AuthorTopic: Hyperinflation or Deflation?  (Read 163954 times)

Offline RE

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📉 The U.S. economy is officially in recession, NBER says
« Reply #750 on: June 10, 2020, 12:14:10 AM »
Except for the $RICH$🤑

Is anyone here surprised?  Buehler?

Capitalism on Parade.

RE

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Offline Phil Rumpole

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Re: Hyperinflation or Deflation?
« Reply #751 on: June 24, 2020, 01:34:48 AM »
Bad juju

https://www.marketwatch.com/story/the-decline-of-the-us-dollar-could-happen-at-warp-speed-in-the-era-of-coronavirus-warns-prominent-economist-stephen-roach-2020-06-22?
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📉 The Second Great Depression
« Reply #752 on: June 25, 2020, 02:09:57 AM »
https://www.theatlantic.com/ideas/archive/2020/06/second-great-depression/613360/

The Second Great Depression

At least four major factors are terrifying economists and weighing on the recovery.

June 23, 2020
Annie Lowrey
Staff writer at The Atlantic


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The American economy is reopening. In Alabama, gyms are back in business. In Georgia, restaurants are seating customers again. In Texas, the bars are packed. And in Vermont, the stay-at-home order has been lifted. People are still frightened. Americans are still dying. But the next, queasy phase of the coronavirus pandemic is upon us. And it seems likely that the financial nadir, the point at which the economy stops collapsing and begins growing again, has passed.

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What will the recovery look like? At this fraught moment, no one knows enough about consumer sentiment and government ordinances and business failures and stimulus packages and the spread of the disease to make solid predictions about the future. The Trump administration and some bullish financial forecasters are arguing that we will end up with a strong, V-shaped rebound, with economic activity surging right back to where it was in no time. Others are betting on a longer, slower, U-shaped turnaround, with the pain extending for a year or three. Still others are sketching out a kind of flaccid check mark, its long tail sagging torpid into the future.

Excitement about reopening aside, that third and most miserable course is the one we appear to be on. The country will rebound, as things reopen. The bounce will seem remarkable, given how big the drop was: Retail sales rose 18 percent in May, and the economy added 2.5 million jobs. But absent dramatic policy action, a pandemic depression is possible: the Congressional Budget Office anticipates that the American economy will generate $8 trillion less in economic activity over the next decade than it projected just a few months ago, and that a full recovery might not take hold until the 2030s.
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At least four major factors are terrifying economists and weighing on the recovery: the household fiscal cliff, the great business die-off, the state and local budget shortfall, and the lingering health crisis. Three months ago, the pandemic and ensuing shelter-in-place orders caused mass job loss unlike anything in recent American history. A virtual blizzard settled on top of the country and froze everyone in place. Nearly 40 percent of low-wage workers lost their jobs in March. More than 40 million people lost their jobs in March, April, or May.

Derek Thompson: What does the shocking unemployment report really mean?

Faced with this historic catastrophe, the United States marshaled a historic response: Republicans in the White House and Congress, generally hostile to the notion of economic stimulus for low-income households, came together with Democrats to achieve a $2 trillion rescue package, including a $1,200 onetime payment for most adults and $500 for many children, a radical expansion of the unemployment-insurance system to include gig workers, and a $600-a-week bump to unemployment-insurance payouts. It also created a sweeping small-business rescue plan, covering payroll for companies that kept their employees on the books.

The good: This money kept families afloat—at least for the first, intense months of shelter-in-place. New estimates suggest that the congressional rescue plan prevented poverty rates from rising, with many jobless workers seeing their incomes increase during lockdown due to the expanded unemployment-insurance payouts. The bad: It left out roughly 15 million people in immigrant families, many of whom were working essential jobs stocking grocery shelves, delivering takeout, and drawing blood in hospitals. And the ugly: The big helicopter drop was a onetime thing, and the unemployment-insurance expansion was time-limited. Congress designed Uncle Sam’s help to dry up this summer, with the unemployment rate still in the double digits. Democrats and Republicans are negotiating another stimulus bill, but concerns about surging budget deficits are complicating the talks.

That means households are headed for a cliff. But not everyone will be affected by it equally. Rich workers, the ones with do-anywhere office jobs, have remained relatively untouched by job and earnings losses thus far. Wealthy families have seen their stock portfolios rebound to close to where they were in the winter. But poor workers—disproportionately black and Latino workers, as well as younger workers—have borne the heaviest employment and earnings losses. They entered this recession with no wealth cushion, many saddled with heavy rents and heavy debts. Income and job losses for them translate into a loss of demand economy-wide, absent federal intervention.

If and when that federal intervention dries up, millions of families just keeping their head above water will sink, as lost jobs and canceled hours force them to stop paying their rent and go into arrears on their debt payments. Hunger, homelessness, forgotten plans to attend community college, babies growing up in stressed households: These are the stakes. The CBO forecasts that every quarter through the end of 2021, American consumers will buy $300 billion to $370 billion less than they would have if the pandemic had never happened.

This steep decline in consumer spending will hasten mass business failure, the second factor weighing on the economy. The Paycheck Protection Program and other federal initiatives shoved an oxygen mask on many companies. But the PPP was scaled to help businesses through a short, intense disruption, though the economy is expected to remain sluggish for months and months. Moreover, the PPP did not include much aid for businesses with significant nonpayroll overhead costs, such as restaurants in high-cost cities. This means that many businesses will fail, if customers fail to return. Already, an estimated 100,000 small companies have shut permanently.

On top of that, numerous businesses—airlines, restaurants, live-events businesses, hotels, private schools, oil and gas companies—face severe and stubborn slumps. Students are not willing to pay as much for online learning as in-person instruction. Companies are not financing travel to conferences and sales meetings. Concerts and festivals are not expected to restart until scientists develop a coronavirus vaccine. Economists expect that 42 percent of people recently let go will not return to their former employers.

A third factor behind a possible second Great Depression is the budget crisis facing states and cities. The federal government does not have to balance its ledger year to year, and perpetually spends more than it takes in. Yet every state but Vermont and most cities and towns are required to remain in the black. Right now, sales taxes, real-estate-transfer taxes, income taxes, fines and fees—they are all collapsing, leaving local governments with a budget gap expected to total $1 trillion next year. Without help from Washington, this will necessarily mean massive service cuts and job losses: namely, an estimated 5.3 million job losses.

Annie Lowrey: The small business die-off is here

The shrinking of the government at the state and local level has already started, as Congress dithers on providing fiscal aid. Michigan is facing a $3 billion budget gap this year and a $4 billion one next year: It has instituted a work-share plan, asking two in three state employees to accept a partial furlough. In New Jersey, the government has asked 100,000 public workers to move to abbreviated schedules. Schools have already let go more workers than they did during the Great Recession, with nearly 500,000 positions lost.

A fiscal cliff for families. Rolling business failures. A budget crisis for state and local governments. Each is bad enough. Each might be a big-enough headwind to tip the economy into recession alone. But the last element is the true alpha and omega of our worst-case scenario: the catastrophe of the American government’s management of the novel-coronavirus pandemic.

Like many of its peer nations, the United States imposed shelter-in-place and social-distancing measures to curtail the spread of the virus. But it did so late, leading to the unnecessary deaths of tens of thousands of people. And it wasted the time these extreme measures bought, because the government failed to set up a strong test-and-trace regime. Countries including South Korea and New Zealand crushed the coronavirus. The United States merely patted it down. The country is reopening with the disease still spreading and maiming and killing, as several states experience a dramatic surge in caseloads.

Never getting the pandemic under control means never unleashing the economy. Just look at the casinos in Las Vegas: open, yet half-empty. The botched response means millions of parents will need to continue watching their young children instead of committing to work. It means thousands of offices will remain on work-from-home orders, hurting the commercial operations built to support them. It means Americans will avoid doctors’ offices, bars, and sporting events, staying at home and starving local businesses of revenue. It means localities might end up having to return to extreme social-distancing measures over the summer and fall. And it means fear and mistrust: depressed consumer confidence, ruined faith in government, and concerns about the economy’s ability to recover.

The Trump administration has repeatedly argued that there is a trade-off between the country’s economic health and its public health. But economists and physicians have repeatedly argued that that is untrue: Ending the pandemic would have been the single best thing the federal government could have done to preserve the country’s wealth, health, and economic functioning. The Trump administration, in its hubris, obstinacy, and incompetence, failed to do it.

Still, a second Great Depression is not inevitable. All four of these factors, and the many others hurting families and killing Americans, are amenable to policy solutions. Congress could extend unemployment insurance, offer new help to flailing businesses, send monthly cash grants to poor families, offer fiscal relief to the states, and implement a nationwide test-and-trace program. The collapse is over. The rebound is under way. But a terrifying future awaits us, one that does not have to come to pass.

We want to hear what you think about this article. Submit a letter to the editor or write to letters@theatlantic.com.
Annie Lowrey is a staff writer at The Atlantic, where she covers economic policy.
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Re: 📉 The Second Great Depression
« Reply #753 on: June 25, 2020, 03:48:36 AM »
"...reprehensible lying communist..."

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📉 A second Great Depression? Unemployment crisis hits big cities hard
« Reply #754 on: July 23, 2020, 04:57:18 AM »
https://www.cnbc.com/2020/07/21/some-big-cities-are-hitting-great-depression-unemployment-levels.html

A second Great Depression? Unemployment crisis hits big cities hard
Published Tue, Jul 21 20209:56 AM EDTUpdated Wed, Jul 22 20201:58 PM EDT
Greg Iacurci   @GregIacurci

All theater performances in New York are suspended through the remainder of 2020 due to the coronavirus outbreak. Pictured, shuttered Broadway theaters.
Photo by Spencer Platt/Getty Images

Key Points

    The unemployment rate in New York rose to 20.4% in June, even as the broader country’s improved. Los Angeles had a 19.5% jobless rate.
    The unemployment rate is a measure of financial hardship for American families.
    There is no official definition of an economic “depression.” An unemployment rate near or above 20% is one good indicator, according to some economists.


Great Depression levels of unemployment have hit some of the country’s biggest cities.

The coronavirus pandemic has pushed the jobless rate in New York, Los Angeles and other major urban areas to near or above 20%, nearly twice the national rate.

The unemployment rate is a barometer of financial hardship for American families, since losing a job typically leads to a significant drop in household income.

A rate of 20% means 1 in 5 Americans in the labor force can’t find work.

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That’s double the national peak during the financial crisis of 2008-2009 and a level unseen since the 1930s, when the country was in the throes of its worst-ever economic downturn in the industrial era.

“It’s devastating, in terms of how high that unemployment rate is,” said Ioana Marinescu, an assistant professor of economics at the University of Pennsylvania.
New York and Los Angeles

The local business mix and policies around mandated business closures are likely partly responsible for elevated joblessness in some major urban areas, said Wayne Vroman, a labor economist at the Urban Institute. Cities are also generally areas of higher business concentration when compared with other regions, he said.

The dynamic is pronounced in New York, the nation’s largest city and a major tourism and entertainment hub that supports thousands of jobs in a service economy that’s been ravaged by the coronavirus pandemic.

New York’s unemployment rate rose to 20.4% last month, according to state-level data issued Friday by the Bureau of Labor Statistics that detailed figures for some large metro areas. That’s up from 18.3% in May and 15% in April.

The ranks of unemployed New Yorkers have grown by 261,000 people since April, to more than 811,000, according to the Bureau.

The trend stands in contrast to the broader U.S. labor-market recovery in May and June.

The U.S. unemployment rate fell to 11.1% last month from 14.7% in April, largely driven by furloughed workers being recalled to their jobs as states began reopening their economies.

New York, the hardest-hit area of the country early in the health crisis, has been cautious in lifting the economic shutdowns officials imposed to contain the spread of Covid-19.
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The city entered Phase 4 of its reopening on Monday, adding media production, professional sports (without fans) and some cultural institutions like zoos and botanical gardens to the businesses that can reopen, with some limits.

But Broadway theaters remain shut until next year, indoor dining is prohibited and officials haven’t provided a timeline as to when gyms, malls, movie theaters and museums can reopen.

Los Angeles, the second-largest U.S. city, has seen a similar level of joblessness.

Its unemployment rate recovered slightly in June but remains startlingly high — at 19.5%, versus 20.6% in May, according to data published Friday by California’s Employment Development Department.

That reduction is in jeopardy due to rising coronavirus cases in California, which recently led Gov. Gavin Newsom to re-shut bars and suspend indoor activity for restaurants, wineries, movie theaters and museums, among other businesses.

“Los Angeles, sadly, is going through a new health crisis,” Marinescu said. “New York isn’t.

“And yet, the unemployment numbers are still so bad,” she added. “That shows to me how scarring the effects of the coronavirus are.”
What is a ‘depression’?

There isn’t an official definition of an economic “depression.”

But an unemployment rate around 20% or greater is a likely indicator, according to some experts.

“I think very few economists would find that controversial,” Vroman said. “Twenty percent is so out of bounds for our post-World War II experience.

“It’s new territory,” he added, noting that even an unemployment rate of 15% would be considered “extraordinary.”

The metro area of Chicago, the nation’s third-largest city, saw its jobless rate grow to 16.1% in June, from 15.4% the month prior, according to the Bureau of Labor Statistics.

The Detroit metro area saw an improvement in its unemployment rate, although it remained high, at 17.7% in June, versus 23.2% in May.

The only period in U.S. history to actually have received the “depression” label — the Great Depression — saw joblessness peak above 25%, according to the National Bureau of Economic Research.
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Since then, the highest it got was 10.8% during the recession in the early 1980s, according to the Bureau of Labor Statistics, which began tracking the official rate in the late 1940s.

Some big cities appear to have been spared some of the pain felt in other major metropolises, however.
I don’t think many economists would classify a contraction lasting less than one year as a depression, so we aren’t there yet.
Stephen Woodbury
labor economist at Michigan State University

The metro area of Houston, the nation’s fourth-largest city, had a 9.9% unemployment rate in June, according to the Texas labor department.

The metro areas of Seattle, Miami and Cleveland had rates of 9.3%, 11.2% and 13.5%, respectively — all elevated by historical standards but far below depression standards.

As is the case in Los Angeles, some economists fear improving conditions could stall or get worse again as certain areas of the country reimpose economic shutdowns to halt an increase in coronavirus cases.

That could also be the case in Nevada, for example.

Las Vegas had the highest unemployment rate of any metro area in May, at 29%, according to the Bureau of Labor Statistics. (The agency won’t issue June metro-area data for all big U.S. cities until next week.)

There are hints that unemployment may have improved last month in Las Vegas, since Nevada’s unemployment rate fell the most of any state in June. But Gov. Steve Sisolak recently closed bars again and imposed limits on indoor dining.
Unemployment duration

However, elevated jobless spells in metro areas would likely have to persist for a long time in order to qualify the current recession as being severe enough to qualify as a depression, according to some experts.

“I don’t think many economists would classify a contraction lasting less than one year as a depression, so we aren’t there yet,” said Stephen Woodbury, a labor economist at Michigan State University.

“In fact, I would guess most economists would be reluctant to call a contraction a depression until it has lasted two to three years, similar to the Great Depression of the 1930s,” he said.

The current unemployment crisis in big cities also may not be a similar indicator of hardship it’s been in the past.

Those able to collect unemployment benefits have been receiving an extra $600 a week, allowing some lower-wage workers to more than fully replace their lost pay. However, that supplement is scheduled to end after July barring congressional action.
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https://www.cnbc.com/2020/08/04/the-fed-is-expected-to-make-a-major-commitment-to-ramping-up-inflation-soon.html

The Fed is expected to make a major commitment to ramping up inflation soon
Published Tue, Aug 4 20203:43 PM EDT
Jeff Cox   @jeff.cox.7528   @JeffCoxCNBCcom

Federal Reserve Board Chairman Jerome Powell speaks during a press conference following the January 28-29 Federal Open Market Committee meeting, in Washington, DC on January 29, 2020.
Mandel Ngan | AFP | Getty Images

Key Points

    The Federal Reserve is completing a year-long policy review and is expected to announce the results soon.
    One big change would be a harder commitment to getting inflation higher, through a pledge not to raise rates until it hits at least 2%.
    Markets have been betting on higher inflation, with surging gold prices, a falling dollar and a rush to inflation-indexed bonds.


In the next few months, the Federal Reserve will be solidifying a policy outline that would commit it to low rates for years as it pursues an agenda of higher inflation and a return to the full employment picture that vanished as the coronavirus pandemic hit.

Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.

To achieve that goal, officials would pledge not to raise interest rates until both the inflation and employment targets are hit. With inflation now closer to 1% and the jobless rate higher than it’s been since the Great Depression, the likelihood is that the Fed could need years to hit its targets.

The policy initiatives could be announced as soon as September. Addressing the issue last week, Fed Chairman Jerome Powell said only that a year-long examination of policy communication and implementation would be wrapped “in the near future.” The culmination of that process, which included public meetings and extensive discussions among Fed officials, is expected to be announced at or around the Federal Open Market Committee’s meeting.
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US economy will be struggling against disinflationary pressures rather than inflationary, says Fed’s Powell

Markets are anticipating a Fed that would adopt an even more accommodative approach than it did during the Great Recession.

“We remain firmly of the view that this is a deeply consequential shift, even if it is one that has been seeping into Fed decision-making for some time, that will shape a different Fed reaction function in this cycle than in the last,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

Indeed, Powell said the policy statement will be “really codifying the way we’re already acting with our policies. To a large extent, we’re already doing the things that are in there.”

Guha, though, said the approach “would be sharply more dovish even than the strategy followed by the [Janet] Yellen Fed” when the central bank held rates near zero for six years even after the end of the Great Recession.
All-in on inflation

One implication is that the Fed would be slower to tighten policy when it sees inflation rising.

Powell and his colleagues came under fire in 2018 when they enacted a series of rate increases that eventually had to be rolled back. The Fed’s benchmark overnight lending rate is now targeted near zero, where it moved in the early days of the pandemic.

The Fed and other global central banks have been trying to gin up inflation for years under the reasoning that a low level of price appreciation is healthy for a growing economy. They also worry that low inflation is a problem that feeds on itself, keeping interest rates low and giving policymakers little wiggle room to ease policy during downturns.

In the latest shot at getting inflation going, the Fed would commit to enhanced “forward guidance,” or a commitment not to raise rates until its benchmarks are hit and, in the case of inflation, perhaps exceeded.

In recent days, Fed regional presidents Robert Kaplan of Dallas and Charles Evans of Chicago have expressed varying levels of support for enhanced guidance. Evans in particular said he would like to keep rates where they are until inflation gets up around 2.5%, which it has not been for most of the past decade.

“We believe that the Fed publicly would welcome inflation in a range of 2% up to 4% as a long overdue offset to inflation running below 2% for so long in the past,” said Ed Yardeni, head of Yardeni Research.
The market weighs in

The investing implications are substantial.

Yardeni said the approach would be “wildly bullish” for alternative asset classes and in particular growth stocks and precious metals like gold and silver. Guha said the Fed’s moves would see “real yields persistently lower, the dollar lower, volatility lower, credit spreads lower and equities higher.”

Investors have been making heavy bets that would be consistent with inflation: record highs in gold, sharp declines in the U.S. dollar and a rush into TIPS, or Treasury Inflation Protected Securities. TIPS funds have seen six consecutive weeks of net inflows of investor cash, including $1.9 billion and $1.5 billion respectively during the weeks of June 24 and July 1 and $271 million for the week ended July 29, according to Refinitiv.

Still, the Fed’s poor record in reaching its inflation target is raising doubts.

“If there’s any lesson that should have been learned by all the world’s central banks it’s that picking an inflation target is easy. Trying to actually get there is extraordinarily difficult,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Just manipulating interest rates doesn’t mean you get to some finger-in-the-air inflation rate that you choose.”

Boockvar doubts the wisdom of wanting to crank up inflation at a time when unemployment is so high and the economic recovery in jeopardy.

“It doesn’t make any economic sense whatsoever,” he said. “The consumer is very fragile right now. The last thing we should be shooting for is a higher cost of living.”
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📉 The Next Global Depression Is Coming and Optimism Won’t Slow It Down
« Reply #756 on: August 08, 2020, 01:01:49 AM »
If all we get is a Depression, we'll be doing good.

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The Next Global Depression Is Coming and Optimism Won’t Slow It Down

Ian Bremmer    August 6, 2020


The world is confused and frightened. COVID-19 infections are on the rise across the U.S. and around the world, even in countries that once thought they had contained the virus. The outlook for the next year is at best uncertain; countries are rushing to produce and distribute vaccines at breakneck speeds, some opting to bypass critical phase trials. Meanwhile, unemployment numbers remain dizzyingly high, even as the U.S. stock market continues to defy gravity. We’re headed into a global depression–a period of economic misery that few living people have experienced.

We’re not talking about Hoovervilles. Today the U.S. and most of the world have a sturdy middle class. We have social safety nets that didn’t exist nine decades ago. Fortunately, that’s true even for developing countries. Most governments today accept a deep economic interdependence among nations created by decades of trade and investment globalization. But those expecting a so-called V-shaped economic recovery, a scenario in which vaccinemakers conquer COVID-19 and everybody goes straight back to work, or even a smooth and steady longer-term bounce-back like the one that followed the global financial crisis a decade ago, are going to be disappointed.

Let’s start with the word depression. There is no commonly accepted definition of the term. That’s not surprising, given how rarely we experience catastrophes of this magnitude. But there are three factors that separate a true economic depression from a mere recession. First, the impact is global. Second, it cuts deeper into livelihoods than any recession we’ve faced in our lifetimes. Third, its bad effects will linger longer.

A depression is not a period of uninterrupted economic contraction. There can be periods of temporary progress within it that create the appearance of recovery. The Great Depression of the 1930s began with the stock-market crash of October 1929 and continued into the early 1940s, when World War II created the basis for new growth. That period included two separate economic drops: first from 1929 to 1933, and then again from May 1937 into 1938. As in the 1930s, we’re likely to see moments of expansion in this period of depression.
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Depressions don’t just generate ugly stats and send buyers and sellers into hibernation. They change the way we live. The Great Recession created very little lasting change. Some elected leaders around the world now speak more often about wealth inequality, but few have done much to address it. Large segments of society, particularly people who weren’t already on the verge of retirement, were able to hunker down and later return to the same approach to saving and investing they practiced before the crisis. They were rewarded with a period of solid, long-lasting recovery. That’s very different from the current crisis. COVID-19 fears will bring lasting changes to public attitudes toward all activities that involve crowds of people and how we work on a daily basis; it will also permanently change America’s competitive position in the world and raise profound uncertainty about U.S.-China relations going forward.
Bureau of Labor Statistics, National Bureau of Economic Statistics, Eurasia Group
Bureau of Labor Statistics, National Bureau of Economic Statistics, Eurasia Group

In addition, political dysfunction–in the U.S. and around the world–is more severe than in 2008–2009. As the financial crisis took hold, there was no debate among Democrats and Republicans about whether the emergency was real. In 2020, there is little consensus on what to do and how to do it.

Return to our definition of an economic depression. First, the current slowdown is without doubt global. Most postwar U.S. recessions have limited their worst effects to the domestic economy. But most were the result of domestic inflation or a tightening of national credit markets. That is not the case with COVID-19 and the current global slowdown. This is a synchronized crisis, and just as the relentless rise of China over the past four decades has lifted many boats in richer and poorer countries alike, so slowdowns in China, the U.S. and Europe will have global impact on our globalized world. This coronavirus has ravaged every major economy in the world. Its impact is felt everywhere.

Social safety nets are now being tested as never before. Some will break. Health care systems, particularly in poorer countries, are already buckling under the strain. As they struggle to cope with the human toll of this slowdown, governments will default on debt. For all these reasons, middle-income and developing countries are especially vulnerable, but the debt burdens and likelihood of defaults will pressure the entire global financial system.

The second defining characteristic of a depression: the economic impact of COVID-19 will cut deeper than any recession in living memory. The monetary-policy report submitted to Congress in June by the Federal Reserve noted that the “severity, scope, and speed of the ensuing downturn in economic activity have been significantly worse than any recession since World War II.” Payroll employment fell an unprecedented 22 million in March and April before adding back 7.5 million jobs in May and June. The unemployment rate jumped to 14.7% in April, the highest level since the Great Depression, before recovering to 11.1% in June.
A London coffee shop sits closed as small businesses around the world face tough odds to survive | Andrew Testa—The New York Times/Redux
A London coffee shop sits closed as small businesses around the world face tough odds to survive | Andrew Testa—The New York Times/Redux

Now for the bad news. First, that data reflects conditions from mid-June–before the most recent spike in COVID-19 cases across the American South and West that has caused at least a temporary stall in the recovery. Signs of corporate economic distress are mounting. And second and third waves of coronavirus infections could throw many more people out of work. In short, there will be no sustainable recovery until the virus is fully contained. That probably means a vaccine. Even when there is a vaccine, it won’t flip a switch bringing the world back to normal. Some will have the vaccine before others do. Some who are offered it won’t take it. Recovery will come by fits and starts.

Leaving aside the unique problem of measuring the unemployment rate during a once-in-a-century pandemic, there is a more important warning sign here. The Bureau of Labor Statistics report also noted that the share of job losses classified as “temporary” fell from 88.6% in April and May to 78.6% in June. In other words, a larger percentage of the workers stuck in that (still historically high) unemployment rate won’t have jobs to return to. That trend is likely to last because COVID-19 will force many more businesses to close their doors for good, and governments won’t keep writing bailout checks indefinitely.

These factors lead us toward the third definition of depression: a slowdown that will last longer than recessions of the past 80 years. The Congressional Budget Office has warned that the unemployment rate will remain stubbornly high for the next decade, and economic output will remain depressed for years unless changes are made to the way government taxes and spends. Those sorts of changes will depend on broad recognition that emergency measures won’t be nearly enough to restore the U.S. economy to health. What’s true in the U.S. will be true everywhere else.
Eurasia Group
Eurasia Group

In the early days of the pandemic, the G-7 governments and their central banks moved quickly to support workers and businesses with income support and credit lines in hopes of tiding them over until they could safely resume normal business. The Fed, European Central Bank, Bank of England and Bank of Japan threw out the rule book to add unprecedented support to ensure markets could continue to function.

This liquidity support (along with optimism about a vaccine) has boosted financial markets and may well continue to elevate stocks. But this financial bridge isn’t big enough to span the gap from past to future economic vitality because COVID-19 has created a crisis for the real economy. Both supply and demand have sustained sudden and deep damage. And it will become progressively harder politically to impose second and third lockdowns.

That’s why the shape of economic recovery will be a kind of ugly “jagged swoosh,” a shape that reflects a yearslong stop-start recovery process and a global economy that will inevitably reopen in stages until a vaccine is in place and distributed globally.

What could world leaders do to shorten this global depression? They could resist the urge to tell their people that brighter days are just around the corner. People need leaders to take responsibility for tough decisions.

From a practical standpoint, governments could do more to coordinate virus-containment plans. But they could also prepare for the need to help the poorest and hardest-hit countries avoid the worst of the virus and the economic contraction by investing the sums needed to keep these countries on their feet. Today’s lack of international leadership makes matters worse. If COVID-19 can teach world leaders the value of working together to avoid common catastrophes, future global emergencies will be that much easier to manage for the good of all. Unfortunately, that’s not the path we’re on.
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    Seattle City Council Won’t Slash Police Budget, but OKs Cop Layoffs
    The Daily Beast
    Seattle City Council Won’t Slash Police Budget, but OKs Cop Layoffs

    A majority of Seattle's City Council on Wednesday voted down a proposal to slash the police department's remaining 2020 budget by 50 percent. The vote by the budget committee—which came one day after the city's mayor and police chief held a press conference to criticize the proposal—signaled some progress for Black Lives Matter and anti-police brutality advocates who've pushed to defund departments across the U.S. and reallocate funds to community services, including housing and youth programs. The budget-cut plan, proposed by council member Kshama Sawant, would have cut $54 million from the Seattle PD immediately through layoffs and reallocated it to programs, including $34 million for affordable housing.

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Offline Phil Rumpole

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Re: Hyperinflation or Deflation?
« Reply #757 on: August 08, 2020, 01:45:07 AM »
Bill said from the outset that Asian countries would handle covid much better and by sheer coincidence, they have; so it's not an equal global slowdown. I was there in January and saw all the precautions in place that only began getting rolled out in the West in mid March. On top of that everyone in China and Singapore is skinny and the life expectancy is probably ten years less, so less susceptible to death. Remember when everyone thought corona ONLY affected asians, such innocence lost. They had more cooperation from the outset and more authority to enforce, although $1650.00 fine for breaking curfew or being caught outside your radius in Vic should make everyone there behave. The incoming quarantine system also much tighter in Asia, done at airport not hotels.

Overall they are largely getting back to business. Companies like Mitsubishi pulling out of UK, Europe and US markets to focus on Asia is probably  for that reason. They know the local automakers will get the bailouts in US and Europe when people with no work and not allowed to go anywhere unnecessary either, won't be updating to new cars.

Will this all cause their currencies to strengthen against pound, euro and dollar?
« Last Edit: August 08, 2020, 02:14:34 AM by Phil Rumpole »
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https://www.cnbc.com/2020/08/04/the-fed-is-expected-to-make-a-major-commitment-to-ramping-up-inflation-soon.html

The Fed is expected to make a major commitment to ramping up inflation soon
Published Tue, Aug 4 20203:43 PM EDTUpdated Tue, Aug 4 20207:58 PM EDT
Jeff Cox   @jeff.cox.7528   @JeffCoxCNBCcom


Key Points

    The Federal Reserve is completing a yearlong policy review and is expected to announce the results soon.
    One big change would be a harder commitment to getting inflation higher, through a pledge not to raise rates until it hits at least 2%.
    Markets have been betting on higher inflation, with surging gold prices, a falling dollar and a rush to inflation-indexed bonds.

Federal Reserve Board Chairman Jerome Powell speaks during a press conference following the January 28-29 Federal Open Market Committee meeting, in Washington, DC on January 29, 2020.
Federal Reserve Board Chairman Jerome Powell speaks during a press conference following the January 28-29 Federal Open Market Committee meeting, in Washington, DC on January 29, 2020.
Mandel Ngan | AFP | Getty Images

In the next few months, the Federal Reserve will be solidifying a policy outline that would commit it to low rates for years as it pursues an agenda of higher inflation and a return to the full employment picture that vanished as the coronavirus pandemic hit.

Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.

To achieve that goal, officials would pledge not to raise interest rates until both the inflation and employment targets are hit. With inflation now closer to 1% and the jobless rate higher than it’s been since the Great Depression, the likelihood is that the Fed could need years to hit its targets.

The policy initiatives could be announced as soon as September. Addressing the issue last week, Fed Chairman Jerome Powell said only that a yearlong examination of policy communication and implementation would be wrapped “in the near future.” The culmination of that process, which included public meetings and extensive discussions among central bank officials, is expected to be announced at or around the Federal Open Market Committee’s meeting.
VIDEO01:28
US economy will be struggling against disinflationary pressures rather than inflationary, says Fed’s Powell

Markets are anticipating a Fed that would adopt an even more accommodative approach than it did during the Great Recession.

“We remain firmly of the view that this is a deeply consequential shift, even if it is one that has been seeping into Fed decision-making for some time, that will shape a different Fed reaction function in this cycle than in the last,” said Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

Indeed, Powell said the policy statement will be “really codifying the way we’re already acting with our policies. To a large extent, we’re already doing the things that are in there.”

Guha, though, said the approach “would be sharply more dovish even than the strategy followed by the [Janet] Yellen Fed” when the central bank held rates near zero for six years even after the end of the Great Recession.
All in on inflation

One implication is that the Fed would be slower to tighten policy when it sees inflation rising.

Powell and his colleagues came under fire in 2018 when they enacted a series of rate increases that eventually had to be rolled back. The Fed’s benchmark overnight lending rate is now targeted near zero, where it moved in the early days of the pandemic.

The Fed and other global central banks have been trying to gin up inflation for years under the reasoning that a low level of price appreciation is healthy for a growing economy. They also worry that low inflation is a problem that feeds on itself, keeping interest rates low and giving policymakers little wiggle room to ease policy during downturns.

In the latest shot at getting inflation going, the Fed would commit to enhanced “forward guidance,” or a commitment not to raise rates until its benchmarks are hit and, in the case of inflation, perhaps exceeded.

In recent days, Fed regional Presidents Robert Kaplan of Dallas and Charles Evans of Chicago have expressed varying levels of support for enhanced guidance. Evans in particular said he would like to keep rates where they are until inflation gets up around 2.5%, which it has not been for most of the past decade.

“We believe that the Fed publicly would welcome inflation in a range of 2% up to 4% as a long overdue offset to inflation running below 2% for so long in the past,” said Ed Yardeni, head of Yardeni Research.
The market weighs in

The investing implications are substantial.

Yardeni said the approach would be “wildly bullish” for alternative asset classes and in particular growth stocks and precious metals like gold and silver. Guha said the Fed’s moves would see “real yields persistently lower, the dollar lower, volatility lower, credit spreads lower and equities higher.”

Investors have been making heavy bets that would be consistent with inflation: record highs in gold, sharp declines in the U.S. dollar and a rush into TIPS, or Treasury Inflation Protected Securities. TIPS funds have seen six consecutive weeks of net inflows of investor cash, including $1.9 billion and $1.5 billion respectively during the weeks of June 24 and July 1 and $271 million for the week ended July 29, according to Refinitiv.

Still, the Fed’s poor record in reaching its inflation target is raising doubts.

“If there’s any lesson that should have been learned by all the world’s central banks it’s that picking an inflation target is easy. Trying to actually get there is extraordinarily difficult,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Just manipulating interest rates doesn’t mean you get to some finger-in-the-air inflation rate that you choose.”

Boockvar doubts the wisdom of wanting to crank up inflation at a time when unemployment is so high and the economic recovery in jeopardy.

“It doesn’t make any economic sense whatsoever,” he said. “The consumer is very fragile right now. The last thing we should be shooting for is a higher cost of living.”
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📉 The Crash Of 2020: Into The End Game
« Reply #759 on: September 04, 2020, 04:37:05 AM »
https://www.forbes.com/sites/investor/2020/09/03/the-crash-of-2020-into-the-end-game/#7f006b56715d

Editors' Pick|45,166 views|Sep 3, 2020,11:27am EDT
The Crash Of 2020: Into The End Game
Intelligent Investing
Clem ChambersSenior Contributor
Intelligent InvestingContributor Group
Investing

Macro view of a screen of trading terminal with abstract financial graph and digits. Trading and forex concept. 3D Rendering  getty

It is a little annoying when you see an obvious trading set up but you don’t press the button. This is one such instance I wrote about in July: “I should buy Berkshire Hathaway BRK.B -1.6%, but again while the Nasdaq zooms with Fed new money, the time is not right. If inflation rips then all the hokey old Buffett businesses will do great because the one thing inflation does, is get things moving.”

Back then the chart looked like this:
The Nasdaq chart back in July

The Nasdaq chart back in July Credit: ADVFN

Now it looks like this:
The Nasdaq chart now

The Nasdaq chart now Credit: ADVFN

The reason you do not execute is ‘fear’ and while this is great news for Berkshire shareholders it is another reason to be very fearful in the market.
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The market is meant to be a super-efficient valuation mechanism but it appears to be broken. In a nutshell, a company the scale of Berkshire Hathaway should not be performing this way. The stock market has lost its ability to value companies and is now a warehouse for cash.

It all goes back to the Federal Reserve and their bailout programs where the cash in the main is sequestered in the banking system. Banks have the wherewithal to lend vast amounts but won’t. It’s understandable, because who exactly do you want to lend new money to in this apocalyptic economic environment? But money is like honey, given the slightest chance it flows and pretty soon gets everywhere. The money is escaping into equities, initially the incredibly liquid big cap internet darlings and it is now filtering down the hierarchy to the next division.

One mechanism is said to be covered call trading. The incredible recovery in the market has brought in the “buy the dippers” and the FOMO (fear of missing out) crowd, which have fueled a big spike in trading in options. This has pushed up premiums that has driven call option sellers to sell calls and buy the physical stock to cover their upside risk. The call sellers, buyers of stock to cover their call sells, pushes the stock price up and draws more option call buyers in, which drives up premiums, which attracts call sellers, and the virtuous circle spins with a progression of ever higher stock prices.

If this is the loop driving this bubble there will soon be hell to pay.

However, it’s not the only factor at play. Warren Buffett himself is indicating another driver: inflation. He has bought into Barrick Gold (GOLD), an obvious inflation hedging move, and is focusing on buying into Japan, an economy of legendary deflationary tendencies. If you were to hedge your cash pile against the possibility of U.S. bailout-driven inflation, you too would want investments denominated in yen.

Not only is Japan a very Covid-resistant society, it is also the master of creating liquidity for its economy by enabling debt rather than dropping helicopter money on its citizens. The neutral effect of QE on inflation is ensured by matching new assets with new liabilities, and that stops cash quickly escaping into the hands of people who would obviously go spend it as fast as possible and drive up prices in the process. The latest batch of stimulus has plenty of helicopter money in it and that is why the Federal Reserve is adjusting its inflation stop signals and redefining them as green lights.

Reasonable inflation is great for stocks and if that inflation was to get hot but not too hot, it would mean stocks would be a fine place to stash cash. If rates stay low as promised then even if the indices just levitate by inflation the Federal Reserve is offering the world a simple carry trade to borrow cash and buy stocks. If institutions can borrow money at zip and buy stocks to let inflation raise stocks by 6% or 7%, they surely will.

So where is the problem?

The problem is fundamentals. They might be serving great martinis in the bar, but under the waterline the Titanic is split from stem to stern. While the rate at which the ship is sinking might have slowed it is still sinking. Until the day the world economy gets back to pre-Covid levels it will be building a Himalaya of debt. Getting back to sustainability is a long road and it will be hard to get there without a reset.

Whether the market is now an option market Ponzi scheme, levitated by bailout money trickle down or inflation expectations or all three, it makes the market incredibly dangerous, which is what options premiums are telling you. As such, I’m not too annoyed for not following my own Berkshire Hathaway chart and while I hope some of you did, it is just another of many red flags that the stock market is out of control.

We are in the end game of the bubble and it has to be underlined that the bubble can run and run. But it also must be understood that when the bubble bursts it will produce another calamity and it will be violent. This will undoubtedly be followed by yet another bailout. Whether this is sustainable is an open question but it certainly doesn’t seem conducive to low inflation.

This is a perfect traders’ market and the luscious returns for FOMO investors will remain irresistible, until suddenly they get crushed. Meanwhile buy and hold investors are in for a great stretch followed by another test of their resolve.

Personally I am risk off but probably not enough. The Nasdaq vertical is in place and how high and how fast that goes is anyone’s guess. I’m not chasing it.

(Of course this time is different, Nasdaq to 100,000. Two trillion dollar companies, why not $10 trillion. Printing money doesn’t create inflation. The stock market isn’t connected with the economy.)

One last thing:
The Federal Reserve's balance sheet

The Federal Reserve's balance sheet Credit: Federal Reserve

The Fed built this bubble and for now it’s stopped pumping. That is at least a reason to keep a close eye on its website.

 

——

Clem Chambers is the CEO of private investors website ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide.

Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards in 2018.
Follow me on Twitter or LinkedIn. Check out my website.
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📉 US states face biggest cash crisis since the Great Depression
« Reply #760 on: October 30, 2020, 07:31:54 AM »
Here's your economic knock on effect.

RE

https://www.foxbusiness.com/markets/us-states-face-biggest-cash-crisis-since-the-great-depression

Published October 29
US states face biggest cash crisis since the Great Depression
The drop in tax revenue has led to a total shortfall expected in the hundreds of billions of dollars



By Heather Gillers, Gunjan BanerjiThe Wall Street Journal
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Connecticut acted fast. Social distancing, lockdowns and testing slashed Covid-19 cases in the spring.

But when Comptroller Kevin Lembo opened an email from his budget director on April 15, it was clear the state’s quick action to contain the pandemic hadn’t insulated its finances.

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“We hit the brakes so quickly on the economy that we went through the windshield,” his deputy wrote.

Connecticut is projecting a total revenue decline of $8.4 billion through the 2024 budget year—more than twice the rainy day fund built up over the past three years.

“All you can do is grip the bar as tight as you can, make the smartest decisions you can in real time, plan for the worst and be surprised at something less than worst,” said Mr. Lembo.

FILE - In this Sept. 2, 2020, file photo, a passerby walks past a business storefront with store closing signs in Boston. The U.S. unemployment rate dropped to 7.9% in September, but hiring is slowing and many Americans have given up looking for work

U.S. states are facing their biggest cash crisis since the Great Depression.

Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody’s Analytics, the economic analysis arm of Moody’s Corp. The estimates assume no additional fiscal stimulus from Washington, further coronavirus-fueled restrictions on business and travel, and extra costs for Medicaid amid high unemployment.

That’s greater than the 2019 K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure, according to the National Association of State Budget Officers.

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Deficits have already prompted tax hikes and cuts to education, corrections and parks. State workers are being laid off and are taking pay cuts, and the retirement benefits for police, firefighters, teachers and other government workers are under more pressure.

Even after rainy day funds are used, Moody’s Analytics projects 46 states coming up short, with Nevada, Louisiana and Florida having the greatest gaps as a percentage of their 2019 budgets. Louisiana said it didn’t expect its shortfall to be as large as Moody’s projected.

“There is no real model for a crisis like this,” said New Jersey Treasurer Elizabeth Maher Muoio. “It’s going to be tough for the next couple years.”

New Jersey is expecting a more than $5 billion revenue decline for the 2021 budget year, a 13% drop from the state’s pre-Covid projection. Already one of the most indebted states in the nation, New Jersey authorized a contested plan to borrow up to $10 billion; raised taxes on people earning between $1 million and $5 million; and is making another billion in cuts to help plug the gap.

(Photo by Evan Agostini/Invision/AP, File)

States are dependent on taxes for revenue—sales and income taxes make up more than 60% of the revenue states collect for general operating funds, according to the Urban Institute. Both types of taxes have been crushed by historic job losses and the steepest decline in consumer spending in six decades.

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Americans have since ramped up spending on everything from home improvements to bicycles with the help of stimulus checks sent to millions, though overall expenditures remain below pre-pandemic levels.

States that earn big chunks of their revenue from hard-hit industries are hurting. Americans are commuting and traveling far less, and oil prices have tumbled, hitting energy industries in Texas, Oklahoma and Alaska. Tourism has dropped in Florida, Nevada and Hawaii, and casino closures hurt Rhode Island, New York and Illinois.

Hawaii, for example, is expecting fewer than half the visitors it took in last year in 2020, and state officials forecast its general fund revenues won’t recover to pre-pandemic levels until its 2025 fiscal year.

For the budget years 2020 through 2022, average annual revenues in all 50 states combined are expected to fall short of the 2019 total, Moody’s Analytics said.

NEW YORK, NEW YORK - AUGUST 25: A person wearing a protective mask walks by a going out of business sign displayed outside a store in Harlem. Photo by Noam Galai/Getty Images)

A nationwide decline in combined state revenue has happened after only two events in 90 years: following the Sept. 11, 2001, attacks and in the aftermath of the 2008 financial crisis.

Annual state revenue fell following the Sept. 11 attacks and the bursting of the dot-com bubble around that time, but recovered within a year. During the recession that followed the 2008 crisis, state government revenue fell 9% over two years, according to Census Bureau data.

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This time the shortfall could reach 13% over two years, according to Moody’s Analytics projections.

An uptick in Covid-19 cases to new daily records in recent days makes that scenario increasingly likely.

The U.S. economy has steadily recovered since the spring, and more than 11 million jobs of the 22 million lost earlier in the year have come back. Still, the unemployment rate recently hovered at 7.9%, and there has been an uptick in permanent layoffs.

Economists warn a two-track recovery is emerging, with well-educated and well-off people and some businesses prospering, at the same time lower-wage workers with fewer credentials, old-line businesses and regions tied to tourism are mired in a deep decline.

State government workforces shrank 5% across the country from February to September to 4.9 million, fewer people than at any point during or after the 2008 recession, according to the Bureau of Labor Statistics. Local government workforces cut 6%, or nearly a million people, and local revenue shortfalls are adding pressure to states’ budgets.

In Michigan, more than 31,000 state workers were furloughed two days per pay period for 10 weeks, while others were temporarily laid off. A spokesman said temporary layoffs have ended and none are currently planned, but that they could be reconsidered if economic fallout worsened.

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Earlier this year, Chris Kolb, budget director for the state, calculated that even if he eliminated 12 state departments—including education, environment and treasury—and used up every penny in state reserves, Michigan would still be short $1 billion needed to balance his budget.

Federal coronavirus aid and rainy day funds ultimately helped him balance the budget and cover Covid-related expenses, and some tax revenues were better than initially forecast. But the state is bracing for a shortfall of up to $2 billion for the next fiscal year, since $4 billion in tax revenue that the state anticipated back in January has disappeared.

Pedestrians pass an office location for the New York State Department of Labor (AP Photo/Frank Franklin II) (Associated Press)

“We really have uncharted waters in front of us,” Mr. Kolb said this month. “The waves appear to be getting more choppy.”

After 2008, some states implemented or added to rainy day funds—cash reserves that can be used to fill revenue gaps caused by a potential shock. The funds are important because state laws typically don’t allow states to supplement operating revenues with borrowing, in contrast to the federal government, which helps finance its operations with Treasury bonds. States, on the other hand, typically issue bonds for specific projects, such as building roads or bridges.

At the end of the 2019 budget year, state rainy day funds had accumulated about $50 billion over the previous decade, according to the Pew Charitable Trusts, putting about two-thirds of states in a better position than they were heading into the 2008 crisis.

States had a median of more than four times the number of days of cash on hand as when they emerged from the recession in 2010. Connecticut’s rainy day fund at the end of 2019 ranked 11th out of the 50 states, according to Pew, with about 40 days worth of cash on hand. The stockpile grew to about two months worth of cash in 2020.

Ohio, which like Connecticut had emptied its reserves by 2010, had about a month’s worth of cash when Covid hit.

Since then, Ohio has cut $300 million from its K-12 education budget for the 2020 budget year and reduced salaries for some state workers.

The Willoughby-Eastlake City Schools near Cleveland lost $1.7 million in state funds this year, and expects to lose another $1.7 million in 2021. The school district made ends meet by halving its curriculum budget and buying fewer textbooks and other learning aids, among other cuts.

If the money doesn’t arrive eventually, the district will have to reduce course offerings, said Superintendent Steve Thompson.

Interior of classroom in elementary school. Row of empty desks are in illuminated room.

School systems also usually receive local funds through property taxes. This year, the Willoughby-Eastlake system has so far received $800,000 less than last year, the district’s treasurer said, as out-of-work residents struggle to pay the tax.

Schools received federal aid from the pandemic-stimulus packages passed by Congress earlier this year. Willoughby-Eastlake received $1.3 million that it used for technology, health and cleaning supplies and additional custodians. The money was quickly spent, the superintendent said.

About 30% of the district’s roughly 8,000 students qualify for free or reduced-price lunch, and many lack computers or internet access at home. The district, which has online classes, has purchased hundreds of computers and hot spots. “At this point we’re spending dollars out of our general fund,” said Mr. Thompson, who estimated that total technology and health-safety costs from the start of the pandemic to the end of the current school year will approach $4 million.

Teachers are recording classes so that students in families sharing one computer can watch lessons that they miss because their siblings are using the computer for their own online classes.

“If they have a question, they’re going to have to wait until the next day when it’s their turn to have the Chromebook from their brother or sister,” Mr. Thompson said.

The Ohio Education Association, a teachers union, said the state’s school districts could face budget shortfalls for the 2022 and 2023 budget years of between 20% and 25%.

New York, projecting a shortfall of $59 billion through 2022, held back scheduled payments for schools and social services and postponed public worker raises. Missouri has held back funding for services for the elderly and other programs. Florida’s governor vetoed spending on a range of items including a new state courthouse, trade schools and appropriations for local projects.

A few states are likely to come through the pandemic in comparatively good shape thanks to robust savings, tight financial controls or local economies that are insulated from the worst impacts of social distancing.

Bubble tents are set up outside Cafe Du Soleil following the outbreak of the coronavirus disease (COVID-19) in the Manhattan borough of New York City, REUTERS/Jeenah Moon - RC2K4J9Z967F

Wyoming, though dependent on energy prices, has a very large rainy day fund relative to other states. Minnesota and North Carolina have some of the highest credit ratings in the nation and foster a mix of manufacturing, education, health care and business services, according to Moody’s Investors Service, the rating arm of Moody’s.

Many states are pleading for more aid from Congress, which has so far sent money in its coronavirus relief packages to deal with the health crisis but not to offset revenue losses.

Congress has doled out about $150 billion in Covid-19 response dollars to state and local governments, plus some additional money to cover elevated Medicaid costs. The money sent to local governments has helped pay for needs like personal protective equipment. But it can’t be used to replace revenue lost as a result of the shutdown.

In recent weeks, White House and Democratic negotiators have been discussing roughly $2 trillion in additional stimulus, but the price tag has encountered resistance in the Republican-controlled Senate amid concerns about rising debt and some of the expected provisions, and a deal is unlikely to come together before the election.

In the negotiations, House Speaker Nancy Pelosi and White House officials moved closer on many issues, including how much additional aid to provide to state and local governments, but had not yet reached an agreement finalizing an amount.

President Trump and Senate Majority Leader Mitch McConnell have said they don’t want Covid-19 aid used to address longstanding financial problems. Mr. McConnell suggested in April that states should be allowed to file for bankruptcy to address their pension debt. Mr. Trump asked in a tweet that month: “Why should the people and taxpayers be bailing out poorly run states like Illinois?”

Illinois, with the worst finances of any state, has been banking on billions in federal funding. The state has a $230 billion pension liability after years of putting off payments, according to an estimate by Moody’s Investors Service, and faces an additional $8 billion backlog of unpaid bills.

Since the pandemic, Illinois’s total retirement and debt liabilities are on track to make up 45% of the state’s gross domestic product by June 2021, up from 35% in 2019, according to Moody’s Investors Service.

Illinois was one of only two borrowers to tap loans offered from the Federal Reserve as part of the aid packages. New York’s Metropolitan Transportation Authority was the other.

Illinois issued $1.2 billion in notes, but the funds are expensive, with an interest rate about 10 times the level typical in the market. The state has said it could borrow more. A spokeswoman for the state didn’t respond to requests for comment.

Over the past six months, there have been 51 first-time bond payment defaults, according to Municipal Market Analytics data. It’s the highest level over that time frame since 2012, when a string of borrowers still reeling from the last recession ran out of money to pay their debts.

A pedestrian wearing a mask walks past reader board advertising a job opening for a remodeling company. Photo/Elaine Thompson, File) (Associated Press)

While none of the recent defaults have involved state credits, some local governments are facing repayment strains. The airport authority of Rock Island County, Ill., for example, disclosed in August that it hasn’t been able to collect enough in airline ticket fees to maintain the level of cash it promised bondholders it would set aside. The authority filled in the gap with other funds, such as parking lot revenues, and may consider delaying capital projects, its executive director said.

In Connecticut, debt costs have reduced the state’s spending flexibility. Before the pandemic, yearly payments on bond debt, pensions and retiree health obligations absorbed 31% of state-generated revenue, according to Moody’s Investors Service, making it one of the most indebted states in the nation.

Much of Connecticut’s liability stems from state efforts to shoulder the burden of its aging cities and towns. Almost a third of its total debt is local teacher pension and retiree health-benefit obligations, Moody’s Investors Service said, much of it from the 1990s, when officials skimped on retirement payments.

Two years ago, the state backstopped debt issued by its capital city of Hartford, which was warning it could declare bankruptcy.

The state’s hospitality and leisure jobs were down by about half at the height of the shutdowns, according to the Boston Fed, and were still down by about a quarter in August, despite a partial recovery. The state’s total unemployment rate was 9.5% in August.

The flurry of home buying as people fled New York City for Connecticut towns has had limited revenue benefits. The state’s tax collections from real-estate sales surged to a 10-year high of $47 million in August, according to the state revenue services department, but total collections from April through August remain below where they were the past two years.

To address the shortfall in this year’s budget, Connecticut’s governor is recommending the state make about $25 million in cuts and draw on its rainy day fund. The state has avoided reducing state funding to social-service providers despite revenue losses, said Melissa McCaw, secretary of the state’s Office of Policy and Management.

Groups that provide mental-health and substance-abuse treatment have received federal aid to help with Covid-related health and safety costs, but have asked for additional state help as well. Ms. McCaw said the state “will continue to monitor provider needs.”

Connecticut has historically been one of the top 10 states for drug overdoses, which have increased during the pandemic, spiking higher in the first quarter of 2020 than in any of the previous eight quarters, according to the Centers for Disease Control and Prevention.

Community Health Resources, which offers mental-health and addiction services to 27,000 children and adults, is concerned it won’t receive its expected more than $40 million in state funding—62% of the organization’s annual budget—in the next fiscal year, which begins in July.
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Offline John of Wallan

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Re: Hyperinflation or Deflation?
« Reply #761 on: November 02, 2020, 08:26:26 PM »
We just went full monetary crazy here in Oz. Following Merika's lead...
Going into a small deflationary blip right now, then inflation here we come with the reserve bank knee jerk over reaction.

JOW

Reserve Bank cuts interest rates to record low 0.1 per cent

The Reserve Bank has slashed the official cash rate to a record low 0.1 per cent in an attempt to speed up the economic recovery.
In a widely anticipated move, the bank announced it would trim the cash rate by 15 basis points (0.15 percentage points) and buy $100 billion of government bonds (quantitative easing) to encourage more spending and investment.
It said it would also reduce its target yield for three-year government bonds from 0.25 to 0.1 per cent and lower the interest rate it charges on new drawings from the Term Funding Facility from 0.25 to 0.1 per cent.
Reserve Bank governor Philip Lowe said the measures would work in tandem with the measures outlined in the Federal Budget “to support jobs and economic growth”.
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs,” he said.
“Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago.”

The end of monetary policy: Why RBA rate cuts aren’t enough to fix our economy
Financial comparison site Mozo says a 15-basis-point cut would deliver a monthly saving of $33 to households currently paying the average variable rate of 3.34 per cent on a $400,000 mortgage.
But, at the moment, it’s unclear whether the major banks will pass on the rate cut in full, as their profit margins have been squeezed by successive rate cuts and savings rates can barely go any lower.
Prominent economists including UTS industry professor Warren Hogan are also concerned that the rate cut – as small as it is – will do little for the economy besides inflating property prices.
Data released by CoreLogic on Monday shows national house prices rose 0.4 per cent in October – with Melbourne the only capital city to report price falls and Adelaide and Darwin reporting monthly price increases of 1.2 per cent.
Meanwhile, separate figures from the Australian Bureau of Statistics shows the value of new home loans jumped 5.9 per cent in September – led by owner-occupier loans for the construction of new dwellings, which were up 25.3 per cent.

Shadow treasurer Jim Chalmers told reporters in Brisbane that the RBA’s “drastic” measures were “a vote of no confidence in the Morrison government’s handling of this recession, and their handling of the Budget”.
BIS Oxford Economics chief economist Dr Sarah Hunter said the bank’s main priority was getting people back into work.
“The Board will be hoping that the full set of stimulus measures feeds through to the broader economy, particularly to non-mining businesses where investment and employment intentions are weakest,” she wrote in a note.
“As ever, their top priority is jobs growth, with the statement explicitly mentioning the need to reduce the unemployment rate (which they now expect to peak at around 8%).
“This in turn will lead to upward pressure on wages growth, which is ultimately necessary for inflation to move sustainably back into the RBA’s 2-3 per cent band.”

Link:
https://thenewdaily.com.au/finance/finance-news/2020/11/03/rba-interest-rate-record-low/

Offline John of Wallan

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My Orlov has his take on Hyperinflation
« Reply #762 on: March 19, 2021, 03:31:42 PM »
I always find the Russian to be a good read even when I dont agree 100% with his analysis.

JOW

Link
 http://cluborlov.blogspot.com/2021/03/getting-hyperinflation-right.html#more

Text:
MONDAY, MARCH 15, 2021
Getting Hyperinflation Right

Profligate money printing by the US Federal Reserve and by other Western central banks has amounted to around $10 trillion over just the last year. The amount of currency in circulation has grown to $2 trillion, breaking a record set in 1945 and showing an almost 12% increase over 2019. The US federal budget deficit stands at just about $3.5 trillion, which is over 16% of GDP—the highest it's been since World War II. Meanwhile, the US federal debt has just topped $28 trillion. Over the past year the US has overspent its revenues by a staggering 194%.

Prices are going up everywhere even as the underlying economy remains in coronavirus-inspired doldrums, specifically because consumption has been repressed, with the coronavirus as an excuse, to delay the onset of hyperinflation. And then the Chairman of the Federal Reserve steps in and calms the troubled waters by publicly claiming that "There is no reason to be afraid of hyperinflation." This sounds a lot like denial, which is the first of the five stages of grief, after which come anger, bargaining, depression and acceptance. Powell said "hyperinflation"; therefore, there shall be hyperinflation.

What happens to the value of money when a government prints lots of it—to spend or to simply hand out to people—is that the money becomes less valuable because there is more money per unit things to buy with it. The expectation that this trend will continue then triggers a continuous process of increasing prices, called inflation, while the resulting expectation that the rate of inflation will continue to increase triggers hyperinflation.

My view is that hyperinflation is hardly a problem at all and that, quite the opposite, it is a solution to a great many pressing problems. Here we will look at hyperinflation as nature's gentle way of solving the problems of a society that has forgotten how to live within its means. But nature needs help. Just as a radical weight loss program can go better given some input from an expert nutritionist, hyperinflation too has its best practices, which I am eager to impart.


There are a lot of historical examples of hyperinflation. The most ancient one occurred on the Arabian peninsula after Emperor Mansa Musa I of the Malian Empire made his pilgrimage to Mecca in 1324, in the course of which he handed out 71,000 pounds of freshly mined Malian gold. Since gold's value is based on its scarcity, this rendered it all but worthless. But that is a unique case; all of the recent examples of hyperinflation featured piles of suddenly worthless paper money in ever more extravagant denominations.

This is most inconvenient from many perspectives. The sheer mechanics of hyperinflation—of printing and issuing ever more notes, repeatedly exchanging older, increasingly worthless notes for newer ones, making payments using cartloads and wagonloads of cash—become increasingly burdensome. When it takes an entire suitcase of cash to pay for a pack of cigarettes or a bar of soap, soap and cigarettes themselves become a makeshift form of currency.

Hyperinflation is most unpopular with people who insist on storing their savings in the form of cash. In response, they turn to buying up and hoarding other things, causing shortages and further driving up prices. But all of these problems can now be solved because we have the technology to make hyperinflation safe, comfortable, convenient and fun for the whole family!

However, this requires a change in mindset and a different approach to money. To start with, we need to recognize that money is not a physical quantity. It is dimensionless because it can only be measured relative to other currencies. Unlike any physical quantity, it is measured with infinite precision; any physical measurement, be it in kilograms, cubic meters or kilowatt-hours, has to have error bars on it to be meaningful, while monetary quantities, no matter how large, are precise down to the last penny. It is circularly defined: money derives its value from things that can be purchased with it, and these things in turn derive their price from the value of money.

Although money can be given a physical representation in the form of coins or paper currency, its essential nature is ephemeral, nonphysical and intangible. In essence, money only exists as pure thought in the minds of people who are involved in its exchange. Its physical embodiments are just theatrical props. Its reality is conceptual, similar to that of the irrational number π, which can also be given a physical representation—as, say, a one-meter-diameter circle carved in stone that has a circumference of π meters—but that would be pointless. Just as π is ubiquitous in mathematics, money is ubiquitous in economics.

Once we jettison the very idea of giving money any sort of physical representation, things become much simpler. Treating money as mere information to be represented as numbers within computer systems opens up all sorts of wonderful possibilities. To eliminate the physical representation of money while retaining its concept as a universal medium of exchange, it is necessary to shift to an all-digital currency.

To a large extent this is already happening. Most people have a smartphone, and many people link their bank accounts to payment systems that allow them to wave their phone at payment terminals without even having to touch them. This contactless method of payment is becoming increasingly popular and common in this contagion-obsessed age as people realize that cash is a major source of germs, passing as it does through many unwashed hands.

Physical cash has already become a legacy technology. It can be phased out simply by neglecting to upgrade it with higher-denomination bills while hyperinflation rages. By the time it takes an entire bulging wallet full of $100 bills just to gain admission to a public toilet, most people will take the hint and voluntarily switch to waving their smartphones around to pay for things. The annoying suitcase full of cash that is the linchpin of many a crappy film will thankfully become a thing of the past. Rich vulgarians who might previously light their cigars with $100 bills would perhaps switch to using something truly scarce, like toilet paper.

With physical cash gone, there still remains the problem of hyperinflation creating ever-larger numbers: millions, billions, trillions, quadrillions, quintillions, sextillions, septillions, octillions and so on. Here, expressing monetary quantities in scientific notation, with a mantissa and an exponent, makes hyperinflation much easier to handle computationally. The US federal debt, which has just surpassed $28 trillion, can be more compactly and flexibly expressed as $28E+12 with the 12 indicating that 12 zeros are to be added after the number. If it goes up by a factor of 1000 to $28 quadrillion that would make it $28E+15. Quintillion? No problem, $28E+18.

There are estimated to be between 1E+78 and 1E+82 atoms in the known, observable universe, but since money is not physical this is not a constraint. The only constraint is the ability of computer systems to represent very large exponents. The solution is to have the exponent wrap around. Once the lowest-denomination virtual coin reaches, say, $1E+100, the exponent wraps around and the redenominated value becomes $1E+1. Whenever that happens, a little green checkmark symbol would appear for a time on everyone's smartphone screens, with a hint: "Your favorite digital currency has been redenominated for your comfort and convenience."

Much more frequent than the periodic adjustments to the hyperinflationary currency itself will be the necessary adjustments to the prices charged for every product imaginable. Depending on the rate of hyperinflation, all prices need to be adjusted upwards on a regular basis—perhaps once a week, once a day, an hour or even once a second. To take maximum advantage of Everyday Higher Prices, software would need to be written to make it possible to automatically place an entire raft of previously set up orders the moment a sum of money lands in an account, to be able to lock in the lowest possible prices.

The software should make it possible to prioritize purchases, placing feminine hygiene products and diapers, prescription medicines, toilet paper and other outright necessities near the top of the list and luxuries (soft drinks and booze, chips and cookies, clothing and footwear) near the bottom, to be purchased only if the deposited funds turn out to be sufficient. In turn, the government would be able to harvest order history data and use it to set cut-off points between necessities and luxuries and to determine how much money to issue each month, each week or each day, aiming to provide all of the necessities and a few of the luxuries in an effort to keep hyperinflation under control and the population alive. Charitable organizations could use the list of necessities to determine what to distribute as humanitarian aid, since many people—the innumerate especially—might be unable to comprehend and navigate the wonderful new world of hyperinflation.

Such a system should be able to meet the goal of maintaining very high levels of hyperinflation for a considerable period of time. We should expect economics conferences to be convened to determine the best way to regulate hyperinflation. Mathematical theories would be hatched to calculate the optimum rate of hyperinflation, as has been done with inflation. No doubt great effort will also be invested in finding the proper, principled way to systematically underestimate hyperinflation, just as is being done with inflation today, with the help of hedonic adjustments and similar tricks, to make sure that the value of payments indexed to hyperinflation (for instance, government pensions and long-term contracts such as rental and lease agreements) decreases over time.

Perhaps this could be done by introducing Voluntary Simplicity Adjustments: if almost nobody heats or air conditions their house any more or has hot and cold running water, then the exorbitant cost of such luxuries would be excluded from the basket of goods and services used to measure the rate of hyperinflation. Similar reasoning could be used to exclude the cost of cars, bicycles, skateboards and shoes. A hedonic adjustment could also be applied throughout, based on the fact that people would enjoy a greater feeling of moral superiority from the fact that they are no longer having children and generally emitting less carbon dioxide, thus helping save the planet from catastrophic climate change (although it is by no means certain).

People tend to see inflation as a negative and hyperinflation as a calamity of highest order. This prejudice needs to be overcome with the help of proper messaging supported by ad campaigns and mass reeducation efforts. People must become appreciative of the fact that nothing in this world is permanent and that everything we have ages and fades over time, from yoghurt in your refrigerator to money in your wallet. Just as freshly baked bread is better than day-old bread, freshly issued money is better than day-old money. This is natural and in harmony with the rest of the universe, which is rushing headlong in the direction of increasing entropy. Regular visual redesigns, presenting each major new issuance of money as an exciting new virtual world, would not only keep designers busy but could help make month-old money seem as unfashionable and unattractive as month-old half-eaten pizza.

Hyperinflation makes it possible for the perceived values, and prices, to always go up even in the midst of economic malaise, decay and collapse. They may not keep up with hyperinflation, losing value in real terms, and this may be a problem in certain cases, but the major danger in a perpetually shrinking, depressed economy is deflation, especially asset deflation. The US is already experiencing it in a major way with free-falling prices for vacant commercial real estate. As the tourist industry shuts down, numerous assets, from cruise ships to passenger aircraft to hotels and resorts, turn into stranded assets that quickly run down due to lack of maintenance and become worthless except as scrap metal. But hyperinflation makes it possible for even the most stranded of assets to at least seem to keep their value. A rising hyperinflation creates the appearance of raising all boats, even the sunken ones.

Many people judge the health of the economy based on how stock prices are doing. At present stock prices are performing a most admirable levitation act in spite of a rapidly shrinking real economy. For example, industrial production in Germany, the industrial powerhouse of the EU, has been in continuous decline for the past 27 months, shrinking by more than 8%. In other news, according to the EIA, world oil production over the past year fell by an all-time record of 8%. It is admirable how Germany is keeping its industrial production synchronized with dwindling global energy availability, but that is hardly a reason for stock prices to remain as high as they are, never mind continue to go up.

At present, central banks in the US and in Europe are on the job continuously injecting liquidity into the various stock markets to keep them looking pink and plump, but such blatant intervention tends to make the stock market look like a pyramid scheme, undermining confidence. Hyperinflation can help: once it arrives, stock prices will continue to look pink and plump no matter what else happens. Of course, they won't be able to keep up with hyperinflation, but at least they will continue to go up, not down, instilling confidence in the economy, making stockholders feel happier than they would otherwise, creating a wealth effect that will help slow economic collapse.

With the choice of proper messaging and mass reeducation, it should be possible to inure people to the idea that money is no more durable than the things they buy with it, most of which are not durable at all and are often quite shoddy or outright disposable. After they get used to this new reality, they won't mind it too much, provided the user interfaces of the online banking and electronic payment apps are slick enough to make the work of dealing with Everyday Higher Prices easy, convenient and fun.

Handled properly, hyperinflation can provide numerous other benefits. Gone will be negative terms such as federal budget deficit and federal debt. Normalized over the past 12 months, the US federal government took in $283.8 billion in revenues and spent $552 billion. That is, it overspent its revenues by 194%. Rounding up just a bit, it is safe to say that the US spends twice its revenues, borrowing as much as it earns. The cumulative result of this borrowing currently stands somewhere north of $28 trillion and—here comes the interesting part—the amount of that debt that needs to be rolled over over the next 12 months comes to $7.4 trillion and has grown by $2.7 trillion (that is, by more than a third) in just the past year. Debt that can never be repaid is not really debt at all and continuing to call it that is psychologically damaging. Hyperinflation will make it go away, easing everyone's mind.

There are people who will tell you that this can go on forever because interest rates are close to 0% and so more debt can be produced out of nothing and existing debt rolled over ad infinitum with no adverse effects whatsoever. There are also people who will tell you that, given such an astoundingly huge levels of fiscal/monetary bloat, some of it will eventually leak into the real estate markets (indeed, it already has!), into the commodities markets, from there into the consumer goods sector, and then it will be off to the races! Just a whiff of hyperinflation will be enough to panic the bond investors, making it impossible for the government to continue rolling over its debt while borrowing ever more. Overspending its revenues by a factor of two is by no means an endpoint: the actual endpoint is a deficit of 100%.

It is time to abandon the outdated model of financing US government operations through taxation, which in the midst of hyperinflation will become ineffectual, since by the time the money is collected, allocated and spent it will buy next to nothing. A much better approach is to repeal all taxes and to retire the very concept of public debt. The US Treasury (not the Federal Reserve, which would become superfluous) would by then be directly issuing digital money in the quantities required—be they trillions, quadrillions, quintillions, sextillions, septillions or octillions of dollars a month, a week, a day, an hour or a second.

And then will come a brave new world in which the government issues money, hands it out, it circulates for a bit before losing of its value, and then the government issues more money. Obviously, the government, no longer being good for much, would do well to let the tech giants—Apple, Google, Microsoft, Facebook and, last but not least, Twitter—take over the money-issuing function. New smartphone-based banking and payment systems will not only make it possible to take these changes in stride but will make hyperinflation fun for everyone.

In this brave new world, gone will be the terrible problem of usury, since nobody will be willing to lend any money at all, at any rate of interest, there being a great danger of total loss. Gone will be the vexatious problems of attempting to exercise fiscal restraint and of having to justify to taxpayers how their tax money is being misappropriated and mishandled. The benefits of hyperinflation are too many to mention here, but perhaps the most important one will be in allowing people, rich and poor alike, to make a gradual transition to life without any money at all. To paraphrase Klaus Schwab, you will be broke and you will be miserable, but at least you'll have fun getting there... playing with your smartphone while waiting for deliveries... until the internet goes down... or the lights go out and the battery runs down.

Offline John of Wallan

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Re: Hyperinflation or Deflation?
« Reply #763 on: March 19, 2021, 04:33:16 PM »
I like this guy too.

JOW

Link:
https://wolfstreet.com/2021/03/19/i-truly-believe-that-we-the-rich-will-emerge-from-this-crisis-stronger-and-better-as-we-the-rich-have-done-so-often-before-jerome-powell-in-wsj-op-ed/

Text:
Powell in WSJ Op-ed: “I Truly Believe that We [the Rich] Will Emerge from this Crisis Stronger and Better, as We [the Rich] Have Done so Often Before”
by Wolf Richter • Mar 19, 2021 • 41 Comments
Gimme a break, will ya? Wherein I rant, supported by the Fed’s own data.
By Wolf Richter for WOLF STREET.
In an op-ed today in the Wall Street Journal, Fed Chair Jerome Powell rationalized and defended the Fed’s ultra-radical, previously unthinkably monstrous, and super-fast bailout of asset holders starting a year ago, when within three months the Fed created $3 trillion and purchased assets with them, and created the biggest media hoopla about those purchases and many more trillions in future purchases, in order to inflate asset prices further, and make asset holders immensely rich.

It was a huge success. Asset prices nearly across the board surged way past the levels before the crisis, and those holding them got a lot richer, very fast.

And Powell therefore concluded his op-ed with this line: “I truly believe that we will emerge from this crisis stronger and better, as we have done so often before.”

The “we” being the asset holders, the richest asset holders at the very top. The “we” excludes the bottom 50% of Americans, according to the Fed’s own data, which we’ll get to in a moment.


The reports and data are coming out of the woodwork from all directions. Oxfam said that the combined wealth of the world’s top 10 billionaires has skyrocketed by $540 billion since the crisis began. GOBankingRates came up with a list of the biggest gainers in net worth between March 18, 2020, and October 7. The Americans on this list:

Jeff Bezos (+$72.6 billion);
Elon Musk (+$63.3 billion);
Mark Zuckerberg (+$42.1 billion);
MacKenzie Scott (+$23.6 billion);
Steve Ballmer (+$18.5 billion);
Larry Ellison (+$19.9 billion);
Nike founder Phil Knight & Family (+$19.8 billion);
Bill Gates ($17.8 billion); Michael Dell (+$15.6 billion)
The Fed’s own data on the Fed’s handiwork: ballooning wealth disparity.
The Federal Reserve collects data on its handiwork of creating the greatest wealth disparity of all times, and Powell surely has looked at these reports put together by the outfit he runs. According to which the total wealth (assets minus debt) spreads out this way:



Let’s dive into the Fed’s handiwork a little more deeply, which gets worse the deeper we dive:

The top 10% in Q4 2020 were $8.01 trillion richer than before the crisis; half of those gains ($4 trillion) were pocketed by the top 1%.
The bottom 50% gained only $471 billion in wealth, spread across half of the US population.
The wealth disparity between the top 10% and the bottom 50% ballooned by $7.5 trillion during the crisis.
Even worse: The wealth disparity per capita.
If the US population is 330 million, then 1% = 3.3 million people; and 50% = 165 million people. And so, per capita, at those levels (wealth = assets minus debt):

Wealth of the 1% = $11,700,814 per person (up by $1.22 million from Q4 2019)
Wealth of the bottom 50% = $15,065 per person (up by $2,851 from Q4 2019)
And so from Q4 2019 to Q4 2020, the wealth disparity between the 1% and the bottom 50% has ballooned by $1.1 million per person.

Even worse: Most of the “wealth” of the bottom 50% is in cars and other stuff, not actual assets.
The Fed’s measure of “wealth” includes the value of cars, dishwashers, furniture, smartphones, and other consumer durable goods that people have. But durable goods are not assets that earn a return or grow in value. They’re consumption items, and their value shrinks over time to zero or salvage value.

Per capita at the bottom 50%, the value of durable goods averages $8,920 per person, or nearly 60% of their total wealth. That portion of their wealth cannot earn a return or grow in value.

Their wealth related to actual assets that can earn a return is just $6,140 per person of the bottom 50%. These crumbs may be inadvertently increased by the Fed’s asset bubble. So if asset prices surge by 20% across the board, the bottom 50% would pocket just $1,228, while someone worth $2 billion would pocket $400 million.

This potential income doesn’t even include the powerful impact of leverage, to which the top 10% have much greater and cheaper access than the bottom 50%.

In other words, according to the Fed’s own data, the bottom 50% have nearly no income-producing assets, and cannot gain any measurable wealth from the Fed’s shenanigans.

The year’s gain in durable goods that the bottom 50% own is likely attributable to the factors we have observed for months: Stimulus payments, extra unemployment payments, and the shift in spending from services (flights, hotels, cruises, restaurants, sports events, movie theaters, haircuts, etc.) to durable goods that triggered the record spike in spending on durable goods.

The bottom 50% spent this money on durable goods, and now the Fed counts this stuff as an increase in “wealth.” And this money came from the government and from a shift in spending, and not from the Fed.

Even worse: ownership of stocks and equity funds.
The top 10% own $29.6 trillion in stocks and equity funds, or 88.5% of the total, or $10 million per person.
The bottom 90% own 3.8 trillion, or 11.5% of the total, or $11,600 per person
The bottom 50% don’t own hardly any stocks, just $190 billion, or $1,150 per person.
So when the Fed decided to create the largest asset bubble the world has ever seen, it knew who owned those assets, and who would benefit. The Fed itself is generating the reports on who owns these assets and who therefore benefits from policies that inflate these assets.

Mr. Powell, do you see that we see that you see that we know that inflating asset bubbles is designed from get-go to inflate the wealth of the very rich, and the remainder of the Americans get to eat dust?

Even worse: for the Bottom 50%, life gets more expensive.
There are the negative consequences of the Fed’s asset bubble policies for the bottom 50%: Life gets more expensive. Housing costs surge, and other prices surge too, and buying those durable goods gets more expensive, and thereby the Fed, with its inflation goals, is cutting the purchasing power of labor of the bottom 50%.

Those are the consequences of the Fed’s policies. And the Fed is assiduously tracking and touting those consequences.

Even worse: Congress.
Of course, Congress could crack down on the Fed. But the members of Congress are either already in the top 10% or are trying to get there asap when they join Congress, and so they too benefit from the Fed’s policies, and will therefore never crack down on the Fed, regardless of what their stated policies may be.

End of rant.

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Offline John of Wallan

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Re: Hyperinflation or Deflation?
« Reply #764 on: April 08, 2021, 03:46:39 PM »
Come on fellas, Lets have some predictions to break the boredom:

1. When will markets crash and by how much?
2. When will property bubble in Oz burst?
3. What is the world going to look like in 5 and 10 years time?

Winner gets a sheep station. There are a few cheap ones out West.

JOW

My short answers.
1. In the next 3 months.
2. 2022
3, Watch Mad Max. (The original 1979 film) .
My long answers are a few pages back from memory..