Nel's New Day

November 3, 2019

DDT Owns This Economy

Once again, Dictator Donald Trump (DDT) got his way with the Federal Reserve: it dropped interest rates by another quarter point at a time when the economy is supposedly strong. The reduction of the interest rate by three-fourths of a percent in just three months at a time when the country is not in an economic crisis is not only almost unheard of but also a source of more disaster. Interest rates are lowered to fight a recession, and the United States has lost the ability to do that by dropping the rates.

The good news, other than a rising stock market, is unemployment at a half-century low and inflation at its two-percent target. The bad news is the trade wars causing stock market volatility, investment insecurity, farm losses, shrinking manufacturing jobs, and rising consumer prices as well as slowing global economy. Spending on both structures and equipment was deeply negative from July through September, Commerce reported, and manufacturing is currently in a technical recession, at its lowest since the 2007-2009 recession. 

Eleven years ago, the Fed rate was .25 percent, and the cheap money promoted a borrowing frenzy. By now U.S. companies have borrowed $15.5 trillion, two thirds of the U.S. GDP, and used the money to increase stock prices, buybacks, and acquisitions. Any rise in interest rates will cause a financial crisis, similar to that 11 years ago. According to the International Monetary Fund (IMF), half of corporate debt outside small businesses is high risk or junk rated with a higher chance of default than investment grade debt. Even worse, $660 billion of leveraged debt is in collateralized loan obligations sold to investors and financial situations, threatening a rise in delinquencies and defaults. Selling this debt will accelerate a downward spiral.

The Fed’s meeting this past week, the second in three weeks, was to address the repo (repurchase agreement operations) market’s problems. In the repo market, banks, funds, and other large companies borrow money for a day and use short-term government bonds as collateral: Fed plan to buy $60 billion a month of these bonds through April 2020. After the last recession, the Fed bought long-term bonds and mortgage-backed bonds to prevent a worse economic collapse. The current repos are intended to make it appear that banks are complying with regulations.

Signs of the U.S. weakening economy:

U.S. business hiring has fallen to a seven-year low, and employer are not increasing wages because of slower growth of sales and profits. 

Consumer confidence in the United States has declined for three months in a row. 

Defaults on “subprime” auto loans are at the fastest pace since 2008. 

The percentage of “subprime” auto loans at least 60 days delinquent is now higher than at any time during the last recession. 

Retail vacancies at U.S. shopping malls are at the highest level since the last recession, up to almost ten percent. 

The Cass Freight Index has fallen for ten straight months

U.S. rail carload volumes are at the lowest level in three years

September orders for Class 8 heavy duty trucks were down 71 percent.  

September home sales in the United States declined by another 2.2 percent

New home prices have fallen to the lowest level in almost three years and the same median price as in 2014. 

Forty-four percent of people in the U.S. report that they don’t make enough money to cover their monthly expenses

In a recent survey, over two-thirds of all U.S. households, 69 percent, are taking steps to prepare for a recession. Recession fears can cause consumers to spend less, which can exacerbate the possibility of a recession.

September was the worst month for U.S. manufacturing in a decade as manufacturers laid off employees, and October was even worse.

 In September, 4,200 truck drivers lost their jobs after 5,100 were dropped in August while hundreds of trucking companies are going bankrupt.

Other figures from last spring that haven’t improved include continuing jobless claims at the fastest pace in ten years, retail layoffs at 92 percent higher than the year before, and economic numbers are at the worst start since 2008.  

More problems with the economy from Robert Reich:

Wages are still almost static with only $2,000 more than in 1979—even after DDT promised everyone $4,000 in tax cuts last year.

The low unemployment rate comes from people giving up searches for jobs; the labor-force participation rate is the lowest since the late 1970s.

Almost 4 million people are stuck in part-time jobs and can’t find full-time jobs. Their lack of rights and benefits adds to increased economic insecurity.  

More college graduates are overqualified for their current jobs with ten percent underemployed, much higher than 20 years ago, while college costs have skyrocketed and left students in massive debt.

Health care increases with average family premiums up 55 percent since 2008, three times more than inflation. Prescription drug prices went up 11 percent in the first half of 2019.

Almost 39 million American households pay more than they can afford on housing, and over 25 percent of the renters spend over half their income on housing.  

Consumer debt, excluding mortgages, has climbed to $4 trillion, the highest ever even after adjusting for inflation.

With the DDT-GOP tax cut, 83 percent of the gains go to the wealthiest one percent of people in the U.S.

The bottom half of all U.S. households, as measured by wealth, still have 32 percent less wealth, adjusted for inflation, than in 2003, and the top one percent has more than twice as much.

The federal government is also permitting the expansion of risky mortgages. The almost $7 trillion in mortgage-related debt by Fannie Mae, Freddie Mac, and the FHA is one-third more than before the housing crisis over a decade ago, and a large increase in loan defaults can cost taxpayers hundreds of billions of dollars. A growing number of homeowners face debt payments almost half their monthly income, and about 30 percent of Fannie Mae guaranteed loans last year were higher than this level, up 14 percent from 2016. At 57-percent loans over the high-risk level, FHA is up in this category by 38 percent from two years ago.  Two Freddie Mac officials said that they had been pushed into loans with a higher risk of default. DDT’s officials are trying to privatize Fannie and Freddie which can disrupt the housing market and make buying homes more expensive. At this time, most of the loans are packaged into securities and sold to investors. In 2017, FHA guaranteed 10.9 percent of all single-family mortgage debt, more than half to borrowers with extremely high levels of debt and over triple the rate ten years earlier at the beginning of the recession. 

Another sign that the U.S. is moving toward a recession is the slow growth of the nation’s economy, 1.9 percent annualized pace in the most recent quarter and over one-third less than the 3 percent that DDT promised from his 2017 tax law. Consumer spending has continued, but business investment contracted for six straight months, falling 3 percent in the third quarter, the biggest drop since 2015. Spending on both structures and equipment was deeply negative from July through September, and manufacturing is currently in a technical recession. Economic uncertainty has led to this drop in investment.

DDT promised to erase the federal debt in eight years, but the 2019 fiscal year deficit hit $984 billion—just $16 billion short of $1 trillion, a 26-percent increase from the previous year and up 50 percent since he was inaugurated. The loss comes from DDT’s massive spending increases, especially for the military and a border wall, and tax cuts for the wealthy and big business. Bush’s bad policies, wars, and tax cuts led to a ballooning of the debt which President Obama curbed before DDT’s election. DDT’s shortfall is the same as for 2012 when unemployment was twice the current rate and the economy was coming out of the worst financial crisis since the Great Depression over 80 years ago. 

The debt-to-GDP ratio of 105 percent for the last quarter, up from last year and the first year to be this high since 1945, the end of World War II. That figure comes from the $22.719 trillion U.S. debt as of September 30, 2019 divided by the $21.526 trillion nominal GDP. The World Bank states that any debt greater than 77 percent is past the “tipping point,” when it can’t be repaid. DDT promised to cut the debt, but instead of vastly increased it by giving trillions of dollars to the wealthy and corporations. With these disasters, DDT plans another tax cut to enhance his reelection campaign.

DDT plans to use this economy for his reelection campaigning.

August 25, 2019

Recession Looms, Unconstitutional Demand

Filed under: economy — trp2011 @ 10:15 PM
Tags: , , , ,

The use of “dictator” for Dictator Donald Trump (DDT) may be a misnomer.  He approvingly retweeted a comment from a radio host that “Jewish people in Israel love him like he’s the King of Israel. They love him like he is the second coming of God…” He followed that by saying “I am the Chosen One” while looking meaningfully up at the sky. He was supposedly talking about tariffs on China. Earlier in the week, he accused Jews who vote for Democrats (79 percent of them in 2018) of showing “either a total lack of knowledge or great disloyalty,” meaning to Israel as if U.S. citizens swear fealty to a foreign country.   

DDT panders to evangelical Christians because Jews don’t believe in the second coming. Evangelicals refer to Jews as “uncompleted Christians,” that they still need to come to Jesus.

One response:

“Matthew 24:24 – ‘For there shall arise false Christs, and false prophets, and shall shew great signs and wonders; insomuch that, if it were possible, they shall deceive the very elect.’”

Self-identified evangelical Jay Lowder did call equating Trump with God “blasphemous and sacrilegious.” He added that the “antagonism” toward evangelicals will increase if they support a double standard for DDT’s “actions, policies, or behaviors” and will be forced “to do the same with the next president.”

DDT’s accelerated tariff fight caused the stock market to go on a roller-coaster ride, the Dow Jones down almost 400 points last week after dropping over 600 points on Friday. The volatility came as DDT increased tariffs onto China, China increased them on the U.S., and DDT ordered private companies not to deal with China. After the stock market closed Friday, DDT again increased the tariff percentage on Chinese goods.

Earlier, DDT delayed new tariffs on Chinese goods from September 1 to December 15 but will raise tariffs on $250 billion in Chinese imports from 25 percent to 30 percent starting Oct. 1. In addition, tariffs on $300 billion worth of other goods would increase from 10 percent to 15 percent on the December 15 tariff. DDT decided to punish China by withdrawing from the 192-member Universal Postal Union that set international postal rates for over 150 years. If nothing changes by DDT’s deadline in October, mail service will be disrupted for U.S. voters living abroad and cost them $60 to return their ballots.

DDT excluded some tariffs as favors to his base: no bibles although books are fined; no Chinese processing of salmon and cod caught in Alaska although pollock is not protected; no chemicals used for fracking; zirconium for airplanes, even civilian ones; aluminum oxide for steel manufacturers already protected by earlier tariffs on imported steel; shipping containers for big companies like J.B Hunt and CSX. These items were exempted for “health, safety, national security and other factors (aka favoring his voter base).” Legally, DDT can put tariffs on products only for the reason of “national security,” yet his first tariffs were on washing machines to protect “national security” for Whirlpool. Meanwhile U.S. Steel is laying off hundreds of workers the week after DDT bragged about how he had made the company strong.

After 13 failed trade war talks with China, DDT’s Friday tweets were particularly vicious:

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

Trump also “ordered” the U.S. Postal Service and private companies like FedEx, Amazon, and UPS to search packages from China for fentanyl and refuse delivery. DDT claims that he has the power to force private companies to change their business practices because of the 1977 International Emergency Economic Powers Act that targets rogue regimes, terrorists, and drug traffickers in commerce regulation. Earlier this year, he threatened tariffs on Mexico with the same law because of southern border crossings. By today, he said he had no plan to call a national emergency. (DDT’s Trump Organization has business ties with China; both he and daughter Ivanka Trump have multiple trademarks in China.)  

In its editorial, the conservative Wall Street Journal wrote: 

“Somebody should tell Chairman Trump this isn’t the People’s Republic of America.”

The tariff situation became more confusing today when DDT said that he may be second-guessing his tariff attack on China. Five hours later his press secretary Stephanie Grisham wrote he DDT “regrets not raising the tariffs higher.” G7 Summit leaders reported on DDT’s disastrous trade war, but he said, “Nobody’s told me that.”

The volatile stock market leads to fears of a recession although DDT denies the possibility. He said, “Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money.” Yet 39 percent of people in the nation don’t have enough cash to cover an unexpected $400 expense. DDT sent Larry Kuklow and Peter Navarro to Sunday talk shows with the intent of misrepresenting the current economic situation and railed about how, despite the facts, a possible recession is a conspiracy against him.  

DDT claims he has a strong, “powerful” economy, but he proposed steps for an extremely weak economy. White House officials first considered a cut in payroll taxes for Medicare and Social Security to make up for the tax cut for wealthy and big business that DDT will use to eliminate Medicare and Social Security. Other ideas which might also require Congressional approval were a currency transaction tax weakening the dollar (currency manipulation), rotating Federal Reserve governors to check Powell, and lowering the corporate tax rate to 15 percent to spur more investment. DDT also went back to badgering Powell for a one-percent reduction in interest rates, calling him the same kind of enemy as China’s president Xi Jinping. DDT would save millions of dollars in lowered interest rates. He has already benefited from the decrease in July’s Fed Reserve interest change.

After the Labor Department accurately revised job gains from April 2018 to March 2019, DDT lost over 500,000 jobs. Average monthly job growth dropped to 170,000—9,000 less per month in 2017—with the biggest losses in leisure/hospitality, professional/businesses services, and retail. According to the Federal Reserve Bank of New York, the probability of a recession within a year is the highest since the last financial crisis.

Other recession indicators are the skyrocketing deficit (higher even than expected), GDP drop to 2.1 percent in the second quarter, dropping tax revenues, and consumer confidence at a seven-month low. Wealthy buyers are pulling out of expensive housing markets, and RV sales are down over 20 percent. Car sales are drastically dropping, bankruptcy filings are steadily increasing, major retailers shut down more stores, tech companies are cutting costs, and U.S. freight shipment volume has fallen during the past 8 months, threatening a negative GDP by the end of the year. Both credit card debt and late payments are on the rise. The U.S. manufacturing purchasing managers’ index (PMI) fell to 49.9 in August from 50.4 in July, the first time it was below 50 since September 2009, and exports sales fell at the fastest pace since August 2009. Falling exports cause reductions in inventories, cuts in productions, and loss of jobs. The problems ripple across the economy because manufacturing affects every part of it—business services, distribution, transportation, etc. The fall in manufacturing output during the first six months of 2019 entered a “technical recession.”

The Dow looks good, but DDT’s percentage of increase at 32.2 percent is below that of Democratic presidents at the same time of their first term—Clinton at 39.3 percent and Obama at 45.2 percent. DDT’s only accomplishment is a low unemployment rate, but it was headed there when he was inaugurated. A look at DDT’s chaotic response to the financial problems he caused, and a comparison of the DDT and the Obama economy in 15 charts. 

DDT thinks that dropping interest rates will get him re-elected, but they will damage savings and be devastating for blocking a recession. Buying a year or two with lower interest rates would create a massive credit bubble like the subprime mortgage crisis over a decade ago. The current risk comes from huge corporate debt, especially high-yield bonds. Dumping these at one time at low prices would culminate in a disaster, especially if lenders bought corporate bonds with low-interest loans, and lenders may be forced into more debt. With the weak expansion, sellers may have no buyers, and companies won’t be able to service debt.

DDT started out with a solid economy, and everything he does is designed to ruin it. He is damaging not only U.S. economy but also that in other countries with conservative leadership. UK’s Brexit vote preceded DDT’s election by a few months, but Boris Johnson is pushing the nation into disaster with half Britain’s farms poised to fail. Brazil’s new DDT-style leader, Jair Bolsonaro, has made no reforms to pension and tax systems that undercut economic growth. Italy’s enormous debt and annual deficit led to the collapse of its government and the resignation of Prime Minister Giuseppe Conte after his election 14 months ago—the second election in 18 months.

Frank Rich wrote an excellent article on DDT’s panic about the economy and its destruction because of DDT’s policies. Future generations in the U.S. will have nothing, and DDT cares about nothing except getting re-elected. 

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