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

Tag Archives: Recession

Fed Sees Inflation Coming, Raises Rates to Head it Off

This article appeared online at TheNewAmerican.com on Thursday, March 22, 2018: 

Following the unanimous and much-anticipated decision by the Federal Reserve to raise interest rates by another quarter of a percent on Wednesday, the new chairman, Jerome Powell, said, “The economic outlook has strengthened in recent months. Several factors are supporting this outlook: fiscal policy [i.e., Trump’s tax cuts to individuals and corporations] has become more stimulative, ongoing job gains are boosting incomes and confidence, foreign growth is on a firm trajectory, and overall financial conditions remain accommodative.”

This raises the question:

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Is the Federal Reserve Working Against Trump’s Reelection in 2020?

This article was published by The McAlvany Intelligence Advisor on Friday, March 23, 2018: 

English: Short-Run Phillips Curve before and a...

Short-Run Phillips Curve before and after Expansionary Policy

In politics, according to FDR, there are no coincidences. He famously said that “in politics if something happens you can be sure it was planned that way.” The announcement by Trump that he has filed for reelection in 2020 and the pronouncement by the Federal Reserve following it may just be one of those “planned” coincidences.

The pronouncement from Jerome Powell, the new head of the Fed, was, on the surface, comforting:

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Trump’s Budget a Mixture of Hope, Optimistic Assumptions, and Statistics

This article was published by The McAlvany Intelligence Advisor on Wednesday, February 14, 2018: 

Mark Twain attributed his quote about statistics to British Prime Minister Benjamin Disraeli: “Figures often beguile me, particularly when I have the [freedom] of arranging them myself … there are three kinds of lies: lies, damned lies, and statistics.”

Mark Mulvaney, Trump’s OMB director, must feel the same way. There’s enough statistical smoke and mirrors in the president’s “An American Budget” to, in the words of Tevye [the dairyman in Fiddler on the Roof] “cross a Rabbi’s eyes.”

First, Mulvaney admits that this MAGA budget won’t balance, ever. The government is too big and growing too fast for the economy that funds it ever to catch up. So he and the president decided to ignore a balanced budget and go for the next best thing: show the economy growing faster than the government is growing and someday, eventually, the deficits will start to shrink when compared to the economy itself.

The numbers “prove” the conclusion: for fiscal year 2018 (which ends this coming September 30), government revenues of $3.3 trillion compared to government spending of $4.2 trillion will leave a gap – a deficit – of $873 billion, equivalent to 4.4 percent of the country’s gross domestic product. In the following years that annual deficit is projected to grow to $987 trillion in 2020, equivalent to 4.5 percent of the country’s GDP. Only by 2022 does that percentage begin to decline based on the assumption that government spending is only $4.9 trillion while tax receipts would hopefully be $4.1 trillion.

That is the crux of the new math in Trump’s budget:

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Trump’s Budget Won’t be Balanced, Just Restrained

This article appeared online at TheNewAmerican.com on Tuesday, February 13, 2018:

In his message to Congress describing “An American Budget,” the president started off accurately enough: “The current fiscal path is unsustainable, and future generations deserve better.” Translation: If this budget isn’t approved, wage earners will not only have to hide their wallets but their grandchildren as well.

He added: “Over the next decade, a steady rate of 3-percent economic growth will infuse trillions of additional dollars into our economy, fueling the dreams of the American people and sustaining a new era of American Greatness.” And, hopefully, enough vastly increased tax receipts to pay for it.

He left his Office of Management and Budget (OMB) director Mick Mulvaney to fill in the gaps and pick up the pieces. The budget, apparently, won’t ever be balanced, so we’re changing the goal: grow the economy faster than the budget so that the deficit gap starts to shrink. Said Mulvaney, “As a nation, we face difficult times — challenged by a crumbling infrastructure, growing deficits, rogue nations, and irresponsible Washington spending….  Just like every American family, the budget makes hard choices: fund what we must, cut where we can, and reduce what we borrow.”

Here are the numbers:

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Despite Stock Sell-off, Few See Recession

This article appeared online at TheNewAmerican.com on Friday, February 9, 2018: 

Barbara Friedberg must be feeling pretty good right about now. Last October she made “10 Bold Stock Market Predictions for 2018,” and already she is scoring five out of 10:

Value stocks will triumph;

Cash will be king;

Inflation will inch up;

Market volatility will return; and

Bonds will offer higher yields.

The jury is still out on her prediction that “the Bull Market [in stocks] will end in 2018.”

Friedberg is no lightweight. She is a former portfolio manager and has taught finance and investments at several universities. She authored a popular book in 2014, How to Get Rich Without Winning the Lottery.

Despite the mantra that stocks’ performance is often a harbinger for future economic performance, few at present agree with her about the bull market in stocks being over.

The sell-off (which appears to be continuing as this is being written) in stocks is impressive. The Dow Jones Industrial Average (DJIA, or The Dow) has lost 3,227 points since its high on January 26, or 12 percent, while the S&P 500 Index (SPX) has dropped by 290 points, or 10 percent, since then as well. This is into “correction” territory and should be drawing negative outlooks on the future of the U.S. economy from every quarter.

But they can’t be found. Aside from perma-bears Michael Snyder and David Stockman, few of the usual suspects can be found who agree with Friedberg. When the Wall Street Journal polled its economists, they remained adamant about the health of the economy: GDP will continue to grow and unemployment will continue to drop:

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The U.S. Economy is Built on Papier-mâché and Politicians’ Promises

This article was published by The McAlvany Intelligence Advisor on Wednesday, November 1, 2017:

What a perfect definition of the American economy! Papier-mâché is defined as a “composite material consisting of paper pieces of pulp, sometimes reinforced with textiles, bound with an adhesive such as glue, starch, or wallpaper paste.” Add in a dose of political promises that everyone knows cannot be kept – not even close – and we have the American economy.

From a distance it looks pretty good. More than pretty good: to the untrained eye the American economy is setting world records, to wit:

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U.S. Economy Powers Through Hurricanes, Beats Forecasts With Three-percent Growth in Third Quarter

This article appeared online at TheNewAmerican.com on Friday, October 27, 2017:  

Putting in its best six-month performance in three years, the U.S. economy barely skipped a beat in the third quarter, growing at a three-percent annual rate. That was just slightly behind the second quarter, which grew at 3.1 percent, but way ahead of economists who had forecast growth for the third quarter at just 2.5 percent.

The Commerce Department said

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Trump’s Growth Target Reduced to 3 Percent

This article appeared online at TheNewAmerican.com on Monday, July 17, 2017:  

For Mick Mulvaney, President Donald Trump’s director of his Office of Management and Budget (OMB), reality is setting in. On the campaign trail Trump repeatedly promised four percent growth in the GDP (gross domestic product): “We’re bringing it from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent.” (October, 2016). Later that month he doubled down during a speech to an audience in North Carolina: “I’m going to get us to 4 percent growth and create 25 million jobs over a 10-year period.”

Mulvaney’s editorial in the Wall Street Journal on Wednesday was unapologetic: “We are promoting MAGAnomics — and that means sustained 3 percent growth.” This new tag, which incorporates the acronym for “Make America Great Again,” is a play on “Reaganomics” from the 1980s:

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Will Mulvaney Have Any More Success with MAGAnomics than Stockman did with Reaganomics?

This article was published by The McAlvany Intelligence Advisor on Monday, July 17, 2017:

English: Official portrait of US Rep. Mick Mul...

Mick Mulvaney.

After serving in the House as a Republican representative from Michigan, David Stockman served as President Ronald Reagan’s OMB director from January 1981 until he quit 4½ years later in frustration. He got half of Reaganomics passed – the tax reduction part. He failed in getting the other half passed – the government spending cut part.

Mick Mulvaney is now Trump’s OMB Director after serving in the House as a Republican from South Carolina. And his job is likely to be as difficult and frustrating as was Stockman’s.

It’s far too soon to speculate about Mulvaney.

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CBO Raises Its Deficit, Debt Forecasts in Latest Revision

This article appeared online at TheNewAmerican.com on Wednesday, July 5, 2017:  

The Congressional Budget Office (CBO) just revised its January report with new data on spending, revenues, and economic growth. The revision isn’t good:

The projected rise in [annual] deficits would be the result of rapid growth in spending for federal retirement and health care programs targeted to older people, and to rising interest payments on the government’s debt, accompanied by only moderate growth in revenue collections.

In other words, the CBO simply doesn’t believe that President Trump’s plans to reduce regulation, cut taxes, and repeal ObamaCare will amount to much. Instead the government programs on autopilot — Social Security, Medicare, and especially debt service on the country’s $20 trillion national debt — will eat up nearly 80 percent of the government’s total budget in less than 10 years. Said the CBO:

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U.S. Rig Count Up, OPEC Influence Down

This article appeared online at TheNewAmerican.com on Monday, April 3, 2017:

An announcement on Friday by Baker Hughes, one of the world’s largest oil-field services companies, put one more nail in OPEC’s coffin. Despite the cartel’s attempt to manipulate world crude-oil prices to its benefit, the oil and gas rig count in the United States jumped by 15 last week and now sits at 824, an increase of 374 in just the last year.

Two days earlier, another nail had been pounded into place:

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Harry Dent, Meet Chris Hamilton

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 29, 2017:

For years Harry Dent (shown) has attempted to turn his demographic analyses into investment advice, with middling performance. It seems that when his advice doesn’t turn out well, he writes another book.

Take, for example, his The Demographic Cliff: How to Survive and Prosper During the Great Deflation Ahead. He contends that the economy can be traced and tracked using the behavior of consumers as they grow, mature and age. Young people marry, have families, buy homes, automobiles, and gadgets. Their acquisitions peak at around age 45 or so, and then decline over time into retirement.

His “waves” are like seasons: 

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Wall Street Facing Headwinds as Boomers Forced to Liquidate Their IRAs, 401Ks

This article appeared online at TheNewAmerican.com on Tuesday, March 28, 2017:

New York Stock Exchange on Wall Street in New ...

Under the law those reaching age 70 and a half must start taking their “required minimum distributions” (RMDs) from their various tax-deferred accounts. These include IRAs, 401Ks, profit-sharing plans, and SEPs. The trouble is that there are so many of them, and they control so many assets, that their RMDs are going to put enormous pressure on the stock market, according to Chris Hamilton, writing at his Econimica blog.

The Baby Boom population cohort is nearly 80 million people, and those born in 1946 are now 71, with millions following right behind. The top one percent own or control about one-third of that cohort’s assets, while the top 10 percent own more than two-thirds, according to the Congressional Budget Office.

The real question, according to Hamilton, is this:

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Americans Eating Out Less Thanks to Higher Prices

This article appeared online at TheNewAmerican.com on Friday, February 24, 2017:

At Jamila's, a Tunesian restaurant on Maple St...

A Reuters/Ipsos survey released on Tuesday revealed that one-third of U.S. adults are eating out less frequently than they were just three months ago. Two-thirds of those staying home said it was because of higher restaurant prices. This news comes on top of reports that restaurant traffic was flat for all of 2016. In fact, the industry as a whole has gained just one percent in traffic since 2009.

Apologists for the industry offered all manner of explanations:

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Ford Cancels Plans for Mexico Plant, Shifts 700 jobs to United States

This article appeared online at TheNewAmerican.com on Wednesday, January 4, 2017:  

English: Ford Motor Company Headquarters, Dear...

Ford Motor Company Headquarters, Dearborn, Mi.

When Bill Ford, Ford Motor Company’s executive chairman, called President-elect Donald Trump on Tuesday to inform him of his company’s decision to cancel its plans to build a new plant in Mexico and instead shift some of those new jobs to Michigan, liberal eyebrows were raised. Was this a “capitulation” to Trump? Was it a “sell-out?” Was it a “peace offering?”

CNN’s Poppy Harlow interviewed Ford’s president and chief operating officer Mark Fields following the company’s announcement, attacking him mercilessly with loaded questions. She peppered him with insinuations that

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Trump’s Treasury Secretary Nominee Wants to Sell Fannie Mae, Freddie Mac

This article appeared online at TheNewAmerican.com on Thursday, December 1, 2016:  

English: The Colonial Revival headquarters of ...

The Colonial Revival headquarters of Fannie Mae

In an interview on FOX Business Network’s Mornings With Maria on Wednesday, Donald Trump’s nominee for treasury secretary, Steve Mnuchin, said one of Trump’s “top 10” priorities was to sell government-sponsored mortgage giants Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). Referred to colloquially as Fannie Mae and Freddie Mac respectively, Mnuchin told Maria:

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Saudi Arabia to Sell $10 Billion in Bonds to Shore Up Its Finances

This article appeared online at TheNewAmerican.com on Wednesday, October 19, 2016:  

Coat of Arms of Saudi Arabia

Coat of Arms of Saudi Arabia

Oil ministers from Saudi Arabia have been traveling the world doing investment “roadshows” to promote their $10-billion bond offering that hits the markets this week. In so doing, they must disclose the risks investors could be taking, and then price the bonds according to those risks.

The Saudis appear to be paying the price for losing their bet about American oil producers. In November 2014 they made a massive wager that they could

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Behind the Jobs Report: Weakness in Manufacturing, Transportation

This article appeared online at TheNewAmerican.com on Friday, October 7, 2016:  

The headline number from Friday’s jobs report was a tepid 156,000 new jobs created in September. Not only did this number fall short of economists’ expectations of 170,000, it was 19-percent below the average job growth of the last three months and 22 percent below the level of monthly job growth of 229,000 in 2015.

The Bureau of Labor Statistics, the agency reporting from inside the Labor Department, was none too sanguine itself in reporting the results:

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The Global Recession Claims its First Victim: Hanjin Shipping

This article was published by The McAlvany Intelligence Advisor on Friday, September 9, 2016:  

English: Hanjin container ship

One of Hanjin’s container ships looking for a place to unload.

When the question about a tree falling in the forest is asked, it’s usually posed as a philosophical one: “If a tree falls in a forest and no one is around to hear it, does it make a sound?” The question is never asked: “What if someone is around who doesn’t want to hear it?”

That appears to explain the kept media’s deafness over the state of the global economy. Even when the Wall Street Journal reported on the bankruptcy of Hanjin Shipping, the world’s seventh largest container shipping company, not one word was spent on asking why. Instead

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Puerto Rico to Default on $422M Payment Today; Likely Another $2B in July

This article appeared online at TheNewAmerican.com on Monday, May 2, 2016:  

Puerto Rico continued its “death spiral,” with its failure to make a $422 million interest payment on Monday on some of the island’s gigantic $73 billion debt. This comes on the heels of missed payments over the last year, and will be followed up by a $2 billion payment due on July 1, which it is also widely anticipated to miss. The payment is due from the island’s Government Development Bank (GDB), the main bond issuer and the island’s fiscal agent.

So far Governor Alejandro Garcia Padilla (above) has, as noted previously in The New American, been able to keep the lights on and the water running by moving money around on the island’s balance sheet, paying only those with the highest and most enforceable claims and dealing as best he can with those holding lower credits. It was Padilla who said his island was in a “death spiral” as far back as last July, because his 3.5 million inhabitants, half of whom live in poverty, didn’t have the money.

But for decades Padilla and his predecessors acted as if they did have it,

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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.
Copyright © 2018 Bob Adelmann