance of this year and in 2025, led by robust consumer spending “that has held up through a wrenching bout of inflation and the high interest rates used to tame it,” the International Monetary Fund said on Tuesday.

Such economic policies requiring government investments have worked before. It was Roosevelt’s New Deal that employed more than 8 million people, built 650,00 miles of roads, 120,000 bridges, created the minimum age, 8-hour workdays and started up social security.

Now more than half of the living US recipients of the Nobel Prize for economics signed a letter that called Vice President Kamala Harris’ economic agenda “vastly superior” to the plans laid out by former President Donald Trump.

“While each of us has different views on the particulars of various economic policies, we believe that, overall, Harris’ economic agenda will improve our nation’s health, investment, sustainability, resilience, employment opportunities, and fairness and be vastly superior to the counterproductive economic agenda of Donald Trump,” the economists write in the letter obtained by CNN.

Top this off consumers are now joining the Harris economic bandwagon. The Conference Board’s latest consumer confidence survey surged to 108.7 in October from a revised 99.2 reading in the prior month,the Conference Board said Tuesday.  This is highest level of confidence since January.

“Consumer confidence recorded the strongest monthly gain since March 2021, but still did not break free of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “In October’s reading, all five components of the Index improved. Consumers’ assessments of current business conditions turned positive. Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data.” 

Is Bidenomics finally catching on with ordinary Americans, not just economists?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Bully Mentality--III

 ANSWERING the KENNEDYS' CALL

Why has the bullying behavior of one political party intimidated some of our most powerful men? Reports say that billionaires like Bill Gates, Warren Buffett, and JP Morgan’s Jamie Diman won’t publicly endorse Kamala Harris, even though they have donated to her campaign and say privately they will vote for her?

Timothy Snyder in his latest book, On Freedom, tells us what is necessary to actively preserve and expand freedom, rather than remain quiet, which is the choice for American voters in this Presidential election. One must put their body, not just their money, on the line to successfully oppose authoritarians, as Ukraine’s President Volodymyr Zelens’kyi has done in opposing Putin’s invasion of his land.

Snyder meant one must take a public stand, however dangerous it might seem, because freedom itself is on the line. When Snyder asked Zelens’kyi why he didn’t flee when Russian first invaded the Ukraine as many thought he would do, Zelens’kyi replied, “I could not have done otherwise.”

“He was in the company of others who were also taking risks,” said Snyder. “He understood the situation, he said, because of what it meant to represent others. A president, he said, was only the first grain of sand in a turning hourglass.”

Reuters-January 6

The news that some of our wealthiest men won’t publicly endorse Harris highlights the stakes in this Presidential race, and how fearful even powerful men can be before someone who threatens retaliation, including bodily harm, against anyone who opposes him.

These men don’t understand what underlies the bully mentality of one political party that has no regard for election outcomes. Trump’s own niece has called Trump a coward, and in fact bullies do pick on the weakest who will stand down when opposed by those who stand up to them, say psychologists and psychiatrists.

I first wrote about a certain political party’s Bully Mentality in 2012. “Why do Americans have such a problem with bullies? Whether in schools, in politics, or on Internet social media? The result has been teenage suicides, horrendous school shootings by students who felt bullied or belittled, and now a whole political party that opposes anything that smacks of aiding the poorest, seniors, and less educated.”

Donald Trump’s threats of retaliation have only intensified so close to November 5. Trump aides such as General John Kelley, his Chief of Staff, says he is acting like a fascist who openly supports Russian’s Putin in his Ukraine invasion and has said he wanted “Generals like Hitler had” to put down demonstrations.

The real lessons Americans should take from such tactics of a wannabe dictator was first spelled out in Timothy Snyder’s best-seller On Tyranny:

• #1) “Don’t obey in advance—Most of the power of authoritarianism is freely given. In times like these, individuals think ahead about what a more repressive government will want, and then offer themselves without being asked.”
• #2) “Defend Institutions—It is institutions that help us to preserve decency. So choose an institution you care about—a court, a newspaper, a law, a labor union—and take its side.”
• #3) “Above all believe in truth,” as without truth there is no trust, and without trust there are no effective laws, which leads to tyranny.

Candidate Donald Trump, has made a point of blatant lying, meaning he wants his followers to believe whatever he says rather than objective facts such as global warming, or size of the audience that attended his inauguration.

What better example is there of real freedom and the preservation of our democracy than President Zelens’kyi and the Ukrainian people who are literally putting their own bodies on the line in opposing the Russian bully next door; for those Americans who remain silent?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

On Preserving Freedom

 Popular Economics Weekly

Random House

Freedom is not just an absence of evil but a presence of good.

Timothy Snyder in the introduction of On Freedom, the sequel to his best-selling On Tyranny, tells us why we have a sociopath bordering on psychopathy as the Republican Party candidate for President of the United States of America.

“Deep into a century that was the stuff of dreams in the 1970s, and the subject of confident predictions in the 1990s, we find ourselves at a turning point. Whether we will be free will depend on us—not just on what we do, but on why we do it: our ideals.”

We will need to return to those ideals that are the basis of our democracy to counter the nihilism displayed by a political party and candidate that is a product of the past 40 years of wealth concentration in an economic system that has led to many Deaths of Despair in the Midwest and rustbelt.

It’s a sad commentary that one of our political parties chose a leader that wants to tear down those institutions that have preserved our democracy; even attack the Capital on January 6 to overturn the 2020 election results.

I lived that ‘stuff of dreams’ in the 1970s in public service as a Peace Corps Volunteer, with Cesar Chavez’s United Farm Workers Union, the US Environmental Protection Agency and serving in my own community. I experienced the heady optimism and can-do spirit that prevailed and supported my efforts.

It was because I believed in the Peace Corps motto, Service Above Self, that its first President Sergeant Shiver adopted from Rotary International.

But citizens without that spirit have turned to leaders that promise they will serve them, if they obey the leader's rules, says Dr. Snyder.

What happened to those enduring ideals we lived by and are the foundation of our democracy? Nationalism, a relic of the past, is finding favor because many have lost faith in their democratic institutions that haven’t done enough for those that have felt disenfranchised. They no longer trust their institutions.

They have lost faith in those ideals as well, yet having faith in ideals enables one to fulfill them.

Snyder uses Russia as an example of what America could become if we don’t reaffirm our ideals this November. “In Russia, we see the transitions from the definition of freedom as the lack of barriers to a politics of fascism in which there are no barriers to the Leader’s whims.”

He faults what has happened to the American economy. “American capitalism has been driven toward monopoly, wealth concentration and decadence. Without ideals, it is impossible to be a realist. If you forget about freedom, you misunderstand the world and change it for the worst.”

Nobel laureate Joseph Stiglitz has said as much: “The rise of authoritarian populism has been most pronounced in countries where governments have done too little (to address poverty, inequality, insecurity, and so forth), not where they have done too much.”

Dr. Snyder’s antidote to the rising authoritarianism is live by our enduring values that all Americans hold—Life, Liberty and the Pursuit of Happiness—rather than succumb to the fears and prejudices that divide us.

On Freedom is an expanded sequel to On Tyranny because he tells us not only how to recognize tyranny but how to protect and expand the freedoms we already enjoy because we live in a democracy whose institutions protect fact from fiction, truth from lies; which Dr. Snyder labels as positive freedom vs. negative freedom; the value of values, vs. just the absence of barriers; a sense of togetherness rather than partisan divide.

Positive freedom is the most important value of all.

Nobel Prize-Winners Daren Acemoglu and Simon Johnson, in their new book, Why Nations Fail, have studied which countries grow and nurture a greater equality of opportunity for its citizens. It is because they have strong democratic institutions.

Jakob Svensson, chair of the Committee for the Prize in Economic Sciences, in awarding the latest Nobel memorial prize in economics to them, and Simon Johnson, said “Reducing the vast differences in income between countries is one of our time’s greatest challenges. The (Nobel) laureates have demonstrated the importance of societal institutions for achieving this."

It is a case of the exploiters; wealthy individuals who would limit freedoms to prevent the sharing of their wealth equitably, vs. those who want to expand equal opportunities for all.

Weakening those constraints on the wealthiest is how the Reagan administration and Big Business in 1980 began the deregulation of whole industries as well as financial markets. The wall was breached between commercial FDIC guaranteed banks and much more loosely regulated investment banks that enabled sophisticated investors to gamble with federally insured deposits.

Government oversight was so weakened that another Republican administration failed to carry out its core mandate of protecting Americans. The GW Bush administration failed to anticipate the 9/11 Twin Towers attack and the Great Recession that followed in the same decade.

Republican economic policies have performed badly because they have lobbied for weaker institutions; particularly in the red states they govern; as well tax cuts that have created massive budget deficits with little to show for it. These states have restricted many freedoms, such women’s right to make decisions about their own body, union organizing and minimizing health care benefits for their poorest citizens.

In fact, Republican administrations have attempted more than 30 times to repeal Obamacare, the only health care law that makes health insurance available to all Americans, regardless of preexisting conditions.

That is why “We need government to build the architecture of the American Dream, whether it be autonomous and public universities or functional public roads,” says Snyder.

Our government needs to do more to protect the constitution and our laws than we have done in the past, that Americans thought were not needed in less dangerous times.

We are at a turning point because such a ‘hands off’ attitude towards laws and regulations is allowing a Republican presidential candidate who said he admires Hitler’s generals, Vladimir Putin as a ‘genius’, and was labeled by former Chief of General Staff Mark Milley, “fascist to the core” to possibly become President again.

We need a government and laws representative of its citizens that is strong enough to make the American Dream available to all Americans for democracy to work. When it has been weakened by those wanting an autocracy over democracy, we have the partisan divide of today that is tearing Americans apart.

Concentrating all power in the hands of the few is the goal of authoritarian governments, and the purpose of weak democratic governments. It is what happened to the American economy over the past 40 years when it chose to ignore the guardrails that protected Americans.

We are at such a turning point today, says Dr. Snyder. “My kids have a chance. We all do. This world can be ever so much better.”

We can make the American Dream we believe in work for all, not the few.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Bidenomics Is Working!

 Financial FAQs

Brad Delong

Why are Republicans denigrating Biodenomics, the economic policies passed by a bipartisan congress since 2021 that is causing 3 percent GDP growth and 4.0 percent unemployment, with 8 million job vacancies looking for workers, and inflation back to COVID-19 pre-pandemic levels?

Republicans are playing politics in this election year, of course, but Senator McConnell has touted President Biden for rebuilding some major bridges in Kentucky with the Infrastructure Act.

In fact, the U.S. has far outdistanced other developed countries in recovering from the COVID-19. Why? Because President Biden has pulled off a great renaissance of public-private investments with said bipartisan congress, the largest investments in renewing the U.S. economy since Roosevelt pulled off the New Deal during the Great Depression..

Time Magazine described what it is meant to do: “Bidenomics argues that a large and thriving middle class is the primary cause of economic growth. “When the middle class does well, everybody does well,” the President has repeatedly explained. This is the core proposition of Bidenomics: that prosperity grows from the bottom up and the middle out.”

Vice President Harris has echoed that slogan in her campaign, because very few Americans seem to understand Bidenomics at all. A major reason is that four decades of its predecessor; Reaganomics, or Trickle-down economic policies; have badly damaged the middle class, followed by the double-whammy of COVID-19,

A Monmouth University Poll finds that just under half the public gives President Joe Biden credit for this upturn, for instance, but few say his policies are helping the middle class, especially compared to his predecessor.

“The president has been touting ‘Bidenomics,’ but the needle of public opinion has not really moved. Americans are just not giving him a lot of credit when it comes to the economy,” said Patrick Murray, director of the independent Monmouth University Polling Institute.

The poll also finds that disapproval of Congress has hit a nominal record for the past decade.

Time Magazine cites a major reason for the pessimism in a new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation—the record inequality of the past four decades:

“…had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. “

The authors assert that since the 1970s, some $50 trillion in wealth has been transferred from workers to owners of capital with the massive deregulation of whole industries, including banking, the passing of anti-labor legislation that weakened union collective bargaining, and massive tax cuts for the wealthiest that practically halved the maximum income tax rate from 50 percent in 1980 to 28 percent today.

So, it is no wonder that workers in the Rust Belt Midwest want to return to the ‘good old days’ of post WWII, when income distribution was more equal (but with fewer Black and women’s rights)?

The problem is that has never been Republicans’ agenda, especially MAGA Republicans, still the party of the wealthy attempting to sell their credo that lower taxes and fewer government benefits will benefit all Americans.

Europeans love Bidenomics, however. “With a fast-growing economy, a strong labour market and falling inflation, the US has outpaced its counterparts in Europe and elsewhere, says a recent BBC article. That put the US at 2.5% over the course of the year, outpacing all other advanced economies and on track to do so again in 2024.”

What will it take for Americans to know and value what we have?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Housing Market In Recovery

 The Mortgage Corner

The National Association of Realtor’s Chief Economist, Lawrence Yun, commented on the latest and possibly best unemployment report of 2024. We are at the beginning of the next housing recovery. It’s no secret why; interest rates are returning to somewhere near pre-pandemic levels, which will take time.

“There is no national economic recession on the horizon”, said Dr. Yun. “The net payroll job addition in September strengthened to 254,000 after adding much lighter job gains in the previous months. The annual wage gains also accelerated to 4.0% after softening to 3.6% just two months earlier. More jobs mean more real estate demand, from retail spaces to apartment leases. Home buying will also increase, provided the conditions are right, and more inventory choices and lower mortgage rates will help.”

Calculated Risk

The red line in Calculated Risk’s graph of this year’s single-family for-sale inventory, which is the best indicator of better choices. It is up 34 percent in just one year and 48.3 from the February seasonal bottom, says Calculated Risk.

Inventories were lower in 2021-23 (yellow, purple, blue lines) because of the Fed’s rate hikes but this year’s red line is approaching the 2020 black line, which was the huge sales surge before the Fed began to raise interest rates.

So, what are prospective homebuyers or renters to do who looking for better interest rates? It should not depend on the election outcome, for starters. No party wants to rock the boat on interest rate reductions that the Fed has penciled in for the rest of this and next year.

FRED30yearfixed

That could be at least another 2.0 percent rate drop—from the current 8.0 percent to 6.0 percent Bank Loan Prime Rate. Bankrate.com is predicting the 10-year Benchmark Treasury yield that determines fixed mortgage rates will dip to 3.5 percent in a year. It would bring the 30-year fixed conforming mortgage rate to around 5.5 percent from its current 6.3 percent.

That is being conservative. Fixed 30-year mortgage rates averaged between 4-5 percent after the Great Recession (2008-09) when the Fed succeeded in keeping the inflation rate close to 2 percent for almost two decades. This is what buyers have tolerated in the past and kept existing home sales close to the 5-6-million-unit longer-term average it reached before the Great Recession and briefly after the COVID-19 pandemic.

At least one million new housing units built annually are needed as well, just to house the one million new households being formed each year.

One reason why so many homeowners have been reluctant to sell is the record low interest rates in 2020 because the Fed wanted to counter the effects of the pandemic.

That has resulted in the vast majority of outstanding mortgages carrying an interest rate below the current average of 6%, making those mortgage holders reluctant to sell. “In fact, one in five homeowners with a mortgage has a rate of under 3%, according to an analysis by Realtor.com” that was cited by MarketWatch.

How long can home buyers afford to be patient? If this decade will turn out to have record job and wage growth, as I believe, which so much government spending has stimulated, and housing prices are still rising at least 5 percent annually, if not more in coastal enclaves, it doesn’t pay to wait too long.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Nations Fail

 Popular Economics Weekly

Amazon

The Nobel memorial prize in economics was awarded Monday to Daron Acemoglu, Simon Johnson and James A. Robinson for research that explains why societies with poor rule of law and exploitative institutions do not generate sustainable growth, as with some U.S. states as well.

Whereas the peoples of more democratic countries with institutions answerable to their citizens are more prosperous than those with weak democratic institutions, such as North Korea, Mexico, Russia, and even China, say the authors of Why Nations Fail, Daron Acemoglu and James Robinson, two of the new Suth Nobel Laureates.

“Reducing the vast differences in income between countries is one of our time’s greatest challenges. The laureates have demonstrated the importance of societal institutions for achieving this,” said Jakob Svensson, chair of the Committee for the Prize in Economic Sciences.

The authors use the example of the twin cities of Nogales, Texas and Nogales, Sonora, Mexico. Anyone driving across the border can see the difference. Nogales, Texas has three times the income level, better roads, schools, and better law enforcement to protect its citizens than Nogales, Sonora that has been ruled by drug cartels.

The contrast between North and South Korea is even greater—a prosperous South Korean government elected by its citizens vs. a North Korean dictatorship that has literally starved its people to keep one family in power.

It’s also a devastating analysis of why we have a partisan divide between red vs. blue states that Republican Parties have been able to capitalize on by falsely rationalizing the reason for their differences; especially economic rationalizations.

It is a case of the exploiters—wealthy individuals who don’t like to share their wealth—blaming a Washington elite that has dominated most government institutions since World War Two.

The truth is Republican Party economic programs have performed badly; causing massive deficits from tax cuts without concomitant growth that would pay for the tax cuts that have made the red states they govern poorer; because Republicans have adopted policies designed to weaken governmental institutions that are protected by the rule of law.

Republicans began to actually break laws with President Nixon’s Watergate break-in, President Reagan’s secret Iran-contra weapon shipment to Khomeini’s Iran, and GW Bush’s fabrications about Sadam Hussein’s weapons of mass destruction that justified the invasion of Iraq.

It has culminated with Donald Trump and the Republican Party’s outright contempt of laws and even the constitution in not accepting its loss to Democrats and Joe Biden in 2020.

This is born out in the major thesis of this year’s Nobel Prize-winners: that so-called illiberal democracies with central governments only answerable to a powerful minority rather than a majority of its citizens have performed poorly.

Georgetown Public Policy Review

A Georgetown Public Review measured the different median household incomes of red and blue states in the U.S.--$74,000 in blue states vs. $60,000 in red states. It’s in part because most red states have lower minimum wages, and fewer social services such as healthcare for their citizens. And even those social services are mostly subsidized by the federal government.

It is why democracies work best when they follow economic rules that serve the majority, and most in danger when attempts are made to weaken or discredit their institutions. The choice for Americans in the upcoming Presidential election should be clear—belong to a party and vote for a country that works for all of its citizens.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Tariff Bomb

 Financial FAQs

Getty

Now that Elon Musk, the world’s richest man, is doing all he can to elect Donald Trump the next American President with his $Billions; because there are too many regulations (read environmental), which means he might never otherwise get to Mars; it’s time to ask what a Trumpian economy would look like if Elon succeeds in his quest.

It would be a big win for wealthy oligarchs such as Musk.

Trump’s biggest lie is that a 20 percent tariff on almost all imports is a tax paid by the exporter, not American users of those imports. Common sense tells us that we can only tax foreign products after they arrive on our soil, not in the country of origin.

Any tax on imports arriving in the U.S. is therefore an American tax, so that the product’s final price charged to American consumers includes the import tax added to whatever the exporter is charging for said product, a price increase.

The results would do horrendous damage to our economy just out of the worst pandemic in 100 years that killed one million Americans. In fact, it would precipitate another recession because past history has shown Americans the damage wrought by high inflation on the working classes that pay taxes on a larger proportion of their income, than the one percent of earners and corporations.

A recent report by the Peterson Institute for International Economics, a serious non-partisan think tank, asserted that the labor shortages and higher tariffs on imports Trump proposes would return inflation to pandemic levels of 6 to 9 percent, not to mention the damage to employment and the USDollar if Trump exceeded in deporting immigrants, or hamstringing the Federal Reserve in its inflation fight.

“We find that all the policies examined could cause a loss of production and employment, especially in trade-exposed sectors such as manufacturing and agriculture.”

CPI consumer inflation rate reached the astronomical height of 14.6 percent during the 1981 and 1982 recessions, 5.5 percent during the Great Recession (2008-09), and rose as high as 9 percent in 2022 during the COVID-19 pandemic.

Trump’s tariff lie exposes an even larger lie beneath it. He can only pay for the tax cuts, such as were enacted in his Tax Cuts and Lobs Act (TCLA) on wealthy individuals and corporations, with a consumption tax that all Americans pay.

It lets corporations and the wealthiest off the hook on paying for the necessary programs that fund Medicare, Medicaid, and defense, which is what the TCLA did that is about to expire and was the only major legislation during his four years in office.

A Brookings Institute analysis of his TCLA was even more damaging, and he intends to renew it if elected: “The new law will reduce federal revenues by significant amounts, even after allowing for the impact on economic growth. It will make the distribution of after-tax income more unequal. If it is not financed with concurrent spending cuts or other tax increases, TCJA will raise federal debt and impose burdens on future generations.”

So, it’s also time to ask exactly what policies have made the U.S. economy the stronger than any other developed countries since the COVID-19 pandemic. Is it by Republicans or Democrats, since it’s become and election issue?

Former president Obama claimed in a recent Detroit campaign speech that it was his eight years—2008-2016, during the recovery from the Great Recession—that his administration was responsible for creating what became almost 11 years of positive GDP growth, longer even than President Clinton’s record recovery streak of 10 years.

That recovery continued into the Trump administration from 2016-2020 and the onset of the COVID-19 pandemic that briefly stopped all growth, but recovered quickly due to the government aid that flooded into the economy (before the supply-chains recovered) and inflation skyrocketed.

The Fed has finally tamed inflation and even more importantly, job growth returned to pre-pandemic unemployment levels. And that was due to President Biden’s Bidenomics policies that are modernizing the American economy for future generations.

Yet Trump has said climate change is hoax; so the increasingly frequent hurricanes and tornadoes must also be illusions. He has also said that he wants to eviscerate many of President Biden’s spending programs and policies, in the name of cutting the budget deficit, as well as once again attempt to repeal Obamacare, if elected.

It is what very wealthy oligarchs such as Elon Musk also say that they want.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Full Speed Growth Ahead--Part II

 Popular Economics Weekly

The September Consumer Price Index (CPI) continued to decline, further evidence that the inflation battle has been won. All eyes are now on whether strong economic growth can continue with the labor market beginning to falter, which the Fed has said is a primary concern.

An early sign of labor weakness is that the weekly initial claims for unemployment has risen. The number of Americans who applied for unemployment benefits surged by 33,000 to 258,000 in the week that ended Oct. 5, the Labor Department said on Thursday. This is the highest level of initial claims since early August 2023.

Some of the increase may be due to one-off events like the Boeing strike and hurricanes ravaging the east coast. But that’s another reason the Fed should continue to cut interest rates for consumers that are facing uncertain futures, whether it’s more frequent natural disasters as our planet continues to warm, or future labor unrest.

FREDcpi

“In September, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in September (SA); up 3.3 percent over the year (NSA),” said the Bureau of Labor Statistics.

Up just 2.4 percent in a year, retail inflation has reached the Fed’s target rate, for all intents and purposes. Continuing to hold interest rates too high for too long could precipitate more job losses.

NY Fed President John Williams said recently that it was now time to help the labor market.

“The FOMC “instituted and maintained a very restrictive monetary policy stance until the data gave us confidence that inflation is sustainably on course to 2 percent,” President Williams said. “With this progress toward achieving price stability, moving toward a more neutral monetary policy stance will help maintain the strength of the economy and labor market.”

Williams predicted what more balanced growth would look like:

· Real GDP to grow between 2-1/4 and 2-1/2 percent this year and to average about 2-1/4 percent over the next two years.

· The unemployment rate to edge up from its current level of about 4 percent to around 4-1/4 percent at the end of this year and stay around that level next year.

I reported another important fact last week. The BEAsaid that profits from current production (corporate profits with inventory valuation and capital consumption adjustments) almost doubled in the final revision. So strong economic growth continues as inflation is declining.

Even more optimistic growth predictions for third quarter growth come from the Atlanta Federal Reserve GDPNow estimate.

AtlantaFed

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 3.2 percent on October 9, unchanged from October 8 after rounding. After this morning's wholesale trade release from the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth decreased from 3.4 percent to 3.3 percent.

So why has job growth been so high, even with the Fed’s restrictive credit policies for the past two years? A grand total of 256,000 jobs were added to nonfarm payrolls in September.

September’s unemployment report showed governments, and the construction industry created 56,000 new jobs. These are largely jobs in rebuilding our infrastructure, a product of Bidenomics. Another 156,000 jobs were added in Leisure/Hospitality, Education and Healthcare.

The Infrastructure Investment and Jobs Act (IIJA), aka Bipartisan Infrastructure Law (BIL), was signed into law by President Biden on November 15, 2021. The law authorizes $1.2 trillion for transportation and infrastructure spending with $550 billion of that figure going toward "new" investments and programs.

Need we say more on what is continuing to power economic growth?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Have Republicans Dumbed Down So Many?

 ANSWERING the KENNEDYS CALL

What is the reason Republicans have become the party of anti-intellectuals? The danger is that it may drown out any intelligent discourse about the most important issues of our day. It's driving at least one of our political parties into insanely ridiculous positions.

Huffington Post

I wrote in 2015 about the issues Republicans discussed in their primary debates. It also explains why Donald Trump took over the party. And nothing has changed in 2024.

We saw in the 2015 CNN Republican candidate debate the results of what seemed to be a prolonged campaign to discount almost all scientific facts, as well as intelligent discussion of the most important issues of the day.

Especially scary was Donald Trump saying if we build up our military enough, we won't have to negotiate with anybody. Or Marco Rubio, the seemingly most moderate Republican, endorsing a 1,900 mile fence along our entire border with Mexico (or double fence, says Dr. Ben Carson) over mountains and rivers, or Carli Fiorina saying that Planned Parenthood was aborting live babies to harvest their organs.

What is the reason Republicans have become the party of anti-intellectuals—some even want to abolish the Department of Education, and otherwise defund public education?

Journalist Chris Hedges once said in a PBS interview President Clinton in co-opting moderate Republican positions, such as deregulation of the financial industry, putting 100,000 more cops on the street, and reforming welfare, had driven the Republican Party to "insanity".

But the anti-intellectual, anti-science bias goes much deeper. It is in fact an almost totally American phenomenon that Republicans have taken advantage of to ‘dumb down’ the electorate to levels that would believe whatever an aging, increasingly incoherent Donald Trump says.

Why would anyone not want to support public education, when it educates more than 80 percent of American students?

The result is that higher education is also falling behind. According to the National Research Council, only 28 percent of high school science teachers consistently follow the National Research Council guidelines on teaching evolution, and 13 percent of those teachers explicitly advocate creationism or "intelligent design," said Psychology Today in a very damning 2014 article entitled, Anti-Intellectualism and the Dumbing Down of America:

"After leading the world for decades in 25-34 year olds with university degrees, the U.S. is now in 12th place," said Psychology Today. "The World Economic Forum ranked the U.S. at 52nd among 139 nations in the quality of its university math and science instruction in 2010. Nearly 50 percent of all graduate students in the sciences in the U.S. are foreigners, most of whom are returning to their home countries."

Republican candidates are still echoing the Republican platform that advocated the deportation of all illegal aliens, would abolish or cripple whole government agencies (including the Environmental Protection Agency), shut down the federal government over Planned Parenthood funding, and maintain that a fertilized egg is a viable human being that can't be aborted.

Pundits give other reasons for such a dumbing down of a segment of the electorate--such as social media and television replacing literacy, or education that no longer teaches math and science or even history.

Maybe that has enabled the Donald Trumps of the world to shout louder. The danger is that it may drown out any intelligent discourse about the most important issues of our day. It has driven one of our political parties into no longer believing in Democracy.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

NO MORE INFLATION

 Financial FAQs

The Fed is no longer worrying about inflation, since its preferred inflation gauge, the Personal Consumption Expenditure Index (PCE), recently dropped to a 2.2% inflation rate, close to the 2.0% target rate.

Fed Chairman Powell said recently the Fed is more worried that the job market is faltering, hence the -.50% Fed Funds rate cut last week with at least two more rate cuts in the offing this year. It would cut the Bank Loan Prime Rate to 7.50% that is the basis for most credit card and installment loan rates.

It is still too high for most borrowers, but auto sales have picked up, which is a sign consumers are still buying, that in means that Q3 GDP growth could also match second quarter’s GDP growth of 3.0 percent.

This is remarkable growth, even with the labor market slowdown, and the unemployment rate up to 4.3 percent in a year.

FREDpceindex

From the same month one year ago, the PCE price index for August increased 2.2 percent. Prices for goods decreased 0.9 percent and prices for services increased 3.7 percent. Food prices increased 1.1 percent and energy prices decreased 5.0 percent. Excluding food and energy, the PCE price index increased 2.7 percent from one year ago.

Job formation is slowing, as the BLS JOLTS report showed 8 million job vacancies, with 5.3 million Hires and 5.0 million Separations in the month. The 300,000 difference approximates the net number of new hires in August.

We are still fully employed, in other words, but the number of vacancies posted by employers looking for workers has come down considerably from the 12 million job opening high during the pandemic and lockdowns.

(That’s why it’s called the Job Openings and Labor Turnover Survey.)

Consumer spending is the biggest ‘tell’ on future employment and economic growth and it barely dropped to 2.7 percent annual growth from 2.8 percent in August. The savings rate is still a healthy 4.8 percent, close to historical norms, so the surge in vehicle sales is no fluke.

Business activity in the service sector is soaring (mainly dining out, travel, leisure activities), but the manufacturing sector is still contracting.

“In September, the Services PMI^® registered 54.9 percent, 3.4 percentage points higher than August’s figure of 51.5 percent. The reading in September marked the seventh time the composite index has been in expansion territory this year,” said survey Director Sterve Miller.

Whereas, manufacturing “Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy — which the U.S. Federal Reserve addressed by the time of this report — and election uncertainty,” said survey director Timothy Fiore.

I see good growth this year. More reductions in interest rates will certainly boost manufacturing, and consumers are still saving, another sign they aren’t tapped out. 

But with one political party wanting to cut back on Bidenomics, the policies spurring much of the growth, economic and job growth next year could depend on which party wins the White House in November.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

LUCKY LOSER--Part II

 A Distrust of the Truth

Born to a rich father who made him the beneficiary of his own highly lucrative investments, Trump received the equivalent of more than $500 million today via means that required no business expertise whatsoever.

Random House

Last night’s Vice President’s candidate debate highlighted the differences between two men coming from the same Midwest. Senator JD Vance was the polished Ivy League debater, and Governor Tim Walz the earnest teacher and sportsman eager to tell the truth about himself and the country.

So what should we think of Donald Trump, Vance’s leader of MAGA Republicans, a man who claims to be the smartest person in the world, and his opponent a loser, who would not release his tax returns, and has even forbidden the release of his school grades, from prep school to college?

Maybe we have heard this so many times that we have become inured to Trump’s blatant obfuscation. But I have always thought it meant only a very stupid person would say what Donald Trump has said repeatedly as he has tried any means to cloak his repeated business failures yet was “Born to a rich father who made him the beneficiary of his own highly lucrative investments…that required no business expertise whatsoever.”

This was highlighted in Pulitzer Prize-winners Russ Buettner and Susanne Craig’s just released book, Lucky Loser that raises a bigger question in a Washington Post review by Bethany McLean about the ‘fake it ‘til you make it’ ethos of modern America. In a world that conflates the ‘trappings of wealth with expertise and ability,’ where ‘fame, detached from any other marketable talent or skill,’ is ‘a highly compensated vocation,’ does it even matter if you never actually make it?”

The outright distrust of truth is a propaganda tool used by autocrats that public media has normalized. This probably tells us best why he was able to take over the Republican Party that has drifted so far from conservative values and was once the environmental party when Republican President Nixon signed the US Environmental Protection Agency into law in 1970.

Nobel Laureate Paul Krugman cited the damage Trump and MAGA Republican propaganda policies could do to the country in a recent NYTimes Op-ed.

He cites Trump’s response to a question in Michigan on what he would do to keep auto jobs in Michigan: “So, pretty much as we’ve been saying and what I want to do and be able to do—look, your business years ago, in this area, I was honored as the man of the year. It was maybe 20 years ago. Oh, and the fake news heard about it, they said it never happened.”

In a word, the chaos in Trump’s mind has morphed into his economic policies that would cause widespread damage to the American economy. What Krugman calls Trumponomics “could create economic disruptions similar to those caused by the Covid-19 pandemic…Round up millions of foreign-born workers would cause an immediate large reduction in labor supply. Tariffs would drive up the cost of imported goods as surely as shipping costs and inadequate port capacity did in 2021-22.”

A recent report by the Peterson Institute for International Economics, a serious non-partisan think tank cited by Krugman, posited that the labor shortages and higher tariffs on imports Trump proposes would return inflation to pandemic levels of 6 to 9 percent.

Republicans had learned to “fake it ‘til you make it” when the Trump administration attempted to break up the USEPA during his tenure so that Trump’s call to “Drill Baby Drill” for more fossil fuels could continue and their call to preserve tax cuts first enacted under Trump will further increase the national debt.

Buettner and Craig’s work exposes how many passes Trump has gotten over the years, how thoroughly he is a creation of the public media that has normalized his propaganda as another kind of truth, without revealing the real man behind it who has never known truth in his own world, and public media as the authors write, ‘rarely revisited his claims and afforded credibility to everything he said.”

The Vice-Presidential debate highlighted the vast gap between truth and propaganda, between substance and the lies that attempt to conceal it. Polls are showing the public can understand the difference, will our media?

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen