Thursday, December 31, 2020

What Happened To Our Leaders?

 Answering the Kennedys’ Call


President-Elect Biden is 78 years old, and will be the oldest President in our history when he is sworn in. He continues to uphold the recent age levels of POTUS set by Donald Trump (74), Presidents Eisenhower, Reagan and GHW Bush that were all over 70 by the time they left office.

The NY Times Ian Philbrick reports that we have the oldest leaders in the western developed countries at a time when the age of elected leaders in other developed countries is falling.

“Since 1950, the average age of heads of government in the three dozen member countries of the Organization for Economic Cooperation and Development has steadily declined, from above 60 years old to around 54 today. The average O.E.C.D. national leader is now two decades younger than Mr. Trump — and almost a quarter century younger than Mr. Biden.”

Why does that matter? I believe it is a major reason for the slow slide into populism and the dysfunctional democracy we currently endure without the increased social and economic benefits enjoyed by citizens of other western developed countries with younger and more forward-looking leaders.

The slide into a federal government led by President Donald Trump that is barely able to function has resulted in our inability to manage the new coronavirus pandemic that is infecting and killing a record number of Americans.

We seem to crave the appearance of strong leadership even if he or she eschews the main requirement of leadership, namely the necessity to keep our 50 different states plus territories, each with its own system of governance, safe and united in common purpose,.

“On a national level, many of us have been seduced by “shiny new objects” – what I call “leadership bling, says Nancy Koehn, a historian at Harvard Business School and the author of the 2017 book, “Forged in Crisis: The Power of Courageous Leadership in Turbulent Times.”Too often, we’re dazzled by personal ambition, reasoning that a person who was born hard-charging and who followed his or her self-interest all the way to enormous wealth, celebrity, or authority has to have accumulated great wisdom.”

The Trump administration’s one legislative accomplishment was the 2017 Tax Cut and Jobs Act that resulted in the first $1 trillion annual budget deficit in our history, while Republicans failed in more than 80 attempts to repeal Obamacare.

Our federal government has become out of touch with younger generations in particular that are almost unanimous in wanting better schools, universal health care, a higher minimum wage, and other benefits now enjoyed by all other developed countries.

A Pew Research Center survey conducted in January of this year found that about a quarter of registered voters ages 18 to 23 (22 percent) approved of how Donald Trump is handling his job as president, while about three-quarters disapproved (77 percent). Millennial voters were only slightly more likely to approve of Trump (32 percent) while 42 percent of Gen X voters, 48 percent of Baby Boomers and 57 percent of those in the Silent Generation approved of the job he is doing as president.

The Times also points out that the average age of Congress has also trended upward for decades. Nancy Pelosi, the House speaker, is 80; Mitch McConnell, the Senate majority leader, is 78. The Supreme Court’s nine justices average above 67. Mr. Trump’s cabinet averages over 60, among the oldest in the O.E.C.D.

Even younger Republicans follow Democrats in wanting more benefits in the PEW survey. Gen Z Republicans, for instance, are much more likely than older generations of Republicans to desire an increased government role in solving problems, says PEW.

“About half (52%) of Republican Gen Zers say government should do more, compared with 38% of Millennials, 29% of Gen Xers and even smaller shares among older generations. And the youngest Republicans are less likely than their older counterparts to attribute the earth’s warming temperatures to natural patterns, as opposed to human activity (18% of Gen Z Republicans say this, compared with three-in-ten or more among older generations of Republicans).”

Looked at in economic terms, our slide into extreme conservatism instituted by Ronald Reagan and the Republican Party with their credo of lower taxes and an unregulated, free market capitalist ideology, is the reason we have a federal government out of touch with most Americans.

Whereas our European cousins enjoy universal health care, higher minimum wages, and shorter work weeks for the same pay; all brought about by keeping their governments young and able to adapt to even a COVID-19 pandemic.

So where are the leaders to come that will bring in programs and policies that will govern for future generations, rather than cater to the populace of the past?

Harlan Green © 2020

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Monday, December 21, 2020

Recovery Slows As Pandemic Spreads

 Financial FAQs

This Chicago Federal Reserve graph of national activity starkly portrays the present state of the US economy. The multi-colored bars represent deviations from the historical growth average, which is the zero line on graph. It is still barely positive though down sharply from May and June when the business lockdown ended.

“Led by slower growth in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.27 in November from +1.01 in October. Three of the four broad categories of indicators used to construct the index (production and income, employment, sales and inventories) made positive contributions in November, while personal consumption and housing declined slightly, but all four categories decreased from October. The index’s three-month moving average, CFNAI-MA3, decreased to +0.56 in November from +0.85 in October.”


This is because successive surges in infections have had consumers saving more and spending less, while manufacturing continues to chug along. The pandemic is just not manageable at the current infections rate with more than 200,000 per day (blue line in graph) now testing positive and more than 100,000 per day (red line) being hospitalized with the virus.

It is easy to see the inverse correlation in these graphs. As total infections in cases per day rise (blue line) economic activity in the Chicago Fed bar graph declines.

There is better news coming as more than 144,000 vaccinations have already been administered in 21 states, according to the COVID Tracking Project.

MarketWatch reports that new daily cases of COVID-19 fell to 179,801 on Sunday from 193,947 on Saturday, and down from 251,447 on Friday, according to data provided by the New York Times. The daily death toll was 1,422 on Sunday, down from 2,628 on Saturday and from 2,815 on Friday.

And hospitalizations dropped to 113,630 on Sunday from 113,929 on Saturday and 113,955 on Friday, according to the COVID Tracking Project. That 3-day streak of declines snapped a 12-day streak of record hospitalizations.

But the Christmas holidays have just begun with many more traveling to family and vacation destinations, which will cause another surge in the new year and keep most consumers at home for a longer period.

In looking back at the history of the Spanish flu, there was another infection surge in the spring of 1919, even as the warm weather returned. It actually took several more years for that economy to stutter back to life.

And it will in fact take much more federal aid than the just passed $900 billion coronavirus relief package to bring back any meaningful recovery for most Americans because so many lost jobs; something the incoming Biden administration will have to tackle.

Harlan Green © 2020

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Thursday, December 17, 2020

What Civil War?

Answering the Kennedys’ Call


Texas, 17 other red state Attorneys General, and 126 Republican House members tried to keep President Trump in power after January 20 by breaking election laws and ignoring the United States Constitution. But the Supreme Court, arbiter of the Constitution, said they had no basis to sue four Democratic states after the election had been decided.

This has led Texas’ GOP Party Chair Alan West to suggest that these states should secede from the United States (which was quickly disavowed by other state GOP leaders).

West and Texas Republicans were in fact still fighting their own version of the 1860s civil war that abolished slavery in suing to overturn the will of a majority of Americans. President-Elect Biden was certified by the Electoral College as our new POTUS and Kamala Harris as our new Vice-President Elect on December 7.

Turning the Supreme Court’s decision on its head, West said, "This decision establishes a precedent that says states can violate the US constitution and not be held accountable," in a statement following SCOTUS’s Friday-night ruling. "Perhaps law-abiding states should bond together and form a Union of states that will abide by the constitution.”

Ben Schatz, the Democratic senator for Hawaii, said Mr West’s statement revealed that the Texas Republican Party had lost its mind, in a post to Twitter.

“The Texas Republican Party is officially in favor of leaving the Union. They have lost their minds,” wrote Mr Schatz. “Biden will be President, but these people are deadly serious about secession and sedition.”

If those red states had ever thought about what they were doing, or even why they were doing it—which they obviously hadn’t—they would have realized many would be bankrupted if they ever wanted a separate union.

They would be in danger of losing much of $437.596 billion in transfer payments made to them from the federal government that is above what they contributed to the US Treasury in FY 2018, according to the Rockefeller Foundation.

There were six states like New York and New Jersey that have large tax revenue surpluses totaling $51.4 billion which are distributed to poorer, mostly red states by the federal government, such as Kentucky that has a $45 billion deficit in their balance of tax payments with the federal government.

The tax surpluses from the richer states are paid out as part of transfer payments (e.g., social security, Medicare, Medicaid, SNAP, welfare) to members of the poorer, mostly red states.

This in fact is why America is a prosperous country—wealthy states help to support the federal programs of citizens in the poorer states. No one state can pull down other states because of its financial problems, and its citizens know they will be covered by our central government, whether in blue or red states.

Then why have Republicans under Trump continued their attempts to overturn the election results? NY Times’ Op-ed columnist Charles Blow said it best. Trump realized that trying to steal the presidency is more lucrative than being president with his calls for donations to his re-election Super Pac that now total more than $200M. In conning his base into believing he won the election, “We are witnessing one of the greatest grifts in history,” said Blow.

Harlan Green © 2020

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Retail Sales, Consumer Spending Falter

 Financial FAQs


Sales at U.S. retailers fell in November for the second month in a row and posted the biggest decline since the onset of the pandemic, showing effects of the record rise in coronavirus cases. Retail sales fell -1.1 percent last month, the government said Wednesday

Sales began falling in February at the beginning of the COVID-19 recession, per the gray shading in the St. Louis FED graph. It plunged -15 percent in April and jumped almost 40 percent to a +20 percent increase in June, as the various lockdown measures were eased and people went back to work. But oh, those holidays beginning with the Memorial Day and summer vacations that brought back the virus so that spending declined again.

Sales fell at restaurants, auto dealers, gas stations, clothing stores, department stores and places that sell home furnishings and electronics. The only segments to post higher sales were suppliers of essentials; grocers, home centers and Internet retailers — and even then the increase in receipts were small.

Bars and restaurants suffered a 4 percent drop in sales, marking the second decline in a row and the largest since April during the height of the pandemic. More people avoided going out to eat or were unable to do so because of new government limits on indoor dining or hours of operation.

Sales also fell 1.7 percent last month at auto dealers, but it has been a good year for the industry. Low interest rates have helped boost sales and more people are driving instead of taking public transportation, say the number crunchers.

This is mainly because coronavirus infection rates have barely begun to flatten the curve. The COVI-19 Project reported 1.7 million tests, 190k cases, and 2,918 deaths, 112,816 people are currently hospitalized with COVID-19 on Tuesday. Current hospitalizations are falling in the Midwest and rising in the Northeast and Western states, per the project.


But next year may be different when the vaccines reach most Americans. Federal Reserve Chair Powell on Wednesday predicted the U.S. unemployment rate would fall faster in 2021 than it previously believed, but it stuck to a cautious forecast for the broader U.S. economic recovery.

The Fed slightly raised its 2021 forecast for economic growth to 4.2 percent from 4.1 percent, reported MarketWatch, “indicating continued caution on the part of central bank officials as they wait to see how effective the new vaccines for the coronavirus perform.”

‘The official unemployment rate slid to a new pandemic low of 6.7 percent in November and has declined a lot faster than expected, but economists also say it likely underestimates the true number of jobless Americans.”

The vaccines began rolling out in the past week. Chairman Powell also said they would do whatever it takes to keep interest rates low and credit easily available to banks and businesses for maybe years to come.

As I said earlier, there is a path to economic recovery from the worst recession since the Great Recession. The Fed is on board to assist for the foreseeable future, but will congress do its part?

They are close to agreement on a bill slightly less than $1 billion that will be announced later this week. But we have to first control the pandemic.

Harlan Green © 2020

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Friday, December 11, 2020

Path To Economic Recovery--Part II

 Financial FAQs


Calculated Risk

As I said in Part I of this series, there is a path to economic recovery from the worst recession since the Great Recession. Firstly, it means studying what economic policies have worked in past recoveries.

It you use job formation as the most important criteria for success, then the Clinton administration wins with its mix of government and private sector programs that cut military spending with the end of the cold war and increase in public spending at no more than 2 percent per year. The policies resulted in four years of budget surpluses from 1996-2000.

The cold war dividend also resulted in the second longest economic recovery on record—1991-2001—only topped by the Obama-Trump era recoveries cut short in February by the pandemic.

Private sector employment increased by 20,970,000 under President Clinton (light blue) in the excellent Calculated Risk, by 14,714,000 under President Reagan (dark red), 11,849,000 under President Obama (dark blue). 9,039,000 under President Carter (dashed green), and 1,511,000 under President G.H.W. Bush (light purple).

But because of COVID-19 during the 46 months of Mr. Trump's term, the economy has lost 2,128,000 private sector jobs (yellow line) to date.

What happened? Most jobs were created, when government spending kicked in to supplement consumer and business activities. Coincidence doesn’t spell facts, as I’ve said, but we can see what worked and to create jobs.

Public payrolls also grew most also during Democratic administrations with the exception of the Reagan administration that wanted to outspend Russia in their arms race. Payrolls grew during Mr. Carter's term (up 1,304,000), then Mr. Reagan's terms (up 1,414,000), H.G.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs). 

However the public sector declined significantly while Mr. Obama was in office (down 277,000 jobs), and during the 46 months of Mr. Trump's term, the economy has lost 870,000 public sector jobs.

Calculated Risk

What exactly did Clinton do to create 10 years of prosperity with budget surpluses to boot?? He was not afraid to raise taxes where it was needed to pay for programs that created more jobs, rather than raise the public debt.

He increased taxes with the Omnibus Budget Reconciliation Act of 1993, his first budget. The Deficit Reduction Act raised the top income tax rate from 28 percent to 36 percent for those earning more than $115,000, and 39.6 percent for income above $250,000. It increased the corporate income tax from 34 percent to 36 percent for corporations with incomes over $10 million.

It also ended some corporate subsidies, taxed Social Security benefits for high-income earners, and created the earned income tax credit for incomes under $30,000.

It raised the gas tax by 4.3 cents per gallon. It also limited the ability of corporations to claim entertainment tax deductions.

The +10 years of tepid economic growth since 2010 were caused in part by limiting government programs (e.g., in infrastructure, scientific research) that would have boosted growth, and because President Obama chose to focus on bringing down national debt after the initial $800B ARRA aid package assisting recovery from the Great Recession.

Republicans in particular seem to have been influenced by the rhetoric of anti-tax activist Grover Norquist when he said,  "I'm not in favor of abolishing the government. I just want to shrink it down to the size where we can drown it in the bathtub," which did tremendous to economic growth during that time.

The irony in this history is that economists are already predicting a huge economic recovery next year once enough Americans have been vaccinated, as happened with the recovery from the 1918-19 Spanish flu-induced recession, and which became known as the euphoric “roaring twenties”.

Harlan Green © 2020

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Monday, December 7, 2020

Jobs Report Bad News for COVID-19 Recovery

 Popular Economics Weekly


Economists have been  worrying about a ‘double-dip’ recession; i.e., should the US economy return to negative growth in the fourth quarter or Q1 of 2021. The Bureau of Labor Statistics (BLS) unemployment report is showing signs that it may happen early next year with the nonfarm payroll job creation of just 245,000 nonfarm payroll jobs in November, down from 610,000 jobs in October and 711,000 jobs in September.

Government payrolls shrank almost 100,000, while private payrolls grew 344,000, the BLS reported. “Notable job gains occurred over the month in transportation and warehousing, professional and business services, and health care. Employment in transportation and warehousing rose by 145,000 in November but is 123,000 below its February level; employment rose by 82,000 in couriers and messengers and by 37,000 in warehousing and storage since February.“

The unemployment rate dropped one-tenth of a point to 6.7 percent because 400,000 stopped looking for work.

Calculated Risk

The Calculated Risk graph compares job losses since 1948, with the blue line a picture of the length in months of the 2007 Great Recession losses until returning to the prior employment peak and red line the current COVID-19 induced losses. It also dramatizes the huge gap in current losses that must be closed to return to normal job growth.

When can that be while the U.S. has the highest case tally in the world at 14.1 million and the highest death toll at 276,401, or more than a fifth of the global total as of yesterday? The U.S. counted 216,548 new cases on Thursday, and at least 2,857 people died, just below the record of 2,885 set a day earlier, according to a New York Times tracker.

“In November, 21.8 percent of employed persons teleworked because of the coronavirus pandemic, up from 21.2 percent in October,’ said the BLS. “In November, 14.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic—that is, they did not work at all or worked fewer hours at some point in the last 4 weeks due to the pandemic.”

There were now a record 100,667 COVID-19 patients in U.S. hospitals on Thursday, according to the COVID Tracking Project, topping Wednesday's record of 100,226. Brazil has now the second highest death toll at 175,270 and is third by cases at 6.5 million. India is second worldwide in cases with 9.6 million, and third in deaths at 139,188. Mexico has the fourth highest death toll at 108,173 and 11th highest case tally at and 1.7 million cases, or sixth highest in the world.

That is a lot of growth to make up in the midst of this pandemic, if there is no surety when it will end, and double-dip recessions are nothing new in our current boom or bust economic system, as I said recently. And will that change with President Biden assuming power in January?

HarlanGreen © 2020

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The Path to Economic Recovery

 Financial FAQs

Calculated Risk

There is a path to economic recovery from the worst recession since the Great Recession—and maybe the Great Depression. But it means escaping from the free market economic orthodoxy that has prevailed since 1980, and which has been the major contributing factor of six recessions since 1980, all occurring during Republican administrations.

Concurring events don’t necessarily determine facts, but we know such a boom and bust mentality has been the hallmark of conservative calls for fewer regulations and lower taxes historically. The Federal Reserve was created in 1913 to even out such booms and busts after the stock swindles of the early 1900’s Gilded Age, and the ‘roaring twenties’ financial markets that led to the 1928 market crash and ultimately Great Depression were also eras when governments had few regulations to tame such speculation.

The most recent example during the Clinton administration when budget surpluses were generated during his last four years. The moment President Bush took office, Vice President Cheney trumpeted Reagan’s maxim that “budget deficits don’t matter,” and fired Paul O’Neill, his first budget-conscious budget director that had recommended using the surplus to pay down the national debt to shore up social security and other social programs.

Bush instead proceeded to cut taxes so much that the first $trillion national debt was born and two recessions followed during his eight years, including the Great Recession of 2007.

In fact, if we look at Calculated Risk’s graph history of job loss durations since 1948, we see that the longest job recoveries took place during the 1980 (black line), 2001 (brown line), 2007 (blue line), and 2020 (red line) recessions; all during Republican administrations when budget deficits no longer mattered, as I said.

It goes back to the conservative free market, small government orthodoxy that government regulations retard growth, when since 1980 it has been the de-regulation of whole industries and championing of free-market maxims that have increased the boom and bust cycles we have seen since then, while worsening our income inequality.

There is much more that went into these recessions, of course, such as Reagan’s the cold war arms race with Russia, the Desert Storm Gulf War of GW Bush, and Iraq-Afghanistan invasions of GW Bush that they paid for with borrowed money.

But the dire results of such free market orthodoxy are incontrovertible, as Rutger’s economic history James Livingston put it once in a memorable NY Times Op-ed that described what corporations do with most of their profits these days.

In the early 1900s, most business investment came from the private sector, not government, whereas by 2000 most of such investments—in public projects as well as research to develop new products and services—came from government.

And that was in large part because of the sky-high tax rates for the wealthiest and corporations that prevailed immediately after World War Two—as high as 90 percent during the Eisenhower years and beyond. As President Eisenhower once put it, higher taxes induce people and businesses to invest more in their future, rather than pay Uncle Sam.

“So corporate profits do not drive economic growth — they’re just restless sums of surplus capital,” Professor Livingston wrote, “ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.”

The COVID-19 pandemic has created the need to do what was done when past generations faced the Great Depression and World War Two. They are government policies (more progressive taxation is one such) that will induce US to create more sustainable growth paths with fewer booms and busts, as President Eisenhower foresaw.

Harlan Green © 2020

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Wednesday, December 2, 2020

Ending Our Economic Civil War—Part II

 Answering the Kennedys’ Call


President-Elect Joe Biden can call a truce from the ongoing Red vs. Blue states economic civil war with just announced picks of his economics team, including Janet Yellen as Treasury Secretary and the economic advisors.

They are what have been called “progressive” economists because they advocate a national government that works for all the people in red and blue states, including stronger labor laws to protect wages and benefits of the salaried workforce that has been suppressed since the 1980s, causing most of the record income inequality we have today.

Janet Yellen is a UC Berkeley economist known for her labor expertise in advocating policies that combat income inequality. She worked to keep interest rates low when she was Fed Chair and advocated more public investments that the private sector avoided as Obama’s chief economic advisor.

Biden’s other progressive economists include Wally Adeyemo for deputy secretary of the Treasury; Cecilia Rouse as chair of the Council of Economic Advisers; and Jared Bernstein and Heather Boushey as members of the Council of Economic Advisers, all advocates of New Deal, Keynesian economics that cured the Great Depression.

Nobel Laureate Paul Krugman said on MSNBC that the advisors are incredibly qualified--even overqualified for the job—since anyone of them could be Biden’s CEA chair and chief economic advisor.

“It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” Yellen said in a speech to a conference on inequality sponsored by the Boston Fed.

In her conference slide show, Professor Yellen showed that after adjusting for inflation, the average income of the top 5 percent of households grew by 38 percent from 1989 until 2013, Yellen said. By comparison, the average real income of the other 95 percent of households grew less than 10 percent.

Federal Reserve

Increasing the income of ordinary Americans will not only increase economic growth with their consumer spending (which even Henry Ford understood), but the concomitant rising tax collections will also help pay down the $1 trillion annual budget deficit engineered by the 2017 Republican tax cuts.

Higher taxes would also help to bring down the deficit. But Republicans that only love budget deficits when it means lower taxes for them, must be convinced that public service projects (e.g., infrastructure) or social programs (e.g, health care) are necessary for a strong economic recovery.

This economy cannot even begin to dig itself out of the COVID-19 pandemic damage to growth and jobs unless massive government aid is injected that includes social programs such as expanded health care that will aid the recovery.

In fact, due to the seriousness of this virus, economists are beginning to discuss the possibility of a ‘double-dip’ recession occurring due to the “dark winter” epidemiologist are predicting ahead for the pandemic.

“Our failure to protect ourselves has caught up to us” said New York Times’ infectious disease expert Donald J. McNeil, Jr. in a recent front-page article. “The nation must endure a critical period of transition, one that threatens to last for too long, as we set aside justifiable optimism about next spring and confront the dark winter ahead.”

He said there are epidemiologists predicting a doubling of the death toll by next March—to more than 500,000, which is approaching the 675,000 deaths estimated to have occurred during the 1918 Spanish flu pandemic.

McNeil also cites a recent U. of Washington study that estimates 130,000 lives could be saved by February if mask use became universal in the US immediately.

Unfortunately, this modern economic war had been caused by one political party’s nostalgia for an illusory past with their attempts to limit government’s role by repealing Obamacare and undermining support needed to conquer this virus, as well as a White House that won’t institute a national mandate to wear masks and socially distance in the name of personal responsibility.

And, “The regions of the country now among those hit hardest by the virus;” continued McNeil, “Midwestern and Mountain States, and rural counties, including in the Dakotas, Iowa, Nebraska and Wyoming; are the ones that voted heavily for Mr. Trump in the recent election.”

A majority of Americans in this election—six million and counting—have said that the income and wealth inequality resulting from owners garnering the lion’s share of income and wealth will no longer be tolerated with their choice of President-Elect Biden.

It has taken natural or human-made catastrophes--such as wars and disease-caused pandemics—to bring Americans together in past times. Let US not lose this opportunity the COVID-19 pandemic presents to end the economic civil war and begin a new economic peace.

President-Elect Biden looks to have picked his economic advisors that will do just that.

Harlan Green © 2020

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Tuesday, December 1, 2020

Are We Having a Double-Dip Recession?

 Popular Economics Weekly


What if we have a ‘double-dip’ recession; i.e., when and if the US economy returns to negative growth in the fourth quarter, or even in Q1 2021? Notwithstanding the record 33.1% annualized snapback in real gross domestic product growth in the third quarter of this year, the U.S. economy was still 3.5 percent below its previous peak in the fourth quarter of 2019, as I said recently, and the pandemic has to run its course before GDP can return to its previous highs.

Except for the 4 percent peak-to-trough decline during the 2008-09 global financial crisis, the current 3.5 percent gap is as large as that recorded in the depths of every other post-WWII recession.

That is a lot of growth to make up in the midst of this pandemic, and we have had double-dip recessions before; the last in 2008 per the above GDP graph. It happened then because President Obama decided in 2010 that it was more important to begin to pay down the national debt, rather than spend more in basic services to bring the US economy out of the Great Recession, the worst one since the Great Depression.

Economist Stephen Roach in Project Syndicate says, “Consequently, it is ludicrous to speak of a U.S. economy that is already in recovery. The third-quarter snapback was nothing more than the proverbial dead cat bounce—a mechanistic post-lockdown rebound after the steepest decline on record. That is very different than the organic, cumulative recovery of an economy truly on the mend. The U.S. remains in a deep hole.”

The real problem with a possible double-dip recession is that job creation will slow down from its current pace, leaving maybe 20 million still dependent on continuing government support.

So preventing another double dip would mean much more government aid that extends unemployment compensation programs scheduled to end this year, if we have learned anything since 2008. as well as more aid to fight the ongoing pandemic that former FDA Commissioner Scott Gottlieb now says is on track to infect 30 percent of Americans.


Though the claims report showed the number of people receiving benefits after an initial week of aid declined 299,000 to 6.071 million in the week ending Nov. 14, that was because many have exhausted their eligibility, which is limited to six months in most states.

In addition, a record 4.509 million workers filed for extended unemployment benefits in the week ending Nov. 7, up 132,437 from the prior week. These benefits as well as those for gig workers and the self-employed will lapse on Dec. 26.

The real problem is the lagging consumer spending and services sector of the economy, where spending is down some 30 percent from January and lockdowns are being re-instituted in many of the largest states.

Services consumption,” says Roach, “which makes up over 61% of total US consumer spending, is a different matter altogether. Services accounted for fully 72% of the collapse in total consumer spending from January to April. While services have since partly bounced back, as of September, they had recouped just 64% of the lockdown-induced losses earlier this year.”

There are now 93,219 COVID-19 patients in U.S. hospitals, according to the COVID Tracking Project. The U.S. leads the world by cases, at 13.2 million, and fatalities, at 257,920, according to data aggregated by Johns Hopkins University.

How can we know when economic growth will return until sometime next year when the vaccines are available and begin to be administered to all Americans?

Harlan Green © 2020

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Friday, November 20, 2020

The Most Home Sales Since Housing Bubble!

 The Mortgage Corner

Calculated Risk

How can there be a record number of homeless and a booming housing market? It’s almost unbelievable that one sector of our economy is growing like in the good old days of the early 2000s when the housing bubble was formed, while a huge number of foreclosures and evictions are looming by the end of the year due to the pandemic.

There aren’t enough houses on the market or being built to satisfy the incredible demand, as home buyers that can afford to are again moving as they did during the housing bubble into larger homes in what they consider to be suburbs safer from COVID-19 infection.

And conditions are different this time. Builders will have a difficulty building enough housing because of the pandemic that is causing a material and skilled-worker shortage. Hence there is a looming housing shortage for those impacted most by the pandemic.

Existing-home sales grew for the fifth consecutive month in October to a seasonally-adjusted annual rate of 6.85 million – up 4.3 percent from the prior month and 26.6% from one year ago, according to the National Association of Realtors.

  • The median existing-home price was $313,000, almost 16 percent more than in October 2019. Total housing inventory declined from the prior month and one year ago to 1.42 million, enough to last 2.5 months – a record low – at the current sales pace.
  • More than 7 in 10 homes sold in October 2020 – 72 percent – were on the market for less than a month.

NAR chief economist Lawrence Yun made the understatement of the year when he said, "Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year.”

This is while more than 12 million workers employed before the pandemic are still without work, and almost 20 million still receive unemployment compensation from various government programs that they would not have received during an ordinary recession.

And this isn’t an ordinary recession. Some economists are beginning to fear a continuation of the pandemic-induced recession with the rising coronavirus death toll, as I said yesterday. While the U.S. makes up 4 percent of the world’s population, it has had 20 percent of all COVID-19 cases. As of Wednesday, the U.S. had reported 11 million coronavirus cases and 248,687 COVID-19-related deaths, just ahead of India (8.9 million cases to date), according to Johns Hopkins University.


Home builders are rushing to fill the demand, with single-family starts up 6.4 percent to a 13-year high and multi-family starts unchanged from an upward-revised September level, according to the National Association of Home Builders (NAHB).  Overall starts rose 4.9 percent and the level of 1.530 million was as expected.

“As seen in the NAHB/Wells Fargo builder confidence index, single-family starts continue to grow off a historic rebound that began in April,” said NAHB Chairman Chuck Fowke. “Current demand is being supported by historically low interest rates and home buyer preferences shifting to the suburbs and exurbs.”

This is the fastest growth in new residential construction since 2007.

It’s almost surreal that parts of the US economy continue to grow during what looks to be a very dark winter for those that may be without jobs or homeless with the expiration of eviction bans and foreclosures scheduled to end in December 31.

The US is currently under a national eviction moratorium that stops landlords from evicting tenants who don't pay rent until at least Dec. 31, 2020. Although the previous eviction ban that was part of the CARES Act only covered certain properties, this current moratorium effectively protects everyone living in one of the nation's roughly 43 million rental households, regardless of the kind of building they live in.

So the housing shortage is more than a lack of inventory for available homebuyers. Conditions will become something much worse if existing homeowners and renters aren’t allowed to remain in their homes until the pandemic ends.

Harlan Green © 2020

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Thursday, November 19, 2020

Retail Sales, Manufacturing Recovering--But What’s Next?

Financial FAQs


Retail sales jumped 5.1 percent year-over-year in October, which means this recovery is much stronger than forecast. But the question for economists will be, can it continue with the ongoing winter COVID-19 surge? It’s incredible that consumers are spending so much when this winter season has just begun and the worst is yet to come.

Higher home improvement/gardening, electronic, and online sales drove the increase. “The level of real consumer spending entered the fourth quarter well above the Q4 average, but this and other measures suggest that it is leveling out quickly,” said Reuters.

Maybe the public is believing “Yes, we can” again with the looming approval of several COVID-19 vaccines? This is while US manufacturing is also in partial recovery, with the Federal Reserve reporting that that overall industrial production rose 1.1 percent. 

“Among the major industrial sectors, the biggest surprise was in motor vehicles and parts manufacturing, which was flat versus our forecast of a moderate increase,” said Reuters.  “Other categories were close to expectations, with non-auto manufacturing up 1.1 percent, mining down 0.6 percent and utilities up 3.9 percent.”

But it is still a tentative recovery with consumers holding back from spending at pre-pandemic levels, in part because only 10 percent have seen an improvement in their finances. It’s become evident that he income/wealth  inequality has only worsened and will damage any recovery unless something is done about it.  Some economists are beginning to fear a second recession may be looming, we well, with the rising coronavirus death toll. While the U.S. makes up 4 percent of the world’s population, it has had 20 percent of all COVID-19 cases. As of Wednesday, the U.S. had reported 11 million coronavirus cases and 248,687 COVID-19-related deaths, just ahead of India (8.9 million cases to date), according to Johns Hopkins University.



Economist James K Galbraith said recently in Project Syndicate, “As for the economic effects, the US has experienced the partial rebound I predicted in March. But I believe now, as then, that this will be followed by a long struggle, for three fundamental reasons, beyond the pandemic itself. First, there is the collapse in global investment, which affects the economy’s advanced sectors. Second, the impulse to save in the face of economic anxiety will devastate services providers, and the jobs and incomes they provide, affecting millions of workers. And, third, unpayable debts are piling up, affecting the entire system.”

What can get us out of a possible second recession? “Progressives should ignore the tired chatter about “excessive” deficits and public debt,” said Professor Galbraith, “and, to tackle inequality, they should vote to increase the top income tax rates and restore the bite of the estate and gift taxes.”

I agree with him—because the wealthiest have not been using their tax savings from the Republicans’ 2017 tax cuts that would boost anything but their stock price, whereas returning some of the 2007 tax cut revenue to Treasury could finance some very necessary recovery spending.

Tackling the record income inequality will also cure some of the discontent that has brought out unhappy populists in the Midwest and South that supported Trump. They are mainly in those red states that have suffered most from job losses, and now the pandemic.

Harlan Green © 2020

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Thursday, November 12, 2020

Plenty of Available Jobs!

 Financial FAQs


Calculated Risk

There were 6.4 million job openings on the last business day of September, ‘little changed” from prior months, the U.S. Bureau of Labor Statistics reported yesterday. But it is below the 7 million job openings in the months before the pandemic.

The Calculated Risk graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS report that gives us the best jobs picture outside the Labor Department’s monthly unemployment report.

And the number of Americans filing claims for unemployment benefits has remained above its 665,000 peak during the 2007-09 Great Recession. At least 21.5 million people were still receiving unemployment benefits in mid-October.

So the JOLTS report shows the spring back in job openings, but fallback in hires as the year end approaches.

How will the new Biden administration bring back those jobs with COVID-19 numbers surpassing last summer and predicted to rise through at least December?

The good news is that the economy was growing and unemployment at record lows before the pandemic hit. There was no housing boom and bust, or overleveraged financial markets and poor credit controls that caused the Great Recession.

But there is still the record income inequality worsened with this pandemic that will slow down any recovery. Consumer demand would be boosted by raising the national minimum wage, which Biden advocates. President Biden could do this for federal contract workers, but congress would have to approve a raise to it nationally.

We could recover quickly, if we regain a national resolve to work together, as this election seems to have mandated, in other words.

The U.S. has already regained 630,000 jobs in October and the unemployment rate fell sharply again to 6.9 percent, said the Bureau of Labor Statistics, reflecting a surprising show of strength for the economy even as coronavirus cases rose to record highs.

“These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic, and efforts to contain it,” the BLS said in its press release. “In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.”


President-elect Biden’s creation of a COVID-19 national task force and implementing national mandates for mask wearing, testing, and vaccinations once he is in the White House should help to control its further spread and shorten the recovery time, bringing consumers back to their shopping ways.

The states reported 1.2 million tests and 131k cases, the highest single-day total since the pandemic started on Tuesday, reports the Covid Tracking Project. There are 62k people currently hospitalized with COVID-19. The death toll was 1,347, and now totals 231,659 Americans since the beginning of the pandemic.

So I see sunnier days ahead if we can prevent even worse consequences from the current phase two or three surge in infections and deaths. That means convincing most Americans to follow the science. President-elect Biden will have the bully pulpit to do so.

Harlan Green © 2020

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Monday, November 9, 2020

When Will The Economic Civil War End?

 Answering the Kennedys’ Call


When Joe Biden becomes our new President in January 2021 and signals an ambitious ‘new’ new deal to rebuild America, the economic civil war that reached a high point with this presidential election has to end.

Americans must reach agreement on what needs to be done to vanquish the worst disease since the 1918-19 Spanish flu pandemic that killed an estimated 675,000 Americans, for starters. The COVID-19 pandemic has infected 10 million Americans and 50 million worldwide at this writing.

And how do we then rebuild from this recession, the worst since the Great Depression (yes, the Great Depression) with 11 million jobs lost and many more unemployed? What tends to be forgotten is the 1932 depression only became the Great Depression when the US economy plunged back into negative growth in 1937. And we are in a second pandemic-induced recession begun in February this year after barely recovering from the 2017-19 Great Recession.

If this economic war isn’t resolved because of what could be an intransigent Republican-majority Senate in 2021, it will be more difficult to implement any new deal that will revitalize the American economy as did the original New Deal that brought us out of the Great Depression and a horrific WWII.

This election is more than a battle over states vs. federal government rights, in other words, as was the civil war with poorer southern states fighting the industrial north to preserve private property rights that included holding slaves—also private property in their eyes.

This modern economic war is also about nostalgia for an illusory past with modern Republicans’ attempts to privatize as much as they can and limit public welfare and social policies by repealing Obamacare and cutting taxes that would support more spending on public projects—our outmoded infrastructure, public K-12 education system (that is ranked last in the developed countries), more R&D support to keep US a leader in scientific research and environmental protection—all battles over who owns and benefits from the role of governments in our capitalist system.

The modern version of this economic civil war is also being fought over a false economic theory first popularized with Adam Smith’s The Wealth of Nations, written in 1776. He said low taxes and regulations on businesses and their profits created higher productivity and greater wealth for all.

At its core this has meant to most modern conservatives maximizing profits should be the sole goal of corporations; that making sure the owners of industries and the owners of capital receive most of the profits from their businesses. Enough of their wealth will then ‘trickle down’ to workers to satisfy their wants and needs as well.

The problem highlighted with this laissez-faire economic policy by economists like Lord John Maynard Keynes in the 1930s and Thomas Piketty more recently is the historical fact that owners’ rate of profit growth from their capital ownership (5 percent historically) has been more than twice that of workers’ incomes (approximately 2 percent). Hence there is an inherent inequality built into capitalism if not regulated via progressive taxes and regulations to level the playing field.

So it was a shockingly new idea when Henry Ford first realized that his workers could only buy more of his cars when he raised their salaries to $5 per day. Their demand for more cars would only increase with an increase in their salaries and benefits. Hence the recognition that only by increasing workers’ incomes and benefits would there be sustainable economic growth with less booms and busts, such as occurred during the Great Depression and more recent recessions—both caused in large part by the record income inequality.

What if we could learn from history? Would there still be an ongoing economic civil war?

The federal government has the means to pay it forward for future generations by funding projects that are too risky for private enterprise. Would we have gone to the moon, built our modern infrastructure of dams, energy grids, established the Internet, or built our freeway system otherwise?

Of course not. The economic civil war of states vs. federal rights, lower vs. higher taxes, less vs. more regulations, does not have to continue, if President-elect Biden is the negotiator and compromiser he is touted to be. But that can only happen if there is agreement on the mechanisms that create a more level playing field.

The world of Adam Smith’s free market, low tax and regulation world that prevailed in England’s early industrial towns and cities, and that Republicans attempted to resurrect with trickle-down economic theories in the 1980s, hasn’t worked today because of the essential role governments play to fight pandemics, or advance scientific research to protect us from many future unknowns.

A majority of Americans in this election—five million and counting—have said that the income and wealth inequality resulting from owners garnering the lion’s share of income and wealth will no longer be tolerated. It has taken natural or human-made catastrophes—like wars and disease pandemics—to bring Americans together in past times. Let US not lose this opportunity the COVID-19 pandemic has presented to end the economic civil war once and for all, and begin a lasting economic peace.

Harlan Green © 2020

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Saturday, November 7, 2020

Another Good Employment Report

 Financial FAQs


The U.S. regained 630,000 jobs in October and the unemployment rate fell sharply again to 6.9 percent, said the Bureau of Labor Statistics, reflecting a surprising show of strength for the economy even as coronavirus cases rose to record highs.

“These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic, and efforts to contain it,” the BLS said in its press release. “In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.”

There are still 11 million workers without jobs of the 22 million jobs lost due to the pandemic shutdown, so it will take much more time to bring the employment picture back to something like what prevailed before the pandemic, and “dark days” for COVID-19 infection rates when the holidays kick in lie, both Drs. Fauci and Birx said in recent days.

That means a lot more suffering and deaths this winter and into next year for many, before any vaccine can be widely administered.

Private-sector employment rose by a more robust 906,000, but a sharp decline in government employment pulled down the overall total. The number of persons who usually work full time rose by 1.2 million to 123.6 million, and the number who usually work part time increased by 1.0 million to 26.2 million.

The number of persons employed part time for economic reasons increased by 383,000 to 6.7 million in October, after declines totaling 4.6 million over the prior 5 months.

Federal Reserve Chair Powell said yesterday after the conclusion of their latest FOMC meeting that more pandemic relief aid is needed to keep economic growth expanding, to no one’s surprise. The rise in new cases “is particularly concern,” the Fed chairman said.

It also means much more than relief aid is needed to rebuild the American economy for the future. It took 10 years after the Great Recession for the unemployment rate to drop to its pre-pandemic low.

The U.S. counted 107,872 new infections on Wednesday, according to a New York Times tracker, and at least 1,616 Americans died. In the past week, the U.S. has averaged 91,878 cases a day, a 51 percent increase from two weeks ago.

The U.S. leads the world by cases with 9.49 million and deaths with 233,777, according to data aggregated by Johns Hopkins University, and accounts for more than a fifth of global cases and fatalities.

So Powell’s warning of “tragic’ economic risks if another coronavirus aid package isn’t passed by congress seems obvious.

“Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth,” Powell said. “By contrast, the risks of overdoing it seem, for now, to be smaller.”

And those hurt most by any further delay in passing another relief package that would benefit states as well federal government programs are the essential workers most needed to conquer the pandemic.

Employment of those in the bottom rung of the wage distribution scale remains 21 percent below its February level, while it was only 4 percent lower for workers who receive higher wages.

Harlan Green © 2020

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Wednesday, November 4, 2020

How Will US Economy Survive COVID-19?

 Popular Economics Weekly


The US economy must first survive this pandemic before it will benefit most Americans. Some sectors are doing better but ignore the financial market swings, which benefit 401(k)s, but not most Americans.

Advance estimates of U.S. retail and food services sales for September 2020, adjusted for seasonal variation and holiday and trading-day differences, show an increase of 1.9 percent from the previous month, and 5.4 percent above September 2019 as an example.

This is a huge bump in spending as consumers left their confined spaces in July, which is mainly why GDP growth rose 33 percent in Q3 from its second quarter pandemic low, since consumers account for most GDP activity.

But it was mostly in so-called durable goods—autos, planes, appliances that last more than three years. The majority of services businesses, such as restaurants, lodgings and travel, will be suffering through much of next year until most Americans are vaccinated and feel it’s safe enough to re-engage with the larger world. Appliance sales are booming, for instance, because most of us remain at home during the pandemic out of caution.

The real question will be how much more will Americans suffer this winter due to the pandemic.


As a prelude to Friday’s official unemployment report, payroll data processor ADP reports a smaller increase of 365,000 new nonfarm payroll jobs in October, mostly in the service industries and down from 753,000 the prior month.

Last month’s US payrolls reported by the Labor Department increased by 661,000 nonfarm payroll jobs last month with an unemployment rate of 7.9 percent, so job creation may be declining in the government’s official report this Friday.

“The labor market continues to add jobs, yet at a slower pace,” said Ahu Yildirmaz, vice president and cohead of ADP Research Institute. “Although the pace is slower, we’ve seen employment gains across all industries and sizes.”

But that still begs the question of what will happen with coronavirus infections now reaching 100,000 per day and the infection rate rising to 9.3 percent, which means a faster community spread.

According to the Washington Post, Deborah Birx, one of the White House's most senior coronavirus advisers, issued her warning in an internal memo on November 2, saying that "We are entering the most concerning and most deadly phase of this pandemic ... leading to increasing mortality." And the White House, she wrote, is not doing enough: "This is not about lockdowns -- it hasn't been about lockdowns since March or April. It's about an aggressive balanced approach that is not being implemented."

The U.S. counted 92,660 new cases on Tuesday, according to a New York Times tracker, and at least 1,130 fatalities. In the past week, the U.S. has averaged 88,168 cases a day, up 46% from the average two weeks ago.

Does anyone believe things can get any better before this pandemic is controlled?

Harlan Green © 2020

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Friday, October 30, 2020

Q3 Real GDP Jumps +33.1 Percent

 Popular Economics Weekly

Calculated Risk

We are not really out of the COVID recession, per Calculated Risk graph, even though the US Bureau of Economic Analysis (BEA) “advance” estimate of third quarter GDP growth increased +33.1 percent from Q2. But it’s still 3.5 percent below last year’s fourth quarter growth rate.

The blue bars portray past recessions, so the graph also tells us how severely this pandemic has affected economic growth. Real GDP had declined -31.4 percent in Q2.

The main driver of the rebound was consumption spending, which rose at a 40.7 percent growth rate.  Consumers bought new cars and trucks in September, purchased new clothes for the start of the school year and cooler fall weather, and spent more on recreation such as gym memberships and park fees. They also visited their doctors and dentists more often.

The biggest surprises were weakness in government spending and a very large rebound in inventories, as businesses stocked up for the holidays. 

“We had thought federal spending would grow enough to keep overall public spending positive,” says Reuters, “but reported spending was down at both the federal and state levels, subtracting 0.7 percentage points from growth.” 

This is precisely why congress’s inaction on passing another pandemic relief package is so maddening. It’s now declining state and local spending that is suppressing growth and additional job creation.

Positive economic growth for the rest of this year is also in doubt, as initial unemployment claims haven’t fallen fast enough to stay ahead of COVID-19, since more consumers are staying home because COVID-19 infection rates are already rising with the fall season and we haven’t even reached the holidays, when families and friends tend to gather.

Altogether, the number of people receiving benefits from eight separate state and federal programs fell by 415,727 to an unadjusted 22.7 million as of Oct. 10, the latest data available, which means 22 million of the formerly employed haven’t yet found another job.

Economists are concerned that rising coronavirus cases will lead people to stay home and cause service industries to begin another round of layoffs. Adding to the sense of unease, Congress went home for the presidential election without passing addition coronavirus financial relief.

COVID Tracking Project

There are now more than 70,000 positive tests per day, surpassing the former 68,000 peak in August, not a good sign. Infection rates have risen above 7 percent (red line in graph), also a sign of faster community spreading of the virus in the long expected third surge in virus infections.

So consumers that drive 70 percent of economic activity are in a quandary. Will the pandemic surge continue and so require consumers to stay at home, as in already happening in France and Germany with their new lockdowns from rising infection rates?

The Conference Board’s latest consumer confidence report was a mixed bag.

“Consumer confidence declined slightly in October, following a sharp improvement in September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs. There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high.”

Senior Director Franco sums up consumers’ current forebodings; what might happen for the rest of this year, and maybe into much of next year, until consumers have some confidence in an effective COVID-19 vaccine.

Harlan Green © 2020

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Wednesday, October 28, 2020

End of the Age of Narcissism--Part II?

 Answering the Kennedys’ Call


South Dakota’s Sturgis Motorcycle Rally this August was notable for the estimated 450,000 attending during the COVID-19 pandemic. It happened in spite of the almost unanimous warnings given by public health officials that it could be the mother-of-all super-spreader events.

Is this the last cry from a culture of narcissism that has prevailed in America since at least the 1970s, a culture of ‘me first’ with the credo of personal freedom unhindered by a regard for the welfare of others?

“Within weeks of the gathering,” reported WashPost, “the Dakotas, along with Wyoming, Minnesota and Montana, were leading the nation in new coronavirus infections per capita. The surge was especially pronounced in North and South Dakota, where cases and hospitalization rates continued their juggernaut rise into October.”

There were no state and local health officials to identify and monitor attendees returning home, or to trace chains of transmission after people got sick. “Some, however, believe the nearly 500,000-person gathering played a role in the outbreak now consuming the Upper Midwest,” according to WashPost.

And a USA TODAY analysis showed COVID-19 cases grew at a faster rate than before after at least five of President Trump’s most recent political rallies in the following counties: Blue Earth, Minnesota; Lackawanna, Pennsylvania; Marathon, Wisconsin; Dauphin, Pennsylvania; and Beltrami, Minnesota.

“Together, those counties saw 1,500 more new cases in the two weeks following Trump’s rallies than the two weeks before – 9,647 cases, up from 8,069.”

Why the almost suicidal determination of those bikers, and Trump die-hard supporters, to behave with such a blatant disregard for their own health, or that of others?

Were they making a desperate last stand against a pandemic that outnumbered them? Many of the attendees maintained it was an infringement of their personal freedom to not be able to participate in such public gatherings that obviously meant so much to them.

“I don’t think there was nothing that was going to stop me,” said one middle-aged biker who was infected with COVID-19 at the Sturgis rally, according to the WashPost.

In every other western country going through the same struggle to control the new coronavirus, super-spreader events wouldn’t be allowed or even considered in this day and age. Yet no authorities, or our Commander-in-Chief, mandated the banning of super-spreader events as a public health danger that could ultimately infect tens of thousands of Americans.

What will it take to end to such destructive behavior, based on a credo of personal freedom that has also fragmented our country into red and blue states? Are we seeing an end in President Donald Trump’s failing faux populism which has always been for the benefit of the financial elites, rather than discontented proletariat, and who has been diagnosed by multiple mental health professionals with a Narcissistic Personality Disorder?

This behavior is another description of a sociopathy —to use a clinical term—that has infected one political party, a party that is in effect destroying itself. The natural world has signaled that this behavior without a regard for the welfare of others, can no longer be tolerated. Mother Nature in the form of this COVID-19 pandemic is calling for an end to this culture of narcissism during the worst disease pandemic in 100 years.

Harvard political scientist Robert Putnam with co-author Shaylyn Romney Garrett, in his latest best-seller, The Upswing, How America Came Together a Century Ago and How We can Do It Again, believes we are seeing the dawn of a new era with the youth of America, one that eclipses the culture of narcissism and advances Teddy Roosevelt’s progressive policies of more than a century ago that broke up big business monopolies and instituted more egalitarian public policies, ultimately leading to FDR’s New Deal.

“America’s challenges will be equally difficult to solve—and will therefore require just as much youthful courage, vigor, and imagination to overcome. And so, to a large extent, America’s fate lies in the hands of the post-Boomer generations. Today’s young people did not cause today’s problems. But like their predecessors 125 years ago, they must forgo the cynicism of drift and embrace the hope of mastery.”

Will it signal the dawning of a new, more forward looking era, a new, new deal? Let us hope so, beginning with the results of this presidential election.

Harlan Green © 2020

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Friday, October 23, 2020

The Housing Boom Continues

 The Mortgage Corner

Calculated Risk

Total existing-home sales,, including single-family homes, townhomes, condominiums and co-ops, rose 9.4 percent from August to a seasonally-adjusted annual rate of 6.54 million in September.

The housing boom continues in the middle of the coronavirus pandemic. Overall home sales are up 20.9 percent from a year ago (5.41 million in September 2019).

"Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season," said Lawrence Yun, NAR's chief economist. "I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home."

That is one of the reasons for the surge—more well-healed, white collar buyers are working from home as the pandemic has accelerated the digital revolution, and a central work location is no longer needed.

Couple this with the upcoming 5G networks that will power more of everything—manufacturing, services, and online education, for starters. The World Economic Forum described what is possible with the wider band widths and faster speeds that 5G will bring to economic growth.

“Think about a world in which not just people but all things are connected: cars to the roads they are on; doctors to the personal medical devices of their patients; augmented reality available to help people shop and learn and explore wherever they are. This requires a massive increase in the level of connectivity.”

And it is exacerbating the existing housing shortage. Builders are playing catch up to this speeding up of the surge in demand.

Total housing inventory at the end of September totaled just 1.47 million units, down 1.3 percent from August and down 19.2 percent from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the more normal 4.0-month figure recorded in September 2019.

Builders are responding. U.S. single-family homebuilding raced to a more than 13-year high in September. The report from the Commerce Department showed single-family homebuilding jumped 8.5 percent to a seasonally adjusted annual rate of 1.108 million units last month. That offset a 16.3 percent decline in starts for the volatile multi-family segment to a pace of 307,000 units, said the National Association of Homebuilders (NAHB). Overall, housing starts increased 1.9 percent to a rate of 1.415 million units last month.

Homebuilding has advanced 11.1 percent year-on-year, with single-family starts surging 22.3 percent. Further gains in single-family home construction are likely, said Reuters, with building permits shooting up 7.8 percent to a rate of 1.119 million units last month, the highest level since March 2007

"Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market," said Lawrence Yun, NAR’s chief economist. "Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery."



Scarce inventory has been problematic for the past few years, according to Yun, an issue he says has worsened in the past month due to the dramatic surge in lumber prices and the dearth of lumber resulting from California wildfires.

Mortgage rates are helping to offset some of those high home prices, however. A 30-year conforming fixed-rate mortgage dropped to 3 percent in August and has averaged below 3 percent in the past few weeks, the lowest on record.

I said last week that the NAR also reports pending home sales for contracts closing in approximately two months are also surging, which will boost sales through the end of the year. Pending home sales in August continued to move upward, marking four uninterrupted months of positive contract activity. Each of the four major regions have experienced growth in month-over-month and year-over-year pending home sales transactions.

Harlan Green © 2020

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