Not too many people, I warrant, would have been aware how close the financial markets came to perdition on March 16. They'd not have been aware of a "liquidity panic" in the municipal bond and commercial paper (money market funds) arenas or that the Choe Volatility Index - known as Wall Street's 'fear gauge' - closed at its highest level on record: 82.69. Nor would people - certainly not Janice or myself (with investments in money market funds) have been aware that on March 16 investors ceased to believe these funds were cash equivalents, i.e. liquid enough to function like checking accounts to help firms manage payroll, pay office leases and move cash to finance daily operations.
We didn't know any of this until the WSJ lead story, 'The Day The Markets Seized Up;, appeared on the front page on May 21. To be sure, the information and graphs shook us to our core, as they ought to have any American invested to any degree in the financial system. Basically, as the piece noted:
"Investors lost faith in Americas public infrastructure. As schools and universities shut down and airports and public transit services emptied out, the market began to question what had previously been considered gold-plated bets on the core institutions that make up community life in the country."
And so (ibid.):
"Terrified investors ditched municipal debt at fire sale prices, underwriters canceled billions of dollars worth of deals, and new borrowing stopped. There was less issuance in the week of March 16 than at any point since the 2008 financial crisis, or the 2001 terrorist attacks.... The liquidity panic quickly leaked into the stock market."
In other words, we came about this ( ) close to another credit freeze financial calamity. According to one money manager in an email to The Journal (ibid.):
"I don't think anyone has experienced anything more violent"
Perhaps the most important line in the whole piece appeared earlier on, in the continued discussion on page A10:
"A barrage of government programs has since pulled the system back from collapse."
Note, it pulled it back from collapse, but that doesn't mean the threat of collapse is expired. Not by a long shot. The reason is that the tight -fisted GOP Senate is not prepared to pass anything more, whether in financial infusions to the states, or more infusions of cash into citizens' pockets. They expect people to either get by going back to work (hardly possible for three quarters of workers as noted in the Denver Post (May 24) - given most jobs are now service-related and workers not able to even pay rent or get adequate food. We further have learned ('More Borrowers Fall Behind In Payments', May 21, p. B10):
"Millions of people are behind on their credit card and auto loan payments, the latest sign of pandemic financial devastation. Lenders in April had nearly 15 million credit cards in financial hardship programs."
And still, despite this havoc, there is no more money coming in for people, no thanks to the GOP's austerity hawks. This is risking yet another liquidity panic which will make the one on March 16 look like a walk in the park. Especially as people with no $$$ coming in are "tapping credit cards and auto loan at record levels." But...at some point that money has to be paid up or the credit-lending markets will themselves collapse, with ordinary citizens' bank accounts.
Other bad news emerged in the WSJ piece, 'Workers Face A Long Road Back To Normal', May 9-10, p. B14, noting how the climb back to normal will be "slow and painful". Indeed, subsequent WSJ articles have pointedly noted how many millions of workers currently furloughed will not get hired back. That means they cannot contribute to purchasing goods or services, i.e. to aggregate demand. Aggregate demand is composed of two parts: 1) demand generated by consumers for goods and services, and 2) the demand for investment goods. When the level of aggregate demand is high, both these components are generally equally high, and the levels of production and employment are high. On the other hand, when aggregate demand is low - or even one of the components (e.g. (1)) is very low, then levels of production plummet.
'Powell Urges Policy Makers To Spend More' (WSJ, April 30, p. A2) showed the Fed Chairman Jay Powell is terrified of another liquidity crisis erupting. He likely suspects it will be triggered by a massive drop in aggregate demand, especially consumer spending which supports 70 percent of GDP. But with no more cash infusion, how can ordinary (not rich) citizens contribute? How can an economy based mostly on ordinary consumption thrive? Well, it can't! People can't just live on air! That includes state employees, local government workers. We know, for example ('State, Local Budget Woes Threaten Recovery', WSJ, p. A2 today):
"When those (state) workers are laid off they have to cut back on spending. That reduces the income of others in the economy, which amplifies the initial cut."
This, according to Gabriel Chodorow-Reich, an economist at Harvard University who estimates that "every dollar in cuts cost the overall economy $1.50 to $2.00." Hence, the imperative of a badly needed cash infusion to the states.
As I made clear in my May 4 post, we desperately need not just a $1, 200 one off payment to each American, but a universal basic income (UBI) of at least $2,000/ month for the next 6 months. (As policy analyst Heather McGee noted on 'All In' last week). So despite the caterwauling and gaslighting from the Repukes, it is clear we need a massive infusion of at least $800 b to help the states, and possibly another $2 trillion more by the end of the fiscal year. This despite the endless austerity whining of the likes of The Wall Street Journal (e.g. 'The Government Economy', April 30, p. A14) who bellyache the states "contributed only 0.2% to the CARES Act". Well, duh! That's because THEY took the brunt of the lockdown hit ("economy put into the equivalent of a medical coma"), and also they have laws that require balanced budgets - so must cut if spending exceeds a certain threshold. Also they have no latitude to print money like the Federal Reserve.
But this is the gist of the Republican penny-pinching strategy which - if it succeeds - will see the U.S. end up in a 2nd Great Depression, not just a bad recession. In fact, while the austerity -minded Repubs have resisted calls for additional funding, citing added debt burdens, Jay Powell pointed out (ibid.):
"This is not the time to act on these concerns. This is the time to use the great fiscal power of the United States to get through this with as little damage to the longer run productive capacity of the economy as possible."
As I wrote in my May 4 post:
"It's incredible that a Scrooge like Mitch McConnell don't grasp this, and would rather put us into another Depression but there it is. They would rather be chintzy now - especially with the states, local governments- and pay ten to fifty times later to dig out from the carnage. Which is why it's good we didn't have these losers in power after the credit meltdown in 2008."
Incredibly, the WSJ's op -ed writers- like Phil Gramm and Michael Solon- continue to peddle their rubbish that no more money is needed, e.g. ('
More Stimulus Would Crush The Recovery', WSJ, April 15, p. 17)
.
What is their solution? It's "rely on private capital and initiative and our free enterprise system". In other words, let the loafers waiting for new handouts get off their butts and figure out - using "initiative" - ways to enhance their cash flow without depending on gov't handouts. Else, "all this new government borrowing will consume the very oxygen a powerful recovery will need,"
Not to be outdone, WSJ op-ed contributor John Cochrane offered up this gem ( 'How to Treat the Financial Symptoms of COVID-19') .just over a month ago:
"Loans are better than gifts. Rather than give each of us $1,000, allow us to borrow a fraction of last year's income from the Internal Revenue Service and repay it when we file our taxes."
Fortunately, the Senate at the time had the sense it was born with and didn't pay attention to this nonsense. It delivered the CARES Act with a $1,200 cash infusion for each person- no strings, no owing anyone- or begging 'forgiveness' for loans to be repaid in huge lump sums. Just as well given even with that infusion and the extra unemployment ($600/week) some "840,000 personal loans were in deferment or some other type of financial hardship program in April" - according to the May 21 WSJ piece on more borrowers falling behind. So good to know cockeyed loans schemes like Cochrane's didn't add even more hardship borrowers.
The answer then is clearly not loans, or asking for "forgiveness" for such, nor raiding Social Security in a payroll tax cut, or any of the other dumb right wing solutions proffered - usually in the editorial pages of the Wall Street Journal. But that's not to say all the offerings were drivel. Standing out for its sanity and reason was William Galston's May 19 piece 'Heed Powell's Call For Fiscal Stimulus', e.g.
https://www.wsj.com/articles/heed-powells-call-for-fiscal-stimulus-11589927206
Galston makes a compelling case for more 'no strings' cash infusions, echoing Jay Powell's call for more fiscal support for citizens and small businesses alike given that:
"demand will remain depressed and unemployment elevated well into 2021. Many households will struggle to pay for food, shelter and medical care. And many small businesses will shut their doors permanently."
And what is the GOP's and Trump administration's brilliant response? Well, it's to "adopt a wait and see stance". But see citizens without money can't "wait and see" about their next meals or keeping a roof over their heads. They need the money now, and as Galston points out "even delay isn't cost free"
As I wrote before, the hesitation in coughing up more money is largely due to the GOP's anti -statism posture. They simply don't believe the government should be "doling out" free money "at taxpayers' expense". Never mind those suffering and waiting in bread lines ARE taxpayers, last time I checked. But the conservos want limits. They want set dates after which they don't give any more money, not one cent. As one WSJ editorial ('The Fiscal Stimulus Panic', p. A16, March 18) howled:
"The checks no doubt will be popular....but they won't come cheap, running at a cost of hundreds of billions of dollars for the first round. What happens if the pandemic lasts into the summer? The clamor will be for another round and then another."
:
And then the "clamor" must be met, but which I tend to think of more in terms of need. But for the WSJ editors and their stable of tightwad hacks, it's the clamor for more money that must be quashed. The Reepos in the Senate then channel these austerity messages and act in kind. Hence the latest twist ('Republicans Seek Alternatives To Jobless Benefits', WSJ, p. A4) where we learn the GOP savants want the increased unemployment benefits cut out ("it's making too many reluctant to return to work") and instead replaced with a 'stipend' paying $150 less. This the brainchild of Sen. Rob Portman of Wisconsin.
Meanwhile, workers across the board are struggling to make ends meet, and pay their just debts. Lenders, credit sources are also being squeezed given the CARES Act "allowed homeowners to suspend mortgage payments for up to a year, but provided no way to pay for this." (WSJ, p. A1 today) Thus saddling lenders with the burden and setting the stage for a ginormous credit crunch. To fix ideas - and perspectives (ibid.): "As of last week 4.5 million households had filed:" for such suspensions, "representing about $1.04 trillion of unpaid principal" - according to Black Night. Meanwhile, "markets froze for s-called jumbo loans" which are too large for gov't baking. (Jumbo loans would be theoretically allowed should homeowners need to pay back a year's worth of mortgage payments at once.)
Well, if there is another depression you know who to blame, given just the "unintended consequences" of what could happen in the mortgage-lending market. . Clue one: think of an elephant.
See Also:
by P.M. Carpenter | May 22, 2020 - 7:07am
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"The Federal Reserve is now officially spent. Saving the U.S. economy from this point forward is now up to others.". Greg Ip, WSJ, 'Don't Look To The Fed. It's Others' Turn Now'.
It's always sad in a movie when the 'good guy' is pinned against the wall with only one round left in the chamber of his six gun, and the bad guy approaches - say with a bigger weapon. Then when you see the good guy fire the round to no effect, you know it's all over but the dirges. The same transpired yesterday when Fed Chair Jerome Powell - desperate to halt the sordid economic effects of unseen enemy - fired off the last round in his chamber. I am talking about the rate cut of effectively 1 percent (down to 0- 0.25%) which will leave nothing in his chamber when the full COVID-19 recession takes off.
As I'd written before, none of these monetary moves work given the nation is in a shutdown - with millions of workers soon forced to stay home either out of choice or necessity (if they get the virus or their kids do). What they need and badly - is money to tide them over when they can't collect a paycheck. In other words, paid leave. (See my post from yesterday).
Will Powell's rate cut get commercial aviation, now facing a $113 b hole (WSJ, March 14, p. B4) earning again? Will it fix the supply chain problems all around, including meds from China? Will it bolster the energy sector- now facing a demand drop from the virus as well as oversupply problems? Hell no, which is why you can expect the markets to tank today. They know the only thing the Fed and Powell have done is to appease Trump. (The dope actually expected the DOW to soar today.)
Most ordinary, e.g. non - financially inclined citizens, still have no clue regarding the economic cyclone about to strike the U.S. This is the case because they've no inkling of the knock -on effects of prolonged shutdowns or terminated supply chains. This is apart from the residual core of congenital morons who insist it's "all media hype" and - to quote one asswit :"If we can't deal with a little bug then we're all a bunch of pansies.". In regard to either of these denizens I want to hear what either says - assuming they can communicate at all- once they get this "bug" and have to be intubated in an ICU at the nearest hospital.
The commonality with all these low IQ mutts who try to spread the memes that "it's just a flu" or "no biggie" is: i) They are incapable of doing exponential math, and ii) they have no conception of the limited margin for error we have in terms of our health care system capacity: ICUs, beds, ventilators, medical staff, i.e. being inundated by a flood of critical care patients when existing resources are at a premium.
Many of these dimwits look at current fatality stats, say 60-odd in the U.S. and are unimpressed, not realizing there are literally thousands backing up in ICUs across the U.S. right now fighting for their lives on ventilators - with loved ones hoping they aren't added to the death toll. You never hear about these cases unless you plow through different newspapers of different cities, say like New Orleans. Where you learn about the current plight of 45 -year old construction litigator Mark Frilot, now in critical care, and isolated and sedated (using paralytic drugs) on a ventilator. His wife Heaven said their physician informed them that COVID-19 was likely circulating for a while before Mark got it, and also before the testing kits arrived. That means hundreds may have been spreading it and displayed no symptoms themselves.
The distaff side is that in rural (say red state) areas, we behold a proud populace who fancy themselves above the fray. As reported in yesterday's Colorado Springs Gazette, many - like in Baca County, or Montrose - see the social distancing measures in cities as "over reaction." They themselves have no idea how close to perdition they are if the virus hits their little burgs, many with only 1,700- 2,500 people. But consider this: most of their little community hospitals have only 5 ventilators (ibid.) If the virus strikes a town of 2,000 and 1,000 cases erupt with 200 critical (respiratory failure like with Mark Frilot) they will have 195 citizens who will have to be triaged, or die. Like the 'no biggie' dimwits they have no clue but for a different reason.
Thank Bonespurs and his spurious maladministration for their colossal failure in implementing the critical testing. (See again Frilot's case described above)
Now, for some hard economic facts for those with IQs over 100:
Mark Zandi of Moody'a Analytics has already projected a $120 b loss by the end of March and has the U.S. effectively in recession now. JPMorgan Chase said Thursday that it expected the U.S. economy to contract in the first two quarters of the year, which would meet a standard definition of a recession. A survey of prominent academic economists, also released Thursday, found that a majority thought the outbreak was likely to cause a “major recession.”
“Coronavirus will cause a recession deeper and more severe than the Great Recession,” Noah Smith, a Bloomberg Opinion economics writer, also predicted.
This will be the case, btw, no matter what manipulations Jerome Powell and the Fed pull with the interest rates (cutting them down to effectively zero yesterday). None of it will work because what is required now is not any monetary fix but a massive injection of at least a trillion bucks. This would most expeditiously done via gov't checks of $1,000 each sent out directly to families hunkered down, like Gee Dubya Bush did back in 2008-09. (As WSJ columnist Greg Ip related to the CBS a.m. anchors last week)
In addition we need lots of federal money to support subsidies for hundreds of small businesses to enable them to give paid leave to their sick or secluded employees, without going into the red. All of which will do far more to keep the economy afloat - and at least avoid the worst potential recession- than the Fed's interest rate gimmicks.
All of this is needed to support a credible Coronavirus response package - as opposed to that piece of compromised crap I wrote about yesterday. Or more Fed interest rate cuts (including toward negative interest rates) which don't do a damned thing otherwise than provide cheap crack to the markets. Which can't avoid crashing anyway if the demand side is basically frozen up, consumers not spending to go out etc.
Measures of consumer sentiment fell sharply in early March, and indexes of business conditions have since cratered. Airlines, ports, hotels and other directly affected industries have already announced layoffs or employee furloughs. In Barbados, docked cruise ships have disgorged passengers mid-voyage who must now try to find air transport back to their homes. All those cruise companies are now shut down and they didn't even give passengers a heads up. (See, e.g., 'Cruise Business Comes To A Halt', WSJ, March 14-15, p. B3)
Postings for restaurant jobs were down 26 percent last week compared with the same week a year ago, according to data from the job marketplace ZipRecruiter. Job listings in catering were down 39 percent and those in aviation down 44 percent.
As energy specialist and pundit Dan Dickers has noted, lot of this has to do with the U.S. shale oil business being over-leveraged for the past five years at least. Thus, "tons of debt" (Dickers' parlance) has been issued with some $600 b "in triple B bonds or B minus bonds". Given this, it's little wonder U.S. shale drillers can't beg, borrow or steal any credit now - say from the banks - to support their activities. (See e.g. 'Shale Drillers Face Fight For Survival As Prices Plummet', WSJ, today, p. B1). Indeed Scott Sheffield (Pioneer Natural Resources CEO) estimates (ibid.): "50 percent of public E&Ps will go bankrupt over the next two years."
Dickers estimated as much as $2 trillion could be out there with U.S. banks holding a lot of it (one reason the bank stocks were "murdered" in the bloodbath yesterday). All of which points to mammoth liquidity problems in many ways analogous to what presaged the credit crisis 10 years ago. Worse, "the Fed is now out of quivers".
Trump has been able to hold up his fake economy - and overextend the life of the Bull (which Dickers insists is 3 years beyond terminal) - by gimmicks such as tax cuts, deregulation and bullying Jerome Powell's Fed to cut interest rates- as they did again yesterday. But this is about to end because of the COVID-19 pandemic upends markets everywhere, from sports, to energy, to entertainment (theaters), restaurant industry, airline industry and banking. As Dickers put it to Hayes:
"The coronavirus will be the straw that broke the camel's back of the global economy."
As Niall Ferguson pointed out in his WSJ op-ed ('Network Effects Multiply A Viral Threat', March 8, .A17):
"Network effects are the reason it is anything but dumb to worry about this novel coronavirus. Not only is it spreading much faster than most Americans realize, it is also disrupting global manufacturing supply chains as well as all the economic activities that depend on travel and proximity."
The even more somber specter hanging over the markets is the degree of ordinary leverage, beyond the already referenced over-leveraged oil markets. This is the degree to which disproportionate debt underlies the purchase of ordinary stocks, shares. One pundit on CNBCs 'Squawk Box' the day of the 9.9% crash observed that currently for every $1-2 an investor uses to purchase a share - say for $10 - the balance is appropriated via leverage or going into hock. Hence, a paper $6 trillion loss in a major sellout could actually turn out to be $50 trillion.
This warning is not new. Two years ago, we read in the April 17, 2018 Financial Times ('IMF Sounds Alarm On Excessive Global Borrowing') :
"The world's $164 trillion debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing. The fund said the private and public sectors urgently need to cut debt levels to improve the resilience of the global economy, and provide greater firefighting ability it things go wrong."
True, in much of the nation the economic hurricane remains invisible, as offices, restaurants, bars remain open - and for now day to day life appears relatively normal. But in places like Seattle where the virus is now widespread we behold the worst effects as mitigation proceeds to try to flatten the infection curve. There the downturn is well underway and it will get worse and hit the rest of the nation as testing ramps up and the infected numbers double, triple and quadruple. For those blinded by stupidity or inability to do exponential math this will be "hype" -until they and theirs also get ill-- from reckless behavior owing to indulging in too much FOX watching. What we know now, as one economist put it, is that shutdowns and recessions are the way to stop the spread of a virus for which there is no immunity. As Dr. Anthony Fauci put it, we have a narrow window to act - especially given Trump blowing the lead time we did have - and if we blow it again now with mitigation (social distancing) then the medical system will be overrun. We will see a replay of what's happened in Italy but with far more catastrophic consequences.
The workers who are feeling the effects of the pullback first are the ones least able to afford it: low-wage, hourly employees, many of whom aren’t paid if they miss work. Only one-third of leisure and hospitality workers have access to any paid time off, according to data from the Bureau of Labor Statistics.
Meanwhile, Dotard Donnie Bonespurs clearly feels proud of himself after he managed to bully lapdog Fed Chair Powell into lowering interest rates a full point. He did this by a day earlier speculating that he'd be able to "demote" him. Btw, do I believe he really tested negative for the belated COVID-19 test he finally took? Hell no! I believe he tested positive and ordered his lapdog doctor to cover for him. After some 17,000 lies why believe anything Trump or his circle of sycophants claims, or says? I don't.
Let's first get it straight, Fed Chair Jay Powell is not the "enemy", Trump is - and he needs to be tossed into a loony bin asap. The nation will not survive even 16 more months of his reckless rule, mental misfires and chaos.
"An order to businesses to leave China? Somebody should tell Chairman Trump this isn't the People's Republic of America." - WSJ Editorial ('Just Another Manic Friday', Aug. 24-25, p. A14.)
The stability of the nation is now spiraling out of control under "Chairman Dotard's" brash edicts and his own deranged judgments, tweets and brain farts masquerading as economic policy. From last Friday through the weekend it's just been one mega-shitstorm with Trump at the center. Those who chided us earlier (like the WSJ's Holman Jenkins Jr.) that we're simply unable to countenance a "disruptive" president, now must admit we've got a rank loony tune on our hands who needs to be put into a straitjacket. Marched out of office for his own good (and ours) under the 25 th amendment, of course.
This after he went off the rails last Friday, ordering American businesses out of China - as if he's the 2nd coming of Mussolini- then sending the markets into a nosedive, tacking on even more (and higher tariffs) on Chinese goods. By one estimate from a reputable source this will cost the average American family $1,000 over the next year. Well, say hasta la vista to your Trump tax cut, kiddies.
Let's begin with the definition of a recession since that is the central topic of this post, and also how deranged Trump groupies are trying to deny its arrival. Or shift the blame in advance to the Fed and Jay Powell.. The generally accepted definition is that a recession occurs when output (generally measured as GDP) decreases for two consecutive quarters. The more technical definition is from The National Bureau of Economic Research: "when there is a significant decline in economic activity lasting more than a few months."
As reported in The Denver Post Business pages (July 25th, 'U.S. Manufacturing In a Technical Recession, How Worried Should We Be?') ) the U.S. is already in a "technical recession". This means that while the immediate statistics are showing significant slowdowns, i.e. in manufacturing output, the official econ gurus have not yet declared it as such. The reason? Such identification is generally given a year or two ex post facto. For example, the "great Recession" which began in 2008, was only deemed so in 2010-11.
But already anyone concerned ought to be paying attention, i.e. the news from last Friday (WSJ, p. B11) that the "yield curve inverted for a second day" This followed a Treasury report on Thursday showing that "manufacturing activity slowed this month to the lowest level in almost ten years."
And note, please, this was nearly 4 weeks after the Denver Post account warning that we are already in a technical recession. The $64 question then becomes: How long can it be between a technical recession and fully recognized one? I would say not that long. The hubbub in the media now is between the Trumpies who keep trying to deny it, or blame the Fed, and the rational side which knows what is happening and that - hey! - it is 99.9 percent Trump's doing.
So we begin with the observation that we continue to be ruled by an ignorant madman and presidential poseur who has not the slightest concept of the actual responsibilities of the office he occupies, the duties incumbent upon it, or the nature and aspects of the U.S. Constitution. Far less any remote knowledge of economics given he has no clue what the tariffs he's imposing are all about. All he does is flail, spout gibberish, backtrack, change his mind, and keep the global economy in a state of uncertainty as to his next brain fart- spawned move.
Incredibly, too many media and other enablers seem to have similar problems, or are willing to give this mutt a pass. So that's where we pick up and take a look at some of the codswallop spewed out in the past week for starters:
Let's first bring on a hysterical crackpot named Peter Bruno who penned the following in a Denver Post Letter to the Editor (Aug. 21, p. 12A):
"When all their bogus accusations to take down President Donald Trump have failed, the Trump haters and media have resorted to a recession to try defeat the president in re-election. Starting with Bill Maher, the leftist media have all gone on a campaign hoping an praying for a recession."
Hopefully by now, 5 days later, Bruno has had a chance to take his meds and perhaps get his weekly ECT. Mainly this bozo needs to recognize that no "leftist media" is "hoping and praying for a recession". (Also he conflates Maher's HBO comedy emphasis show with leftist media and also with corporate mainstream media). Neither the WaPo or NY Times - both corporate mainstream media- is advocating or endorsing such, though they are (correctly) publishing warnings of recession (such as in The Denver Post) based on two instances of the inverted yield curve - the latest on Thursday. It is true Bill Maher - as well as yours truly -also believes recession is the lesser of two evils, the greater of which is 4 more years of Herr Trump - which will have this nation in a permanent dumpster fire. But even so, Maher does not constitute any formal part of the media in the same way as the two newspapers mentioned. He is after all a comedian, and his show 'Real Time' on HBO is a comedy and discussion offering. To conflate Maher's facetious opinions on Real Time with sober warnings given in the mainstream corporate (not "leftist") press is to expose one's ignorance for all to see.
Anyway, not content to spout his preliminary rubbish, Bruno goes on:
"Can anyone imagine the hate of some for the president would supersede the welfare of the people."
Well, can anyone appreciate the hatred for Hitler as he began to impose his own (Reich) laws by fiat? Taking away Jewish property, tossing journalists into the camps, setting up mock courts for bogus prosecutions of Weimar justices? This imp Bruno clearly doesn't grasp that the concepts of 'hate' and 'welfare' are both relative. They are relative to the person hated, and to the supposed "welfare" he would ensure or protect if his power survived an election. In the case of Trump, we've seen he ensures nothing, nada! If he did he would not have imposed a de facto hardship tax of $1,000 a year on each struggling American family arising from his tariffs. Nor would he be leaving the nation's farmers and manufacturers adrift with his deranged usurpation of the tariff power of congress. Think that is protecting welfare? No, it's inflating his own ego and power like the bully he is. Hence, he merits only utter contempt - even hate if you choose to call it that - and the welfare of the nation over his survival. Hence, rationally if his electoral survival depends on no recession, the genuine citizen and patriot must hope for recession. Better some temporary distress than total destruction. Better a bout of salmonella than getting cholera.
And for the biggest howler:
"I wouldn't mind the prognostication if it was based on solid indicators, but a very slight inversion of yield sent the stock market into a selling frenzy. I quote the reputable economist Arthur Laffer "I'm not, right now, concerned about a recession."
So let's get this straight. We are "haters" for either seeing a recession coming, or indeed counting on one to remove Trump's last prop (his 'great' economy) - to liberate the nation from this pestilence. But this nimrod is still open to the prognostication IF it "is based on solid indicators". And yet the most historical and accurate barometer of all, the inverted yield curve, he rejects. To fix ideas, an inverted curve means that bond investors expect growth to slow so much that the Federal Reserve will soon have to resort to drastic action (i.e. cutting short term rates) to support the economy. The problem inheres in when all other signs of the economy are highly stimulative including jobs numbers, and stock share prices.
But instead of acknowledging the importance of inverted yields, we see Bruno endorsing a blurb from Arthur Laffer whom he describes as a "reputable economist".
How about a disreputable charlatan and dummy, the inventor of the infamous Laffer curve? First we need a bit of background. The "Laffer curve" (see diagram below):
Was originally sketched on a napkin and on the fly, by Laffer in 1974. Laffer was then at the University of Chicago and traveled to Washington, D.C. to meet with Donald Rumsfeld, Gerald Ford's then chief of staff, Dick Cheney and Wall Street Journal editorial writer Jude Wanniski to discuss Ford's support for raising taxes.
Laffer had a new theory on why tax rates were inefficient and high, or one might say "inefficiently high".
As it happened, Rumsfeld had other commitments so dispatched Dick Cheney instead to a bar, where the meeting took place. (See, e.g. Economics for the Rest of Us by Moshe Adler, Ch. 6) Laffer then proceeded to sketch his infamous diagram on why the rich could be said to be "over taxed".
As drawn, it was totally convincing, especially for a guy like Cheney with minimal math skills. Note the line defining the highest marginal tax rate of 70% for Gerald Ford's presidency. What Laffer's curve sought to show is that by cutting that rate down, say to 50%, one could increase the revenues by nearly 35%! In other words, the economic equivalent of a perpetual motion machine. Little wonder most real economists believed him to be 52 cards short of a full deck. After all, if one could increase revenues by cutting taxes 20%, imagine what one could do by cutting them more than 40%, or even 80 percent!
Thus did Laffer's curve become the basis of Reagan's tax cuts and the whole tax cut- supply side idiocy ever since, despite the fact that in reality no community, nation or even human body has managed to survive or grow by virtue of starving. But try to tell the bulk of Americans, who continue to buy into this codswallop at a mind-boggling rate! Despite the fact there's never been evidence it's actually worked! (As per a Financial Times examination of the Bush tax cuts in Sept, 2011, showing essentially zero benefit and exploding deficits.)
In like manner, the Trump -GOP tax cuts of 2017 have been found to be a colossal flop and weren't remotely close to paying for themselves as the braying buttbrains (like Paul Ryan) claimed. All they've done is raise the deficits another $1.7 trillion.
So Bruno's invocation of the quote by a numskull like Laffer - to defend his argument of no evidence for recession- falls flat. As flat as Laffer's curve over the last 3 decades.
But one of the best responses to Bruno's nonsense appeared in yesterday's Denver Post letters section, compliments of Dick Dunn, from Longmont. He wrote:
"Why and how have Americans become so gullible? It is blatantly obvious that Donald Trump's failed tariff war has both restricted economic growth and made financial markets incredibly unstable - as well as crippling various American industries. Yet too many Americans are willing to give him a pass and accept his blame game against the Fed,"
Well the reason too many Americans are that way, Mr. Dunn, is because critical thinking is no longer required as part of American higher education. So too many - like Peter Bruno- just accept blather from "on high" or from a degenerate power monger and authoritarian narcissist like Trump.
But even Bruno's fulsome efforts are pitiful besides the PR swill spewed in a WSJ column by Andy Puzder and Jon Hartley ('Recession Fears Are Overblown', Aug. 21, p. A15).. Therein the two clowns trot out a bevy of distractions and canards. So we're supposed to buy into the claims made that the economy is going strong ("GDP rose 2.1 % in 2nd quarter, consumption looks strong, productivity -output per hour increased" etc.) ? Thanks but no thanks.
Interestingly, merely a day after this bollocks was published the WSJ editorial warned (p. A16):
"If Mr. Trump wants to give the economy a policy boost to prevent a recession, he can cut his trade uncertainty tax This is the pall over business investment that is a major result of his trade policies."
Noting before this that "business investment is falling amidst a climate of policy uncertainty" and Trump is not even aware of how his "trade brawls with the rest of the world are weakening the economy".
Oh and that includes the global economy by the way, which is in a dynamic interplay with ours, so despite Puzder and Hartley's efforts to isolate the U.S. from the world, this isn't going to work. And we can further note ('Stumbling Global Economies Heighten Fears of Recession' Aug. 23, p. A5) that:
"Manufacturing activity is falling in most of the world's advanced economies, another sign that a deepening global slowdown is weighing on the U.S. expansion."
In other words, the global economic ills affect our own future, and can't be ignored. Yet, neither Messrs. Puzder and Hartley or our letter writer Bruno, mention the global connections, the adverse effects and especially the god awful negative impacts of Trump's ill-conceived trade war and tariffs. An unforced economic error of monumental proportions if ever there was one. As the WSJ piece goes on (ibid.):
"The International Monetary Fund last month said a sharp deceleration of global trade driven by trade tensions slowed the global economy more than expected in the spring. It forecast global growth, adjusted for inflation, would fall to 3.2 % this year from 3.6% last year and 3.8 % in 2017."
Adding:
"The decline in U.S. factory activity appears to be tied to these factors."
IN other words, the slowdown in global growth affects our own and the source of both is Trump's erratic trade policy and tariffs, especially the latter directed at the world's 2nd largest economy. All of which shows that the selective (cafeteria-style) arguments proposed by those pooh-poohing recession border on the pathetic, if not the laughable.
The WSJ editorial again:
"Mr. Trump and his trade Rasputin, Peter Navarro, claim there's been no harm from his tariffs. But his actions belie the claim."
Then pointing out how he delayed a new round of tariffs on some imports from China lest they raise consumer prices before Christmas. Hence, if the tariffs created no harm such a move would not be necessary. All of this was before Trump upped the ante for economic pain globally on Friday, by threatening to tack on 30 % tariffs on another $250b b of Chinese goods (on Oct. 1st) . Oh, and a further roughly $300b of Chinese fare will see tariffs rise to 15 % on December 15th (WSJ today, p. A6). Last but not least let's recall Dotard ordering - via tweet- all U.S. businesses to depart from China and find other markets elsewhere. Where? In Vietnam which has barely one tenth the population and vastly fewer workers to ensure the manufacturing capacity is maintained? Far less the QA procedures which were developed in cooperation with China over decades.
Really want to know why the current technical recession may well morph into a formal one? Look no further than the deranged, authoritarian narcissist mutt we're saddled with as president - now blowing out more brain farts at the G7 meeting. To the point a fellow UK buffoon (Boris Johnson) even had to take him to task, i.e. "We don't like tariffs on the whole!", WSJ, today, p. A6, 'U.S. Left Isolated At Summit' )
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