AuthorTopic: Hyperinflation or Deflation?  (Read 152128 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..."

Offline RE

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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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Offline RE

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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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