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

“Modern Monetary Theory” Will Pay for AOC’s Green New Deal

This article appeared online at TheNewAmerican.com on Monday, February 18, 2019: 

Stephanie Kelton, professor of public policy and economics at Stony Brook University, served as an advisor to Bernie Sanders’ presidential campaign. She gave similar advice to Alexandria Ocasio-Cortez as she was preparing to be sworn in as a member of the House of Representatives: You can have it all!

Writing in the Huffington Post last November, Kelton said:

We have the outline of a plan. We need a mass mobilization of people and resources, something not unlike the U.S. involvement in World War II or the Apollo moon missions — but even bigger. We must transform our energy system, transportation, housing, agriculture and more.

 

What we don’t (yet) have is the final, vital ingredient — a critical mass of politicians prepared to unleash the enormous power of the public purse to save the planet.

To Kelton’s way of thinking, the only thing standing in the way of spending billions the government doesn’t have to solve problems many think don’t exist, is to change just how we think about the federal budget: “To save the planet and fix historical inequities … we must change the way we approach the federal budget. We must give up our obsession with trying to ‘pay for’ everything with new revenue or spending cuts.”

It starts with discarding that old canard about how inflation

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Consumer Confidence Up, Food Stamp Use Down in Trump Economy

This article appeared online at TheNewAmerican.com on Friday, February 15, 2019: 

Economists expected a rebound in consumer sentiment in February but the index reported by the University of Michigan (UMich) on Friday morning exceeded their expectations. They predicted a reading of 94 (up from January’s 91.2) but got 95.5 instead.

The news behind the headlines was even better: Consumers’ future expectations index jumped from 79.9 to 86.2 while their real (inflation-adjusted) wage gains expectations index was higher “than at any time in more than 15 years,” according to UMich.

In other words,

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Another Small Step Towards Sound Constitutional Mone

This article was published by The McAlvany Intelligence Advisor on Friday, February 8, 2019: 

Doug Casey, writing for his blog International Man, gave his readers a history lesson including the most important one: nearly every currency that blew up through inflation was replaced by sound money, usually gold and silver.

Wrote Casey:

In late 18th-century America, something of minimal value was often described as being “not worth a continental,” which referred to the continental dollar, the American currency at the time of the revolution.

 

The continental was paper money. It had occurred to the colonists that, as their revolution was costing quite a bit to maintain, they could go into “temporary” debt to finance the war.

 

Soon it became clear that the debt could not be repaid. Also, the printing of paper banknotes resulted in inflation. The solution? Print more of them. Further devaluation of the continental motivated the colonists to print more … then more … then still more. The continental became worthless, either for local trade or for repayment of debt.

The Founders learned the lesson:

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New York Governor Cuomo Blames Exodus of Wealthy on Trump

This article appeared online at TheNewAmerican.com on Tuesday, February 5, 2019: 

New York Governor Andrew Cuomo blamed his state’s revenue shortfall of $2.8 billion on Donald Trump during a press conference on Monday, stating,

There is no doubt that the budget we put forward [$175 billion for fiscal year 2019-20] is not supported by the revenues. It’s as serious as a heart attack….

 

SALT [which capped deductions for state income and local property taxes for the wealthy in Trump’s tax reform act] was an economic civil war. It literally restructured the economy to help red [Republican] states at the cost of blue [Democrat] states.

 

That’s exactly what it did. It was a diabolical, political maneuver.

Cuomo could have accepted the blame for the state’s ongoing exodus (out-migration) of wealthy individuals by pinning the blame where it belonged: on his state’s increasingly unfavorable environment for them thanks to its high taxes. Instead, he said he did the right thing by extending the temporary “millionaires’ tax” levied following the financial crisis a decade ago, and signing into law a bill raising sales tax rates to 8.82 percent.

In other words,

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Three Polls Reflect Support for “Soak the Rich” Tax Schemes

This article appeared online at TheNewAmerican.com on Monday, February 4, 2019:  

Three recent polls reflect increasing acceptance of New York Democrat Congresswoman’s Alexandria Ocasio-Cortez (AOC)’s economic worldview: The rich aren’t paying their fair share.

First, the new POLITICO/Morning Consult poll released on Monday found that “76 percent of registered voters believe the wealthiest Americans should pay more in taxes.” A recent Fox News survey showed essentially the same thing: 70 percent favored raising taxes on those earning over $10 million a year, including 54 percent of Republicans.

A Hill/HarrisX poll showed 59 percent of those polled support AOC’s plan to slap a 70-percent marginal rate on income earned over $10 million a year.

And the “wealth tax” proposed by Senator Elizabeth Warren (D-Mass.) is favored by 61 percent of those surveyed for the POLITICO/Morning Consult poll while just 20 percent opposed it.

Such views reflect the politics of envy, revenge, and ignorance. It reflects what Senator Russell Long (who served for 15 years as chairman of the Senate Finance Committee from 1966 to 1981) said about most people’s thinking about such proposals: “Don’t tax you. Don’t tax me. Tax that fellow behind the tree.”

That fellow behind the tree making $10 million or more a year is

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How Many Cities Cook Their Books to Make Their Financials Look Better?

This article was published by The McAlvany Intelligence Advisor on Monday, February 4, 2019: 

Otto von Bismarck is famous for turning Germany from a gaggle of competing provinces into a nation by binding them together using social insurance promises. But he is best known for telling how he did it – behind the scenes: “Laws are like sausages; it is better not to see them being made.”

So it is with many of America’s largest cities when it comes to reporting on their finances. Those sausages are warmed up by the fires used to cook their books.

For the last three years, Truth in Accounting, a non-profit that peers into the dark corners of cities’ kitchens, has exposed the chicanery in its annual report, The Financial State of the Cities. It uses GAAP (generally accepted accounting principles) to analyze what they officially report, and then it goes deeper to find out what’s really going on.

What they learned is ugly: just 12 cities have enough money to pay their bills out of the 75 cities they analyzed. There’s an interactive graph (see Sources below) to show the details, if one dares to know, behind TIA’s conclusions.

TIA also grades each city from A to F depending upon that “taxpayer burden.” There are no “A”s. There are only 12 “B”s. The rest are rated C to F.

TIA staffers really had to dig behind the public numbers in order to determine just how bad some of the financial conditions are. From the report:

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Sanctions on Venezuelan Oil Beginning to Bite

This article appeared at TheNewAmerican.com on Monday, February 4, 2019:  

The impact of sanctions applied to Venezuela’s oil company PdVSA is already beginning to be felt, from drivers in Caracas to Gulf Coast refineries to China’s Communist Party head Xi Jinping and Russia’s President Vladimir Putin.

Last Friday, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) finalized the rules relating to the oil embargo on imports of Venezuela’s heavy crude that was announced on Monday: “Until 12:01 a.m. eastern daylight time, April 28, 2019, U.S. persons are authorized to engage in all transactions and activities that are ordinarily incident and necessary to the purchase and importation of petroleum and petroleum products from [Venezuela’s oil company] PdVSA … provided that any payments to PdVSA … are made to a blocked, interest-bearing account located in the United States.” After that date, “purchases by U.S. persons of petroleum and petroleum products from PdVSA … will be prohibited.”

Citgo Petroleum, a subsidiary of PdVSA, along with Valero Energy Corp., Chevron Corp., and PBF Energy Inc. have seen this coming for months and

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What Recession? Jobs, Manufacturing, Consumer Sentiment All Up in January

This article appeared online at TheNewAmerican.com on Friday, February 1, 2019: 

Three reports released on Friday were good news for everyone involved in the U.S. economy, except for forecasters who once again underestimated its strength. From the Department of Labor came news that in January the economy gained 304,000 new jobs, far exceeding “expert” predictions of 172,000. And even that blowout number failed to appreciate just how strong the economy really is as it overcame both the normal post-holiday layoffs and the partial shutdown of the federal government.

And that job growth is getting stronger, not weaker. The economy has added an average of 241,000 new jobs a month since November, one of the best stretches during the nearly 10-year-old economic expansion. And job gains in 2018 were the strongest in three years.

Omair Sharif, an economist at French banking firm Société Générale, nailed it:

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Economy Ignores Naysayers, Continues Remarkable Run

This article appeared online at TheNewAmerican.com on Wednesday, January 30, 2019: 

The ADP jobs report issued Wednesday put the lie to the naysayers on Wall Street who continue to predict a slowing economy. According to the national bookkeeping firm, private-sector employment increased by 213,000 jobs in January. This report often serves as a harbinger for the report to be issued on Friday from the Labor Department, which measures employment slightly differently.

Those new jobs were created all across the economy: Small employers added 63,000 jobs, while medium-sized companies (50 to 499 employees) hired 84,000 people, and large employers brought on 66,000 new workers in January.

Every aspect of the economy is continuing to enjoy robust growth as well.

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Messages From Maduro’s Military Posturing

This article appeared online at TheNewAmerican.com on Monday, January 28, 2019:  

The hosting of a parade of Russian military hardware in Caracas on Sunday by Venezuela’s President Nicolas Maduro delivered at least three messages: 1) I am in charge here; 2) With the help of my Russian, Chinese, and Cuban friends, that is; and 3) No tyranny remains in power very long unless it is maintained by force or the threat of force.

The show was enhanced with tank rounds being fired into a nearby hillside and by Maduro exclaiming, “Nobody respects the weak, cowards [or] traitors. In this world what’s respected is the brave, the courageous [and] power.” It was further enhanced with video of soldiers kneeling before the dictator and Maduro bellowing “Are you coup plotters?” and their response: “No!”

These messages were delivered after the defection of Colonel Jose Luis Silva, Maduro’s Washington attaché for the last five years. He told Reuters on Saturday that “the top brass of the military and the executive branch are holding the armed forces hostage. There are many, many, who are unhappy.”

And then he addressed them directly:

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White House Recognizes Guaidó as Venezuela’s Interim President While Demonstrators Protest Maduro

This article appeared online at TheNewAmerican.com on Thursday, January 24, 2019: 

In the White House’s statement of support for Venezuela’s Juan Guaidó (the head of the country’s National Assembly) as interim president of that beleaguered country, President Trump said yesterday:

Today, I am officially recognizing the President of the Venezuelan National Assembly, Juan Guaidó, as the Interim President of Venezuela. In its role as the only legitimate branch of government duly elected by the Venezuelan people, the National Assembly invoked the country’s constitution to declare Nicolás Maduro illegitimate, and the office of the presidency therefore vacant….

 

I will continue to use the full weight of United States economic and diplomatic power to press for the restoration of Venezuelan democracy.

It’s going to take more than words to oust the Marxist dictator. As Guaidó himself said, “It needs to be the people, the military, and the international community [to] lead us to take over.”

The people have already responded, with hundreds of thousands of demonstrators (reminiscent of those in 2017) taking to the streets to protest Maduro’s illegitimate presidency on Wednesday. The international community, represented by the Organization of American States (OAS), is holding an emergency meeting on Thursday to consider its role. And there is some evidence that military support of Maduro may be fraying around the edges.

Maduro, however, continues to have the undying support of China, Russia, Cuba, Turkey, and Syria, with China and Russia issuing threats to Trump that he keep his hands off their surrogate. China has provided Maduro with an estimated $65 billion in loans, cash, and investment, while Russia has added substantial financial support as well. Russian Deputy Foreign Minister Sergei Ryabkov told the Russian journal International Affairs that U.S. military intervention “would be a catastrophic scenario that would shake the foundations of the development model which we see in Latin America.”

He added:

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Wyoming Bills Would Require State’s Trust Funds to Hold “Monetary Metals”

This article appeared online at TheNewAmerican.com on Tuesday, January 22, 2019:  

Three bills presented by Wyoming legislators last week requiring the state’s treasurer to invest in gold and silver are the logical follow-up to the state’s decision last summer to declare gold and silver as legal tender, just like the Constitution demands in Article I, Section 10: “No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts.”

If signed into law, the three bills would direct the state’s treasurer to invest 10 percent of the funds held in the state’s pension fund, its reserve fund, and its mineral trust fund in gold and silver. Each bill has 15 or more cosponsors, and they are being sold to other legislators as a necessary counterbalance to those funds’ traditional holdings of government bills, notes, bonds, and other investments. This is especially persuasive, as those funds have suffered paper losses of more than $200 million thanks to investments in foreign securities.

The bills would also reinforce the state’s decision last summer to allow its residents to use gold and silver alongside Federal Reserve Notes (either paper or digital) in daily transactions, and eliminate any taxes on those transfers. That bill received overwhelming support in both the Wyoming House and Senate, and the bills presented last week are expected to get similar support.

Mike Maharrey, communications director for the Tenth Amendment Center, was delighted:

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Bankers to Take Massive Haircut in Proposed Puerto Rican Bankruptcy Settlement

This article appeared online at TheNewAmerican.com on Monday, January 21, 2019:  

The judge sorting out the Puerto Rican bankruptcy got it right. Said Judge Laura Taylor Swain (appointed to the position by Chief Justice John Roberts back in 2017): “There is no decision that can perfectly reconcile all concerns.”

That’s an understatement. The primary revenue source to pay interest on Puerto Rico’s $74 billion in debt is the island’s sales tax. There are barely three million citizens living on the island, and almost 85 percent of them live in poverty. So the sales tax revenue stream comes primarily from tourists [Correction: most of the sales tax – 11.5 percent! – is borne by the locals]. It turns out that that revenue stream has been overcommitted, some of it illegally, in order to support the government’s profligate spending.

All Swain has to do is

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Investors Holding Puerto Rican Bonds Are About to Learn Important Lessons

This article was published by The McAlvany Intelligence Advisor on Monday, January 21, 2019:

Bond investors trusting big dog Wall Street bankers like Goldman Sachs are about to learn (or relearn) at least two very important lessons: 1) don’t trust them; and 2) don’t assume the U.S. government will bail you out if things go south.

Like they are in Puerto Rico.

The island’s debt crisis dates back to 1973 when

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VW Expanding its Chattanooga Plant Again, Investing a Billion Dollars and Creating Jobs

This article appeared online at TheNewAmerican.com on Wednesday, January, 16, 2019:  

Following the announcement that Volkswagen America was going to be expanding its Chattanooga plant to build electric vehicles (EVs), President Trump was delighted. He tweeted: “Congratulations to Chattanooga and Tennessee on a job well done. A big win.”

It was a big win for the president, who invited the CEOs of VW, BMW, and other foreign car manufacturers to the White House in December to persuade them to invest more in the United States. At the same time VW made its announcement at the Detroit Auto Show on Monday, BMW management announced its own expansion plans of its production facilities in the United States. With VW’s financial commitment of $800 million for Tennessee and BMW’s financial commitment of $600 million added to the $340 million VW announced last March for its Chattanooga facility, those two automakers are investing almost $2 billion in their U.S. automobile manufacturing plants. Their expansion plans will require more than 2,000 additional workers, adding to the already robust manufacturing resurgence taking place in the United States.

That resurgence has added nearly 500,000 manufacturing jobs in just the last two years, the most in more than 20 years.

Following the announcement by VW’s CEO Herbert Diess, CEO of Volkswagen AG, his American counterpart, Scott Keogh, CEO of Volkswagen Group of America, added, “We could not be prouder to build the future of mobility here in the United States. We’re known as ‘the peoples’ car’ for a reason, and we plan to build EVs for millions, not millionaires.”

What Keogh didn’t say was that

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Maduro’s Second Six-Year Term Won’t Last Six Months

This article was published by the McAlvany Intelligence Advisor on Wednesday, January 16, 2019:

This writer is happy to declare that his prediction (see Sources below) about Maduro’s longevity appears to be dead wrong. Washington has just issued credible threats that it will turn off Maduro’s cash flow by prohibiting exports of crude from his state-owned PdVSA oil company to U.S. Gulf Coast refineries.

Last Friday, this writer thought that Maduro could not only remain as Venezuela’s dictator for another six-year term, but for as long as he wished. Now his tenure is likely to be measured in months.

An unnamed White House official told the Wall Street Journal on Monday that, “until now, we have been going around the edges. Now, it’s a new dynamic: we are no longer going to be tinkering around the edges.”

Earlier the Journal pointed out that

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Bull Market Could Run for 10 More Years; Tariffs Are Helping

This article appeared online at TheNewAmerican.com on Friday, January 11, 2019:

Jeffrey Vinik, one of America’s most successful hedge-fund operators, told CNBC’s “Squawk Box” on Thursday that he thinks the current bull market in stocks will run another 10 years. Furthermore, Vinik sees such opportunity in stocks that reflects the thriving U.S. economy that he’s reopening the hedge fund that he closed in 2013.

Vinik managed Fidelity’s Magellan Fund from 1992 to 1996, during which time the fund made its investors rich, averaging

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Fed Head Powell Admits He Has Accomplished His Purpose: Stopping Trump

This article was published by The McAlvany Intelligence Advisor on Friday, January 4, 2019: 

If you stop Trump’s economy, you stop Trump. This is more and more clearly the policy of the Federal Reserve under its temporary head, Jerome Powell. Temporary because the Fed, now more than 100 years old, is the bastard child of the international banking establishment and its authority is granted only temporarily to its chairman.

The Fed’s job is to slow the Trump economy to the point where it becomes a liability for his reelection campaign in 2020 instead of an asset. How do we know this? In Powell’s Q and A following the announcement that the central bank was raising interest rates by another 25 basis points on December 19, he was asked a question about the “runoff” of bonds that it has been engaging in for months now, sucking capital out of the financial markets. Asked Heather Long of the Washington Post: “I’m wondering if the Fed has had any discussion of altering the course of the balance sheet normalization and if you could give us any thoughts on what might lead the FOMC to alter that balance sheet normalization in 2019?”

Responded Powell:

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Following Great Jobs Report, Fed Chair Says He’ll Be “Patient” Before Raising Rates Further

This article appeared online at TheNewAmerican.com on Friday, January 4, 2018: 

The jobs report issued by the Department of Labor on Friday was unequivocally positive. Every sector of the economy, save one, saw robust gains in employment, with 312,000 new jobs created in December beating forecasters’ predictions by 30,000 jobs. In addition, the DOL revised October’s and November’s numbers upward by 58,000 jobs. Even the rise in the unemployment rate from a record low of 3.7 percent to 3.9 percent was explained by the number of new people entering the job market.

The number of unemployed workers dropped by 300,000 over the last 12 months, while the labor participation rate jumped. Wages improved as well

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As Economy Slows, Bond Investors Say Fed Won’t Raise Rates

This article appeared online at TheNewAmerican.com on Thursday, January 3, 2019:  

A month ago, bond investors were predicting that the Fed would be raising interest rates several times in 2019. As the economy is now clearly slowing, those same investors are predicting the Fed has now done its job and won’t be raising rates in the New Year. Said the Wall Street Journal:

Fed-funds futures, which investors use to bet on the direction of Fed policy, on Wednesday showed a 91% probability that the central bank’s policy makers will finish the year [2019] with interest rates at or below their current levels.

 

That is a reversal from early November, when futures prices indicated a 90% probability that rates would end 2019 higher than they are now.

The latest report from the Institute of Supply Management merely confirmed that slowing economy, with its manufacturing survey published on Thursday coming in below forecasters’ expectations (which were below October’s).

The New American has been tracking and noting the slowing of the U.S. economy that has been established policy at the Fed for many months now. In November we noted that

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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