This article appeared online at TheNewAmerican.com on Tuesday, December 20, 2016:
The Government Accountability Office (GAO) issued its report on student loan repayments on Tuesday, revealing that 114,000 Americans age 50 and over had their Social Security checks garnished (the GAO calls them “offsets”), including 38,000 over age 65. In total the government recovered $171 million from this group last year, putting many of them into poverty.
Under the law,
This article appeared online at TheNewAmerican.com on Monday, March 26, 2018:
Remington Arms
Remington Arms filed for bankruptcy protection under Chapter 11 in Delaware on Sunday evening. Directors of the 200-year-old company — America’s oldest gun maker — threw in the towel: “Directors have determined that it is advisable and in the best interests of the Company that the Company file … a Voluntary Petition … for Chapter 11 [bankruptcy].”
Observers blamed the president and Adam Lanza for the filing. Remington’s sales of its iconic shotguns, rifles, and pistols were increasing during the 2016 presidential election as American gun owners, fearing that anti-gun Hillary Clinton would assume the presidency in November, went on a buying spree. When Donald Trump won, those gun buyers not only breathed a sigh of relief, they ended the spree, leaving gun shops with vast inventories and gun manufacturers such as Remington with falling sales and revenues.
Others blamed Adam Lanza for using one of Remington’s products, its Bushmaster AR-15, to kill 20 youngsters in Newtown, Connecticut, in December 2012. They note that the families of those victims filed a class-action wrongful-death lawsuit against Remington two years later, which lawsuit is presently before the Connecticut Supreme Court.
Those much more familiar with Remington’s recent history are blaming the company itself
This article was published by The McAlvany Intelligence Advisor on Wednesday, January 24, 2018:
It would seem so. Following Monday’s announcement by President Trump that tariffs of between 30 and 50 percent would immediately apply to imported solar panels from China and washing machines from South Korea, U.S. Trade Representative Robert Lighthizer rejoiced: “The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranches, and businesses.” This view was confirmed by a White House trade official who told reporters:
This article appeared online at TheNewAmerican.com on Wednesday, January 17, 2018:
Teachers protesting over proposwed cuts to government pension plans.
While running for governor of New Jersey, Democrat Phil Murphy was asked what he would do about the state’s overwhelming pension crisis, and he waffled: there’s “no easy answer,” he said. He added that the state would have to do something about the problem. Said Murphy, “The state has to stand up for its side of the bargain. Period. If the state doesn’t, there’s no use in having [any further] discussion.”
Murphy was inaugurated as the New Jersey’s 56th governor on Tuesday and promptly forgot all about the pension tsunami about to engulf the state. Instead he offered both a “wish list” and a “to-do list” for his supporters and Democratic legislators in attendance. His “wish list” contained the usual collection of liberal promises, while his “to-do” list is what he wants the state legislature to bring to his desk within the next 30 days.
His “wish list” was a rehash of his campaign promises — long on generalities but short on specifics — including legalizing marijuana, protecting illegal immigrants from ICE, providing free tuition at the state’s community colleges, eliminating “tax breaks” that large corporations are allegedly unfairly enjoying, investing state funds in more costly “green energy” projects, and paying for it all by raising taxes on those few millionaires still residing in one of the country’s highest-tax states.
He was much more specific with his “to-do” list. He ordered the state’s liberal and heavily Democratic legislators to get off the snide and send him six bills within the next 30 days, each of which, said Murphy, “will be met with a signing ceremony.” Their marching orders from Murphy included new funding for “women’s health” and Planned Parenthood, raising the minimum wage in the state to $15 an hour, mandating “equal pay” for women, requiring employers in the state to provide paid sick leave to their employees, passing laws removing barriers to having illegals vote, and, of course, additional attacks on the state’s more than three million law-abiding gun owners.
He mentioned not a word about the state’s pension crisis, which has been brewing for years and accelerating nearly exponentially. It’s not that Murphy doesn’t know about the crisis or its extent and potential for bankrupting the state. In 2005, acting New Jersey Governor Richard Codey convened a commission to study “the problem,” naming Phil Murphy as its head. In its conclusion, that study urged the state in no uncertain terms to end immediately all “pension holidays” (the skipping of payments to the state’s five pension plans for a period of time), to avoid actuarial “gimmicks” commonly used to make those liabilities appear to be smaller than they actually are, and to eliminate borrowing to pay the state’s contributions. It also recommended a series of reforms, including an end to pension “spiking” (by which employees can sweeten their final payouts as they approach retirement), and raising the age at which plan beneficiaries could retire with full benefits. That last recommendation, which was never implemented, would have raised the full-benefit retirement age from 55 to 60.
So Murphy cannot claim ignorance. He is also certain to know of the accounting chicanery that took place last year, i.e., using the state’s lottery program to help pay the state’s pension contributions. But it was chicanery taken to level of audacity rarely seen even in states as corrupt as New Jersey. Instead of demanding that the lottery’s annual $1 billion proceeds flow into the pension funds’ coffers, the legislature actually transferred the entire program into those coffers and then declared that the future value of those annual proceeds (happily and likely generously estimated at more than $13 billion) was now an asset, reducing (on paper at least) the amount of the unfunded liability.
Moody’s Analytics was not impressed: “The lottery transfer does not change the state’s weak [and] steeply rising pension contribution schedule. [Even after the transfer] there remains considerable risk that the state will be unable to afford rapidly growing pension contributions.”
Also not impressed were two senior fellows at the Manhattan Institute, who just released their study of New Jersey’s pension problems. In January, well before Murphy neatly demurred on even mentioning them, the authors concluded: “It is highly unlikely that New Jersey will generate enough new revenues to meet its pension obligations without severely hobbling the rest of the state’s budget. At the same time, allowing its pension system to continue to accumulate debt by not contributing adequately to it will push New Jersey toward a potentially catastrophic failure of its government pensions.”
At the moment, those five government pension plans have the lowest funding ratio of any state in the union, with a liability estimated to be $124 billion. Those plans are only 30-percent funded currently and declining with each passing day.
But Murphy’s term is for only four years, and if he wins reelection, his tenure ends in eight years. Those plans will likely remain in place, continuing to threaten pensioners who still think they will be getting their benefits, and threatening the state with bankruptcy if it tries to fund them properly. But Murphy will be long gone, proving once again the old adage: Politicians come and go, but the unfunded promises they make live long after them.
This article appeared online at TheNewAmerican.com on Wednesday, September 27, 2017:
Flag of City of Hartford
S&P Global Ratings and Moody’s Investors Services dropped Hartford, Connecticut’s credit rating nearly to the bottom of their rating schedules on Tuesday, one day after Mayor Luke Bronin said no to the city’s two bond insurers who offered to refinance the city’s debt further out into the future.
Explained S&P,
This article appeared online at TheNewAmerican.com on Tuesday, September 19, 2017:
Janet Yellen
What makes tomorrow’s [today’s – Wednesday, September 20] meeting at the Federal Reserve so interesting to market watchers and bond investors is the likelihood that Fed Chair Janet Yellen will provide more details on her plans to begin unwinding the Fed’s balance sheet: how much, how fast, how soon, and what does it all mean? In addition, she is hoping to placate conservatives in Congress who remain unhappy over the Fed’s intervention in the markets in the aftermath of the real estate collapse that triggered the Great Recession.
In June, Yellen outlined some possible scenarios, which included letting some of the bonds on the central bank’s enormous $4.2 trillion balance sheet simply mature without reinvesting the funds in new issues. She suggested the Fed would also start selling off some $10 billion a month of existing securities, and then raise that amount every quarter until it reaches $50 billion a month. This way, by expanding on her plans, and by slowly — very slowly — shrinking the Fed massive balance sheet, she hopes to avoid another “taper tantrum” that bond investors experienced back in 2013 when then-chairman Ben Bernanke first said the Fed should start reducing some of its holdings of U.S. Treasuries and mortgage-backed securities.
If she provides sufficient clarity, and sufficient caution, Yellen might not only start the process without disrupting the market, but also avoid further criticism from congressional critics who think the Fed stepped way out of bounds in starting the whole “quantitative easing” (QE) program in the first place. In that way — again, if she is successful — she will not only cement into place the Fed as a necessary element in the American economy, but show that further “QE” expansions to meet future recessions are a legitimate tool.
Whether she can pull it off is an open question. Keynesian economist Austan Goolsbee, who headed Obama’s Council of Economic Advisors in 2010 and 2011, said, “The final exam, with the grade yet to be determined, is: can the Fed actually get out of this stuff?”
The Fed has been essentially flying blind for years, moving outside not only its mandate (to maximize labor force participation while keeping inflation under control) but its past experience. Said David Blanchflower, a Dartmouth College economist (read: Keynesian) who was on the monetary policy committee of the Bank of England from 2006 to 2009, expressed it perfectly: “We had no idea what we should buy, how much, for how long … [and] there is no idea on the way going out.”
It was all a grand experiment: expand the money supply to keep interest rates so far below market rates that people seeking income would take higher risks — i.e., dividend-paying stocks, real estate ventures, etc. — and home owners would find it easier to buy houses. This was the Keynesian antidote to the economic collapse. Rather than let the economy right itself by itself (see America’s recession and recovery in 1920-1921), Keynesians suffer the hubris to think they know better than the market, and intervened, resulting in the longest, slowest recovery from a recession in American history.
Once the Fed began to embark on its plan to bail out banks and other financial institutions in the wake of the real estate collapse, there was no going back. When the federal government took over Fannie Mae and Freddie Mac — mortgage insurers that were approaching bankruptcy — it found that it needed to buy up billions of their failing mortgages. That explains why $1.7 billion of the Fed’s balance sheet consists of mortgages and mortgage-backed securities.
But when that didn’t work the Fed adopted the strategy of “quantitative easing” (QE) — creating money to spur spending across the economy — which some observers thought would never end.
But it did end, in 2014, and the Fed has been sitting on its massive pile of government and mortgage debt, waiting for the economy to revive enough so it could be offloaded without major economic disruptions.
The Fed won’t be unwinding its entire portfolio. Instead it expects to reduce it by between $800 billion and $1 trillion over the next few years, leaving in place a balance sheet of between $2.5 and $3.2 trillion. This means that the Fed will never again see days when its balance sheet shrinks all the way back to the $900 billion it had prior to the Great Recession.
Its plan should have little impact on short-term rates. Using the 10-year Treasury as the standard, when Yellen’s plan (assuming it begins in October) kicks in, it might boost its yield by perhaps a quarter of a percentage point. This would be the natural result of increasing supply in a market with a fixed demand. When more is supplied, prices will go down. In the bond market that translates into a mini-interest rate hike.
But demand from abroad for U.S. bonds continues to be strong. Yields on 10-year bonds issued by foreign governments such as Japan’s and Germany’s remain far below U.S. 10-year bonds and so any increase in rates here will only make them more attractive to foreign buyers.
In fact, once Yellen has filled in the details, as she is expected to do on Wednesday, investors and market watchers are likely to express a sigh of relief, and continue the Fed-fueled rally in stocks that began in 2009 and that shows little sign of stopping. Diane Swonk, chief economist at DS Economics, agrees: “The start to reducing the Fed’s balance sheet is an action the markets are ready for. The Fed has laid out a roadmap and there is really a sense of relief to finally get it started.”
This article appeared online at TheNewAmerican.com on Wednesday, August 9, 2017:
Three years after Jessica Ghawi was gunned down by mental case James Holmes in an Aurora, Colorado, theater, her parents, at the urging of the Brady Campaign to Prevent Gun Violence (aka the Brady Center), filed suit against the dealer, Lucky Gunner, who sold Holmes his ammunition. In August 2015, the judge threw out their case and required them to pay the gun dealer’s legal fees:
This article appeared online at TheNewAmerican.com on Friday, July 28, 2017:
The Coat of arms of Venezuela
In its foreign travel advisory issued Thursday, the U.S. State Department warned American visitors against traveling to Venezuela and ordered family members of U.S. government employees at its embassy in Caracas to leave the country. It also offered assistance for those employees wanting to leave before the country’s crucial and controversial election on Sunday. The order and warnings were due to “social unrest, violent crime and pervasive food and medicine shortages” in the country.
Sunday’s vote could be crucial for the direction of the country run by Marxist Nicolas Maduro. Already rumors of vote fraud are suggesting that
This article was published by The McAlvany Intelligence Advisor on Friday, July 21, 2017:
It’s no wonder that investors owning bonds of companies in the energy business are getting nervous. They purchased high-yield bonds issued by them, seeking income when there was little to be had elsewhere. Last year they were rewarded with 38 percent gains in their holdings as the industry rebounded.
But in June Bloomberg reported that those same bondholders saw their values drop by two percent. This is on top of energy stocks that have tanked 16 percent so far this year.
It’s the vicious circle facing frackers.
This article was published by the McAlvany Intelligence Advisor on Friday, June 30, 2017:
Seal of Illinois.
The Journal declared that although the state of Illinois “is in deep trouble”, that shouldn’t be troubling to those investors holding billions of the state’s debt that is about to be downgraded to junk. On Saturday morning, barring a miracle, S&P Global will keep its promise and announce that Illinois’s debt rating is being reduced by at least one more notch, to junk status.
The Journal said that downgrade reflects the fact that the state faces “large uncertainties” and has “major exposure to adverse conditions.” But none of those need bother investors, said the Journal. Even though several bond mutual funds have bailed since the first of the year, offloading an estimated $2 billion of the state’s $25 billion in investor-owned debt, the Vanguard Group is standing firm. It has the largest exposure to Illinois in its seven mutual funds, holding $1.2 billion of its debt and claiming that it is “comfortable with (its) risk/reward”.
This article appeared online at TheNewAmerican.com on Thursday, June 29, 2017:
Susana Mendoza
Despite the clock’s ticking on the downgrade of Illinois’ $25 billion of indebtedness to junk status on midnight Friday, investors remain complacent. True, some mutual funds have offloaded $2 billion of Illinois debt in the last few months, but the Wall Street Journal provided salve to investors’ concerns that those remaining invested will be badly hurt. Unnamed analysts, wrote the Journal, “predict prices would drop only a few cents in the event of a junk downgrade.” They noted that Vanguard Group has $1.2 billion of Illinois bonds spread across seven of its bond mutual funds, with a company spokesman saying that it is “comfortable with the risk/reward” of investing in the state’s bonds.
Besides,
This article appeared online at TheNewAmerican.com on Wednesday, June 21, 2017:
In Dr. Ed’s Blog, Ed Yardeni, for 25 years one of the industry’s leading energy strategists, proposed on Wednesday that OPEC should consider going back to Plan A to fund members’ treasuries as Plan B clearly isn’t working:
Rather than [attempting to prop] up the price [of crude oil], maybe OPEC should sell as much of their oil as they can at lower prices to slow down the pace of technological innovation that may eventually put them out of business.
Plan A, it will be remembered,
This article appeared online at TheNewAmerican.com on Monday, June 12, 2017:
Despite 97 percent of Puerto Ricans voting for statehood in Sunday’s plebescite, the chances of adding the island as the country’s 51st state are between slim and none.
The island’s voters had three choices on Sunday’s ballot: Stay as a U.S. territory, move ahead with statehood, or seek full independence as a sovereign nation. This is the fifth vote on the issue since 1967, with the first three failing to gain a majority vote for statehood. That majority is required for the U.S. Congress to consider it. The fourth vote was marred by some 500,000 voters boycotting it to protest the ballot allegedly being rigged in favor of statehood.
The chances this time aren’t any better.
This article was published by The McAlvany Intelligence Advisor on Monday, June 12, 2017:
Ever since he announced his campaign for governor of Puerto Rico, Ricardo Rossello, who was installed as the island’s new governor in January, has been pushing for statehood. Offloading his country’s financial problems onto American taxpayers is the American way. By gaining statehood, Puerto Rico would be poorer than Mississippi, the poorest of the American states, and therefore would be the likely recipient of federal largesse by the truckload. As Rossello said so clearly,
This article was published by The McAlvany Intelligence Advisor on Tuesday, June 6, 2017:
The Trump tax reform proposal has put the Democrats into a deliciously difficult position. He wants to eliminate state and local deductions for income and property taxes (but leave charitable and mortgage deductions alone) as part of his attempt to keep his proposal revenue-neutral.
The amounts involved are enormous. The Urban-Brookings Tax Policy Center estimates that, if passed, it would cost the rich $1.3 trillion over the next 10 years. The Tax Foundation ran the same numbers and came up with an even bigger number: $1.8 trillion.
The law currently allows state and local income and property taxes to be deducted in calculating an individual’s federal tax liability. But, as both tax groups noted, those benefitting the most from the deductions happen to live in liberal, Democrat-leaning and supporting states. This forces Democrats to face a conundrum:
This article appeared online at TheNewAmerican.com on Tuesday, June 6, 2017:
Aetna Insurance Company and Aetna National Bank, Hartford, Conn, from Robert N. Dennis collection of stereoscopic views
Aetna, the $50 billion health insurer that has had its headquarters in Hartford, Connecticut, since 1853, confirmed rumors last week that it was looking to move out of state. The company said, “We are in negotiations with several states regarding a headquarters relocation, with the goal of broadening our access to innovation and the talent that will fill knowledge-economy type positions … and hope to have a final resolution by early summer.”
Hartford’s Mayor Luke Bronin expressed his disappointment:
This article appeared online at TheNewAmerican.com on Tuesday, June 6, 2017:
The Connecticut State Capitol in downtown Hartford
Joseph De Avila, writing in the Wall Street Journal following Aetna’s announcement of its imminent departure from Hartford for more business-friendly climes, used the “B” word: “Hartford, Connecticut’s capital city and hub of the state’s insurance industry, is edging closer to a small club of American municipalities: those that have sought bankruptcy protection.”
As a hanging tends to focus the mind, so is Aetna’s departure focusing more and more attention on Hartford’s financial problems and, to a greater extent, those of the state of Connecticut itself. After being headquartered in Hartford since before the Civil War, Aetna said
This article was published by The McAlvany Intelligence Advisor on Monday, June 5, 2017:
Aetna building in Hartford, Connecticut
The state has a staggering deficit of more than $5 billion, home prices are about where they were a decade ago, unemployment is rising (not falling as it is elsewhere in the northeast), and big companies who have been there for decades are leaving.
What is going on?
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