Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Economics

The US Economy is No Eric Liddell

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 17, 2018: 

There was a moment in the 1981 film Chariots of Fire when Eric Liddell was bumped onto the grassy infield during a quarter mile race. Once he recovered, he was 30 yards behind the pack of runners. Let Simon Burnton of The Guardian tell the story:

In Stoke on Trent in July 1923, in a race run over a quarter of a mile, England saw just how true this was. At the first bend he tripped over the legs of the English runner JJ Gillies, falling off the track. By the time he was back on his feet, the last of the other runners was 30 yards away and moving fast, but Liddell attacked them with such pace that he finally overtook Gillies three yards from the line to win before collapsing, spent, to the ground.

 

“The circumstances in which Liddell won the event made it a performance bordering on the miraculous,” wrote The Scotsman. “Veterans, whose memories take them back 35 years, and in some cases even longer, in the history of athletics, were unanimous in the opinion that Liddell’s win in the quarter-mile was the greatest ever track performance that they had ever seen.”

The U.S. economy, as astonishing as its performance is, is no Eric Liddell. JJ Gillies [the federal government] is just too far ahead.

On Monday, the White House officially announced

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Growing U.S. Economy Unable to Keep Up With Growing Government Spending

This article appeared online at TheNewAmerican.com on Tuesday, October 16, 2018:  

The White House just officially announced the final numbers for Fiscal Year 2018, which ended September 30. They are ugly: The gap between revenues and spending widened to $779 billion over the previous year, a jump of $113 billion (or 17 percent), despite increased revenues. This is the third consecutive year of rising deficits, with no apparent end in sight.

The White House blamed the usual suspects: the rising costs of “entitlement” benefits (i.e., Social Security, Medicare, Medicaid, and others) and increasing interest costs to service the rising national debt.

Those interest costs increased by one-quarter this year over last, from $263 billion in 2017 to $325 billion in 2018. By 2020, the Congressional Budget Office (CBO) estimates that interest costs will increase by another 50 percent, to nearly $500 billion.

There is no more talk of how the expanding economy will throw off revenues sufficient to start shrinking the national debt. Now, according to Office of Management and Budget (OMB) Director Mick Mulvaney, the best that can be hoped for is some eventual shrinking of the government’s annual deficits:

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Is the Fed Trying to Kill the Trump Economy?

This article appeared online at TheNewAmerican.com on Friday, October 12, 2018:

William McChesney Martin, the ninth and longest running Chairman of the Federal Reserve, said “The Federal Reserve … is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.” Rudi Dornbusch, the German economist who worked for most of his career in the United States, was more blunt: “None of the U.S. [economic] expansions of the past 40 years died in bed of old age; every one was murdered by the Federal Reserve.”

Is the sharp selloff in stocks following the sharp rise in interest rates last week signaling the death throes of the longest-running bull market in history, to be followed by similar expiration of the 112-month long economic expansion? On Tuesday, October 2, the key financial instrument followed by most observers — the U.S. 10 Year Treasury Note — was yielding

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IMF Lowers Global Economic Growth Estimates, Blames Trump Tariffs

This article appeared online at TheNewAmerican.com on Tuesday, October 9, 2018: 

The International Monetary Fund (IMF), in its latest World Economic Outlook (WEO) released on Tuesday, fell into the same trap as so many other forecasters have: ignoring both the temporary nature of Trump’s tariff strategy and the incoming wave of repatriated funds that have been languishing overseas for years.

The chief apologist for the IMF, Maurice Obstfeld (on loan from the University of California, Berkeley, and a former member of President Obama’s Council of Economic Advisors), in a note accompanying the WEO, said that world growth has “plateaued”:

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Investors Remember William McChesney Martin, and Sell

This article was published by The McAlvany Intelligence Advisor on Monday, October 8, 2018:  

William McChesney Martin served as the ninth and the longest-running chairman of the Federal Reserve, from April 1951 to January 1970. He served under five presidents. But when people think of him, they remember him saying that:

Our purpose [at the Fed] is to lean against the winds of deflation or inflation, whichever way they are blowing.

 

The Federal Reserve … is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.

It’s not known if he was trying to be funny or merely ironic. But history records that the last 12 economic U.S. expansions were doused when the Fed raised interest rates, ending the parties.

The current Fed chair, Jerome Powell, is in full party mode. Last week he made an astonishing four public appearances, serving as the Number One (well, Number Two) cheerleader for the Trump economy. He called the economy “remarkably positive,” “extraordinary,” and its outlook “particularly bright.”

Added Powell on Tuesday:

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In Baseball Lingo, Conor Lynch Thinks the U.S. Economy is in Its Final Innings

This article was published by The McAlvany Intelligence Advisor on Friday, October 5, 2018:  

Conor Lynch is a New York City liberal whose writings have appeared on Salon, AlterNetCounterpunch, and openDemocracy. But in his latest blog at TheWeek.com, he left all that baggage behind and instead focused on the harbingers for a downturn in the U.S. economy. He wrote:

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Clouds Appearing on the Economic Horizon

This article appeared online at TheNewAmerican.com on Thursday, October 4, 2018:

The bright blue sky that represents the U.S. economy got a little brighter on Wednesday with the release of ADP’s jobs report for September. Not only did the 230,000 new jobs beat forecasters’ estimates, ADP also adjusted upward August’s jobs numbers by 5,000. That means that since the first of the year, the booming U.S. economy has added nearly two million new jobs. Mark Zandi, chief economist at Moody’s Analytics, which partners with ADP in its jobs reporting, declared that “this labor market is rip-roaring hot.”

And then Zandi went and spoiled it all by adding,

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Amazon’s New $15 Minimum Wage Is a Shrewd Political Move

This article appeared online at TheNewAmerican.com on Wednesday, October 3, 2018:  

Amazon’s announcement on Tuesday that starting November 1 every full-time employee working in the United States, and every temporary worker hired to meet the holiday crush, will be paid at least $15 an hour is a smart political move for its owner, and it will cost the company almost nothing. The owner, anti-Trumper Jeff Bezos (also owner of the virulent anti-Trump Washington Post), is smoothing the feathers of socialist Bernie Sanders who has repeatedly criticized Bezos (whose net worth is estimated at $165 billion) for allegedly paying his employees so little. Sanders said the announced wage increase is “not only enormously important for Amazon’s hundreds of thousands of employees; it could well be, and I think it will be, a shot heard around the world.”

It also pushed forward the agenda of the union-backed Fight for $15 which has largely been languishing for the last six years.

And along the way, the move also puts pressure on Bezos’ nearest competitors,

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Tsunami in Indonesia is Nothing Compared to the One Headed for the U.S.

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 3, 2018:  

It wasn’t until the death toll following last Friday’s Indonesian earthquake and tsunami reached 800 that the global media began to make it front page news. By Tuesday the toll exceeded 1,200, with many more still buried in dozens of collapsed buildings in the towns of Sigi and Balaroa. Some 62,000 citizens have been displaced either because their homes have become uninhabitable or were flattened.

At least they had some advance warning, but there was little they could do. Most were caught off guard, unprepared. As of this writing, many have gone four days without food.

What was unnerving is the report from the U.S. Treasury just three days later giving advance warning of the economic tsunami preparing to roll over the American economy. Precious few are taking heed. On September 20, the Senate passed another spending bill – $854 billion – calling it a “stopgap” bill to pay the government’s bills until after the midterm elections. It passed 93-7.

This brought the national debt of the United States government to

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The Coming National Debt Tsunami

This article appeared online at TheNewAmerican.com on Tuesday, October 2, 2018: 

The report from the U.S. Treasury coming on the heels of news reports about Indonesia’s earthquake and resulting tsunami is unnerving. According to the Treasury, the government’s national debt jumped in the fiscal year ending September 30 from $20.2 trillion to $21.5 trillion, or by $1.3 trillion. That’s more than a six-percent increase year over year which, if not reined in, will double the national debt to $43 trillion in less than 12 years.

Unlike the Indonesian earthquake and tsunami, however, Americans have had plenty of warning about what’s coming. And yet Senators just voted 93-7 to spend another $854 billion in a “stopgap” measure. Six of those Senators opposing the bill were Republicans (Independent Senator Bernie Sanders was the seventh).

In July, former Representative Ron Paul pointed out that the national debt now exceeds the total economic output of goods and services in the United States in a year, but even that isn’t the whole story: “Social Security and Medicare trust funds will both soon be bankrupt, putting additional strains on the federal budget [and] on American taxpayers.”

That’s because the “reserves” in those trust funds have already been spent by the federal government and have been replaced with promissory notes to be redeemed by the Treasury in the future. The future is now, and as those reserves are tapped, those promissory notes will be redeemed by the Treasury, adding to the national debt.

FirstPost.com said that “a series of natural disasters in Asia have led to massive economic damage [and] human loss”, explaining:

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NAFTA “Finessed” to Include Canada at the Expense of U.S. Sovereignty

This article appeared online at The New American on Monday, October 1, 2018:  

In the rush to include Canada in the USMCA (United States-Mexico-Canada Agreement), now being referred to by some in the press as NAFTA 2.0, before the witching hour of midnight Sunday, the United States “finessed” the agreement, according to various press reports. Last Friday, the liberal Toronto Star first leaked about the coming “finesse”: “The dispute resolution impasse [over sovereignty-threatening Chapter 19 in the original NAFTA] could be finessed.” (Emphasis added.)

Late Sunday afternoon, the Wall Street Journal confirmed that the United States could fold in order to keep Canada in the deal by noting that “there are still ways to finesse deadlines and processes to work Canada into the deal before NAFTA 2.0 ultimately takes effect.” (Emphasis added.)

Just before midnight Sunday, another writer at the Wall Street Journal wrote that Trump’s demand to eliminate Chapter 19 altogether from the USMCA disappeared entirely under pressure from those who wanted to keep it:

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Stock Market Bears Still Looking for Evidence of the Next Recession

This article was published by The McAlvany Intelligence Advisor on Monday, October 1, 2018: 

As noted here [at The McAlvany Intelligence Advisor] two weeks ago, Trump holds the winning hand in the trade war with China. But he can still lose the hand if he doesn’t play it. Based on China’s slowing economy that is accelerating downward thanks for his tariffs, now would be a good time – perhaps the very best time – for him to up the ante. . As Robert Carnell, Chief Asia-Pacific economist at investment banking firm ING, put it: “This is probably the best time for the U.S. to go back to the table … [this time] with a ‘take it or leave it’ type of trade demand.”

The numbers are in:

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Trump’s Tariffs Are Biting China

This article appeared online at TheNewAmerican.com on Sunday, September 30, 2018:

The latest data from China — both “official” (government) and unofficial (more reliable) — are confirming that the world’s second-largest economy is slowing, thanks in part to the first two rounds of tariffs President Trump has applied to the communist country.

It was already slowing because of increasing concern by China’s central bank about the country’s national debt. It is reported to be nearly three times the country’s total national output of goods and services, and the central bank has been taking measures to keep it from getting totally out of hand by raising capital requirements and short-term interest rates.

Two previous attempts to negotiate over President Trump’s biggest concerns

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Stock Market Bears Still Looking for Evidence of the Next Recession

This article was published by The McAlvany Intelligence Advisor on Friday, September 28, 2018: 

The bears are still out there, but their voices are being drowned out by the exuberance of the stock market and the economy. New records are being set almost on a daily basis. Take this from the Conference Board earlier this week, for example. For an economist, Lynn Franco, director of Economic indicators for the Board, was positively giddy:

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U.S. Economy Setting Records, Surprising Market Bears

This article appeared online at TheNewAmerican.com on Thursday, September 27, 2018:

The Conference Board’s report on consumer confidence in September, released earlier this week, caught forecasters by surprise once again. Its Consumer Confidence Index, a barometer that measures the average American consumer’s confidence based on a monthly survey covering 5,000 households, jumped to 138.5 from August’s 134.7. Economists polled by Reuters expected a drop to 132. The baseline is 100, set back in 1985.

As Lynn Franco, director of economic indicators for the Board, noted:

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GOP’s Favorability Rating Highest in Seven Years

This article appeared online at TheNewAmerican.com on Tuesday, September 25, 2018:  

On many levels the latest poll from Gallup should give great comfort to Republicans ahead of the midterm elections now just six weeks away: Their party is enjoying its highest favorability among Americans in more than seven years. Not only is the gain from a year ago startling, it’s an improvement reflected across gender and income levels, and it even reflects Republican support from independents who are leaning in their favor.

Said Gallup:

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New Unemployment Claims Headed for 50-year Lows

This article appeared online at TheNewAmerican.com on Friday, September 21, 2018:  

The jobless claims report from the Department of Labor (DOL) for the week ending September 15 came out on Thursday, the same day that Wall Street learned of even stronger corporate earnings. This one-two punch drove stock averages to new highs, which continued into Friday.

The report from the DOL was cryptic, and disappointing to economists who had forecast higher claims. Said the DOL: “In the week ending September 15 … seasonally adjusted initial claims was 201,000, a decrease of 3,000 from the previous week. This is the lowest level for initial claims since November 15, 1969.”

Even better was its four-week moving average, which smooths out week-to-week fluctuations: “The 4-week moving average was 205,750, a decrease of 2,250 from the previous week … [and] the lowest level for this average since December 6, 1969.”

Still better is the news that

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“Capital Goes Where It’s Welcome and Stays Where It’s well Treated” – Walter Wriston

This article was published by The McAlvany Intelligence Advisor on Friday, September 21, 2018:  

The quote most famously made by Walter B. Wriston, the former chairman and CEO of Citicorp and former chairman of Ronald Reagan’s Economic Policy Advisory Board, is the one quoted in the title. He passed away in 2005, long before Trump’s tax reform plan (and its tax holiday for foreign corporate earnings) proved it to be so by beginning to transform the U.S. economy. In the first six months of 2018, nearly half a trillion dollars have been repatriated by American companies holding profits overseas waiting for such a time as this. Taxed at just 15.5 percent instead of 35 percent, companies are now reclaiming their foreign capital and treating it with the respect it deserves, and the results are showing up everywhere.

Apple is already bringing the “vast majority” of its $250 billion in foreign cash

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Nearly Half a Trillion Dollars Already Repatriated; More Coming

This article appeared online at TheNewAmerican.com on Thursday, September 20, 2018: 

President Donald Trump said in an interview in July that untaxed corporate earnings held offshore used to be “$2.5 trillion … I guess it’s $5 trillion now. Whatever it is, it’s a lot more. So we have anywhere from $4 [trillion] to 5 or even more trillions sitting offshore.”

Thanks to Trump’s tax reform act and its related tax holiday, that number “sitting offshore” is now a lot less: almost half a trillion dollars less. In the first six months of 2018 alone, American companies have called back $465 billion of those untaxed corporate earnings from abroad.

In an attempt to denigrate Trump’s July statement, Politifact focused on just how much was being held overseas by American companies unwilling to pay the previously exorbitant 35 percent to bring them home. It was trying to show that Trump had once again exaggerated and overstated the numbers. But Manuela Tobias, writing the hit piece for Politifact, admitted that

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Time Is Running Out for NAFTA 2.0 to Include Canada

This article appeared online at TheNewAmerican.com on Wednesday, September 19, 2018: 

As talks begin again today [Wednesday] in Washington between top people from the United States and Canada over revisions to the inaccurately-named North American Free Trade Agreement (NAFTA), the pressure is all on Canada. Representative Steve Scalise (R-La.), the House majority whip, has about had it with Canada’s stalling. Negotiations have been taking place for nearly 14 months and essentially have been going nowhere. Said Scalise,

There is a growing frustration with many in Congress regarding Canada’s negotiating tactics. While we would all like to see Canada remain part of this three-country coalition, there is not an unlimited amount of time for it to be part of this new agreement.

Canada’s Foreign Minister Chrystia Freeland was adamant: “Any negotiator who goes into a negotiation believing that he or she must get a deal at any price — that is a negotiator who will be forced to pay the maximum price for that deal. No deal is better than a bad deal.”

On the Canadian side, pressure is building on Prime Minister Justin Trudeau to repudiate Freeland’s non-negotiable position not only from Doug Ford, the premier of Ontario (the center of Canada’s auto industry), but also his trade minister, Jim Wilson. Said Wilson on Monday:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.