Nel's New Day

April 5, 2021

‘Ever Given’ Causes Economic Difficulty, Craziness

Filed under: economy — trp2011 @ 9:59 PM
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The episode is over except for the economic fallout, but internet liars can’t let it go. Sexist media created the falsehood, complete with photoshopped images, that Egypt’s first woman ship captain, Marwa Elselehdar (right), was responsible for the debacle. If so, she is quite talented because on the day the Ever Given ran aground, Elselehdar was working as first mate on another ship in Alexandria, hundreds of miles from the Suez Canal.

The first woman to enroll in the Arab Academy for Science, Elselehdar, 29, had to obtain permission from then Egyptian President Hosni Mubarek. Her 1,200 male classmates were “older men with different mentalities,” according to Elselehdar: they didn’t accept women “working in the sea away from their families for a long time.” In 2015, she helped lead the procession to celebrate the Suez Canal expansion and was the first Egyptian woman to captain a ship cross the canal. Only two percent of worldwide seafarers are women with almost all working on cruise ships.

On March, 2021, the combination of high winds and a dust storm supposedly caused the Ever Given to accidentally hit the canal bottom at a diagonal angle between opposite banks of the canal. An investigation may discover whether human or technical errors were responsible as the head of the Suez Canal Authority (SCA) has claimed. Bound for Rotterdam, it was fifth in a northbound convoy of 20 vessel. All ship traffic was blocked for almost a week, causing a blockage of 422 other ships.

The Ever Given may be floating, but it’s still “stuck” in the Suez Canal while maritime lawyers determine liability for its grounding. The ship’s owner lawsuit against the ship’s operator in UK’s High Court highlights ownership complexity and determination of responsible parties for anything going wrong. The vessel flies Panama’s flag, two Japanese firms own the ship, and it is leased by Taiwan-based Evergreen Marine Corporation. A German entity, Bernhard Schulti Shipmanagement, is the technical manager. Although the company hired the Indian crew, it isn’t party to the lawsuit.

Another question is which nation’s courts have jurisdiction. Egypt has started an investigation by reviewing the data recorder and interviewing the captain and crew while both Panama and the ship management company plan separate probes.

The SCA wants $1 billion to cover lost revenue from tolls during the six-day period, the cost of equipment and work to free the ship, and the damage to the waterway to complete the freeing of the ship. The ship’s owner cited maritime law requiring the owner of cargo on a ship to contribute to the vessel’s rescue because of a major casualty event. For example, Ikea, shipping furniture on the beached ship, couldn’t get its furniture back until it pays a percentage of the furniture’s total value. Delays for ships now going through the canal may keep them from places to dock and/or unload their cargo, and their goods could spoil or have charges for late arrival. The insurance claims could be phenomenal. The 25 crew members, all Indian nationals, will be under “house arrest” during any review while the Ever Given is anchored in the Great Bitter Lake, halfway through the canal. The ship can’t leave until a final court settlement if needed to determine compensation.

About 12 percent of global trade uses the 120-mile-long canal, saving ships an extra eight-day trip around South Africa’s Cape Horn while traveling between Asia and Europe. About one million barrels of oil and eight percent of the world’s liquefied natural gas normally go through the canal each day. In addition to the longer time, shipping costs thousands of dollars in additional fuel costs which are passed to the consume, and pirates preying on ships along the longer route may be interested in the valuable consumer products shipped out of the East. 

Alternatives to the Suez Canal are the Panama Canal and the Northwest Passage, but many ships, like the Ever Given built in 2018, are far too large for the Panama Canal. The trip through the Arctic could be safer than in the past after climate warming melted a great deal of ice, but the Northern Sea Route still sees only a few hundred shipping vessels a year. Yet Russia will be pushing for the this alternative. 

The 220,000-ton Ever Given finally escaped the mud and sand with the use of a Dutch dredger, over a dozen tugboats, and a high spring tide caused by a full moon and a “king tide.” Equipment and workers removed over 1.1 million cubic feet of the muck from around the ship.

The SCA lost about $15 million every day the canal was blocked. Tolls provide about two percent of Egypt’s GDP. For six days, the blockage stopped about $9.6 billion of trade each day–$400 million and 3.3 million tons of cargo each hour ($6.7 million per minute). German insurer Allianz said annual trade growth could lose 0.2 to 0.4 percent for the year. The cost of renting ship to and from Asia and the Middle East increased 47 percent to $2.2 million.

Egypt considers extending another channel after paying $8 billion in 2015 for that process of 43.5 miles, over one-third the complete length. The SCA will also purchase two new tugboats, get the biggest dredger in the Middle East, and arrange for another five Chinese tugboats.

Almost all container ships headed to Europe from China’s factories go through the Suez Canal; the shutdown affected up to 15 percent of the world’s container shipping. Delayed oil supplies to Syria caused rationing for “basic services … such as bakeries, hospitals, water stations, communication centers, and other vital institutions,” according to the Syrian Ministry of Petroleum and Mineral Resources.

Bizarre QAnon conspiracy theories emerged from the blockage of the canal. An early one blamed Hillary Clinton for operating the ship with a cargo of child sex slaves. QAnon followers connected the name “Evergreen” on the side of the ship to the concealed Secret Service name for Clinton when she was first lady. Note the ship’s all sign of “H3RC”? It’s close to Clinton’s initials! And the falsehood that the ship’s captain looks like Monica Lewinsky! Elselehdar has little similarity in appearance to Lewinsky and wasn’t the captain.

In another viral—and false—Facebook post, the grounding was planned to raise prices. The falsehood claimed this was the first accident in the canal although three others closed the canal in the past two decades. The ship charted a course in the Red Sea like a giant penis before entering the Suez Canal, according to another post, giving credit to a hacker friendly to the QAnon cause who controlled the ship’s computers. The lengthy treatise compared the canal to a birth canal showing imminent unmasking of the deep state and worldwide changes. Resurrecting a 2018 post, supporters repeated “watch the water” because they believe the QAnon conspiracy is real regarding an occurrence on or near water. [Right: the QAnon “proof” board about its conspiracies.] 

The disaster presages future disasters. China is dependent on the three-fourths of its oil consumed as well as four-fifths of iron ore for its infrastructure building in exchange for exporting goods to pay for oil and iron ore. Eastern Asia is vulnerable to maritime blockades in case of geopolitical conflicts. One suggestion is for world powers to manage the Suez Canal with international authorities while respecting the current leadership.

Even a short-term hit to the economy can cause problems. The U.S., already suffering from economic shutdowns from the pandemic, experienced disruptions of traditional buying patterns like those in Europe and China. Purchasing changed from eating out to ordering imported goods for working at home, and shipping costs from China to the U.S. doubled in less than a year. Metal shipping containers sat in some ports while others had a shortage, and COVID-19 resulted in fewer longshoremen while dozens of container ships waited for California ports. The lack of truckers caused more problems after goods were unloaded from shipping vessels. The Suez blockage came on the heels of the “big freeze” in Texas which stopped petrochemical plants. Global executives may drop its strategies reducing costs and consider the vulnerabilities of disasters like this one in the Suez Canal, especially after the supply chain interruptions from the coronavirus.

Meanwhile oil prices are going down again, and conservatives will forget about the usefulness of globalization until the next disaster.

January 31, 2021

Redditors Treat Investing like Gaming

When the Dow drops by over two percent in one day, in this case 633.87 points, the cause is usually political. Last Wednesday, however, the reason came from a group of people who thought they were ganging up on hedge fund investors. The situation started last December when big investors did their usual “short selling,” betting companies will lose the value of their stock. An investor tells the broker to borrow the stocks and sell them at the current price, hoping the price will drop. After the company’s loss, the investor rebuys an equal number of stocks at the lower price, returns the borrowed stocks, and pockets the different in price as profit. The short seller only gets into financial trouble if the stock price goes up.

On Reddit, however, a large group of small investors tried to show big investors they weren’t in control. They used a free app allowing purchase of small amounts of stock, Robinhood, to purchase shares of GameStop, causing the stock prices to skyrocket. GameStop, a retailer with 5,000 stores selling video games, struggled even before the coronavirus increased online competition. Wall Street, convinced the company was due for bankruptcy, bought its outstanding stock “short.” In retaliation, Redditors planned a “short squeeze” to buy all the stocks at once, driving up the price. As the shorts got worried, they bought back the stock on its way up and drove the price up. Others decided to short the stock. Overvalued at $40, the stock was exorbitantly priced at $300 and so forth. Melvin Capital competitors had to bail out the hedge fund, which had a $3.75 billion loss.  

Although their losses sound like retribution, many ordinary day traders also got in financial trouble while some financial firms benefited if they actually owned stock early on. Asset manager Blackrock, with 13 percent of GameStop, gained about $2.4 billion from $173.6 million worth of stocks in about a month. Norway’s government also owned 2.6 percent of GameStop. 

The problem for Redditors is when to sell. The price won’t stay at today’s price of $325 forever, and people may lose bigtime. And while they think they are scheming against Wall Street, they are doing exactly the same thing as hedge fund investors. The stock market has nothing to do with investing in companies—just in stripping its resources.

Vice has a detailed description of the GameStop event. 

The GameStop saga didn’t end with people purchasing the stocks. By Thursday, Robinhood decided to stop selling stocks from both the video game retailer and other companies caught up in the decision. It also raised margin requirements for some of the securities, forcing users to front more of their own money for purchases and benefiting investors with more ready cash. TD Ameritrade and Charles Schwab did the same thing. Short-sellers bought shares to hedge their positions, sending the stock market up by over 300 by the end of Thursday.

A Robinhood customer filed a class-action lawsuit against the app with almost 31,000 users for banning sales of GameStop shares, claiming the action rigged the market against its customers and benefited those who weren’t—especially the huge hedge fund investors.

After a backlash, Robinhood announced “limited buys” of GameStop and other drastically shorted stocks, raising $1 billion overnight to comply with federally mandated capital requirements. GameStop shares increased almost 65 percent Friday, up $308 since the beginning of the year from $17 per share, going as high during the day as $414. Yet pessimism about economic problems and anxiety about the trade volatility dropped the Dow another 621 points, another two percent down. The week’s loss was 1,000 points.

Before Robinhood reinstated trading, the amateur traders pushed negative reviews about the app, leading to Google’s one-star rating early Friday morning based on 275,000 reviews. By noon, however, the rating went up to four stars after 100,000 reviews mysteriously disappeared, supposedly deleted by Google.  

The melodrama continues on Monday. After saying on Friday that he was not pressured to restrict the sales of stock, the head of Robinhood is again restricting these sales, narrowing a list of 50, however to only eight: GameStop, AMC Entertainment, BlackBerry, Koss, Express, Nokia, Genius Brands International and Naked Brand Group. For example, users can buy only one share and up to five options contracts. They are permitted ten each of AMC stock. Robinhood said the limits were subject to changes throughout the day.

Last week, the central Wall Street clearinghouse required a ten-fold increase in the firm’s deposit requirements last week. The clearinghouse also required an increase in Robinhood’s margin, the funds in a client’s account when they borrow to buy a security. Huge collapses in share prices, highly possible with the risks taken in buying GameStop and other heavily shorted securities, leave Robinhood on the hook. Margin shares could have placed further strain on Robinhood’s balance sheet, potentially leaving the broker on the hook in the event of a massive collapse in GameStop’s share price.

Jaime Rogozinski, possibly the founder of the Reddit community, called the insanity of GameStop’s shift in share prices “a train wreck happening in real time.” Keith Gill, the trader kicking off the scheme called r/WallStreetBets, said “he didn’t expect this.” Jim Cramer, Wall Street commentator on CNBC, referred to it as “insane.” Video game industry analyst Michael Pachters said it was a Ponzi scheme, a fraud appearing to make money only when propped up by funding from new investors. Critics described Robinhood as a dangerous “gamified” stock trading.

While the news may appear to affect only those involved, it shows “how social media can upend everyday life,” according to tech writer Ian Sherr. He explained:

“Twitter has changed the worlds of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industries. Now Reddit is taking on Wall Street… And TikTokers banded together in attempts to confuse President Donald Trump’s reelection campaign.”

Other stocks targeted by Reddit communities include the once-popular Blackberry and the struggling movie chain AMC. Nasdaq, the stock market index focusing on tech companies, threatened to stop trading on stocks manipulated by social media.

The gambling of Redditors and hedge fund investors exacerbates the problem of growing inequality in the U.S. and the economic problems of the vast majority of its population. Billionaires’ assets have gone up 38.6 percent in less than a year. The $1.1 trillion they acquired is equivalent to over $3,400 for every person in the United States. And billionaires make this money because they own most of corporate stock.

People who try to cover for the huge inequality claim these wealthy people have fortunes because of their exceptional talents. For example, Elon Musk, Testa’s CEO, was worth $24.6 billion last March; last week he had $179.2 billion. Yet his increase came from business-supported government policies and a plutocracy in which very few accumulate most of a nation’s assets. In addition to DDT’s gift to the wealthy of huge tax cuts, the Feds contributed to their riches with low interest rate policies to “grow” the economy. Last year, the Dow Jones, Nasdaq, and S&P 500 hit record highs. New financial instruments help rich people get more money; i.e., special acquisition companies (SPACs) to buy shares in companies wanting to cash out or expand. The result is greater demand for shares and higher windfalls for the top executives who had done nothing special.

Even the misnamed Robinhood is making big bucks from Redditors’ “games” from “third party” financial companies paying Robinhood for each client trade. One of them, Citadel Securities, belongs to hedge fund billionaire Ken Griffin, who bailed out Melvin Capital by taking a big ownership share in the hedge fund loser. Other Wall Street players—Goldman Sachs, JPMorgan Chase, and other big banks—make money off Redditors with its “dark pools,” hidden exchanges serving the big institutional investors without the need to specifically or timely report their trading. The relationship between Robinhood and its investment firms may face an investigation.

The whole Reddit/Wall Street/GameStop debacle is destined to end badly. Bored and frustrated by low interest rates, participants treat investing like entertainment, behaving like a mob at a sports event. The winner will be Robinhood and other zero-cost brokerages who gamble on the ignorant traders.  A few investors will sell before an inevitable crash, but more will lose everything from greed. Last summer, a 20-year-old student killed himself because he thought he had lost $730,000 on an option. In fact, he was $16,000 in the red.   

Financial markets are meant to move capital from savers to firms needing capital. The sideshow of GameStop does nothing to benefit the company while destroying faith in the markets’ functions. Hopefully, the COVID-19 vaccine will allow Redditors to find other amusement. Meanwhile, GameStop is the one without benefits: the company plans to close almost ten percent of their stores this year.

December 22, 2020

No Government Shutdown, Little Funding

The threat of the holiday 2020 government shutdown has been averted if Dictator Donald Trump (DDT) signs the $2.3 trillion budget bill. Included in the bill is $900 billion for coronavirus relief. Congress already passed the $741 billion defense bill which DDT has not yet signed and promised to veto. He has until Wednesday before it goes into law unless he vetoes it in that time.

The House passed the budget by 359-53, the Senate by 92-6. The White House said DDT will sign the measure. The six GOP senators voting against the bill: Marsha Blackburn (TN), Rand Paul (KY), Rick Scott (FL), Ron Johnson (WI), Mike Lee (UT), and Ted Cruz (TX).  

DDT has signed a one-week Continuing Resolution to give time for the budget’s paperwork preparation.   

Last May, the House passed a $3 billion stimulus bill; it passed another one for $2.2 trillion in October. Senate Majority Leader Mitch McConnell (R-KY) refused to go above $1.1 trillion but finally settled on $900 billion in his attempt to get two GOP incumbent senators re-elected in Georgia on January 5. Arguments about the contents of the bill included the inclusion of stimulus checks, extended unemployment, and assistance for state and local governments—all opposed by Republicans. The GOP wanted no liability for lack of safety from COVID-19 and the elimination of any programs to use money from the Treasury Department rainy-day fund to save the country from financial crisis. Republicans lost both of these as well as financial help for states. The 5,593-page measure probably has lots of mystery items because lawmakers had only a few hours to consider it. A few openers:

  • $1.375 billion for 56 miles of DDT’s border wall;
  • $5 million for a database to track police misconduct;
  • $153 million for programs to better community relations with police;
  • 3 percent pay raise for military;
  • 1 percent pay raise for the civilian federal workforce.

Critics have pointed out that the “stimulus” bill is quite skimpy, especially the direct aid: 

  • $166 billion: the federal unemployment insurance supplement of $300 a week, extended for 11 weeks;
  • $120 billion: direct aid checks of $600 a person making under $75,000;
  • $284 billion: forgivable loans for businesses paying for rent and workers;
  • $15 billion: live venues, movie theaters, and other entertainment;
  • [several billion]: other Small Business Administration programs;
  • $82 billion: colleges and schools with $54 billion going to public schools;
  • $69 billion: vaccines ($22 billion – testing and tracing, $20 billion – vaccine procurement, $9 billion – vaccine distribution);
  • $45 billion: transportation, including $15 billion for the airline industry;
  • $25 billion: rental assistance and an extension of the moratorium on evictions;
  • $20 billion: Economic Injury Disaster Loans;
  • $13 billion: food-assistance programs, increasing the maximum Supplemental Nutrition Assistance Program benefit by 15 percent;
  • $10 billion: childcare assistance.

States and cities have a full year to use funding from last March’s Cares Act bill. In another measure, health providers must work with insurers for a fair price in case of unexpectedly out-of-network care to avoid massive bills. Republicans get a tax break on “three-martini lunch” because Democrats wanted expanded tax credits for low income families and the working poor. DDT lobbied for that benefit. Lawmakers claim this bill is only a starter for help, but McConnell will almost surely not allow another one. The GOP firmly believes in austerity when a Democrat is president.

Oregon hit national news when about 300 heavily armed white supremacists, including Proud Boys and Patriot Prayer, broke into the state capitol during a one-day special legislative session. The far-right protesters attacked police with spray chemical agents, broke glass in the doors, and tore tarps from vandalized marble reliefs on the front steps. Streets around the capitol were closed, and residents were told to avoid the area. DDT has gone silent about any protesters, including the Antifa, because of the white supremacists’ unprovoked attacks on people. [Left: a protester at the Oregon capitol.]

Arizona’s GOP Chair Kelli Ward wants DDT to “cross the Rubicon,” the illegal action Julius Caesar took to change the Roman Republic to the Roman Empire through civil war and require people to swear fealty to him and not their country.

Caught up in a conspiracy theory, air-conditioner installer David Lopez-Zuniga was going to work in a small cargo truck filled with parts last October when a SUV deliberately struck his truck and forced him to the edge of the highway. Feigning an injury, Mark Aguirre, a former Houston police officer who believed the truck had 750,000 fraudulent ballots, ordered Lopez Zuniga to the ground and pointed a gun at his head. Aguirre claimed “Hispanic children” were used to sign ballots because their fingerprints weren’t in any databases. Steven Hotze, head of a conservative nonprofit, hired Aguirre as one of 20 investigators looking into Texas ballot fraud—conspiracy theories fed by DDT and his court cases. Aguirre was fired from the Houston police force in 2003 for ordering the arrest of 300 people in a retail store parking lot, some of them shopping. He claimed drag racing, and the city paid almost $1 million to settle multiple lawsuits. Aguirre refused to say why he picked Lopez-Zuniga and called the charges a “political prosecution.”  

AG Bill Barr has until Wednesday in office, and he opposes special investigators for both Hunter Biden, Joe Biden’s son, and election fraud. He also thinks DDT is wrong with his rejection that Russia is behind the current cyber espionage; he said the hacking “certainly appears” to be from the Kremlin. On Monday, DDT told a tea party conference he won in a landslide and wants the Justice Department to back him in overturning the election. Barr also said there is no reason for seizing voting machines, something Sidney Powell talked about with DDT Sunday at the White House. DDT’s campaign had fired Powell because of her history of false claims. 

Boeing’s 737 MAX is back in the air after being grounded for 21 months ago, but a bipartisan Senate report describes how the company and the FAA manipulated its recertification tests after the two fatal crashes in 2018 and 2019. Boeing “inappropriately coached” FAA test pilots for the airplane’s desirable outcome with some tests on simulators not equipped to recreate the same conditions as the crashes. The FAA also retaliated against whistleblowers, blocking the investigation, didn’t hold senior managers accountable, and permitted Southwest Airlines to operate dozens of falsely certified planes.

The post office is again failing to deliver packages on time. This time the reason is heavy e-commerce and COVID-19 infections/exposures among almost 20,000 employees. DDT’s Postmaster General Louis DeJoy’s sabotage of USPS delivery, especially of ballots, worsened the situation by trashing sorting machines and cutting back on overtime. Georgia’s election, with a deadline on January 5, has a request for 1.3 million mail-in ballots.

Last August, Russians poisoned Vladimir Putin’s opposition leader Alexey Navalny. Almost dying, Navalny tricked the Russian assigned to tail Navalny into explaining the method of poisoning: the lethal nerve agent Novichok was planted inside the crotch of his underpants. Konstantin Kudryavtsev believed he was being debriefed by a senior official from Russia’s National Security Council and talked about traveling to Siberia to clean up the evidence. Navalny probably lived because his flight was diverted to Omsk where he was treated within minutes of landing. When Kudryavtsev got the clothing, he applied solutions to destroy any evidence of poison, according to directions from Stanislav Makshakov, the official in charge of the toxin team.

Russia’s four-year ban from international sports competition may be cut in half, but the country will still miss the next two Olympics and the World Cup. No flag, no anthem, no presence at next summer’s Tokyo Olympics, 2022 Winter Games (Beijing), and other competitions such as the FIFA World Cup, the Youth Olympic Games, Paralympics, and other world championships. Russian athletes can compete but not under the Russian flag. The court ruling for Russian doping also requires Russian government representatives, including Putin, cannot attend a major international event for the next two years. Russia must pay $1.27 million to the World Anti-Doping Agency for covering the costs of its investigation and turn over data from its Moscow laboratory.

With the addition of a Moderna vaccine, the CDC is planning more vaccinations with the next tier going to essential workers and people 75 and over. The first group was comprised of healthcare workers and people in nursing homes along with “older” members of Congress. Sen. Marco Rubio (R-FL), 49, joined the “older” group to get vaccinated, becoming one of the 32,000 Floridians in a state with a population of 21,480,000, mostly people over 65 and an enormous nursing home population.

Grifters are making money off the grifter in the White House. Reggie Skyrock and Ashley Weiss selling bus tickets to Donald Trump’s inauguration on January 20, 2021, for $40—no refunds. Yes, you read that right. It’s posted on Event Brite. And the announcement was still there a few hours even after The Bulwark outed them.  

December 18, 2020

GOP Sabotages Stimulus Bill, Economy

The United States is on the verge of another government shutdown, almost two years after the last one created by Dictator Donald Trump (DDT) and his GOP minions. This one comes from the attachment of a stimulus bill to the budget which expires today, December 18. The general election slowed down any stimulus bill because Senate Majority Leader Mitch McConnell (R-KY) wants to destroy the economy for a Democratic president. He found no value in austerity when the GOP gave trillions of dollars to the wealthy and big business in the 2017 tax cuts and earlier this year with the CARES law giving billions more to big business. The hope last fall was that DDT’s name on another set of $1,200 checks for most people in the U.S. would make him—and other Republicans—reelected in the fall. There was no bill: Republicans came out of the general election better than expected, but DDT lost, much to the denial of his supporters.

McConnell’s decision was to vastly shrink the amount of the current stimulus bill to under $1 trillion while blowing up the amount by using money from the CARES law. He blocked the stimulus bill by refusing to send any money to local and state governments, in serious shape from the pandemic, and demanding big business have no liability for endangering their workers, even when they sit around and make bets about how many of their employees will die.

To further jeopardize the stimulus bill and the economy, the GOP tacked on another demand today, ending emergency lending programs for small and medium-sized businesses authorized by the CARES Act. The CARES Act states the programs don’t expire until 2026 unless Congress changes the law.  Language from Sen. Pat Toomey (R-PA), who doesn’t plan to run for reelection in two years, blocks all money in the Treasury’s rainy day fund, even funds not from CARES, from use in similar future programs to respond to a financial crisis. Of nine programs needing to be renewed at the end of 2020, Treasury Secretary Steve Mnuchin wants to scuttle five of them. Toomey wants to prevent any future Treasury secretary of either party from ever providing assistance for both small businesses and non-federal governments.

“My goal … is always to get as right-of-center an outcome as possible,” McConnell said when questioned about a crisis, specifically a government shutdown. His one goal is to stay in power, and he’ll do anything to keep the job. He admitted the only reason he might send out smaller stimulus checks is to reelect the two Georgia incumbent senators, who McConnell says are being “hammered” by the stimulus check issue, but he wants the amount small to depress the economy.  McConnell appears to be a DDT loyalist, but his admission about Biden being president-elect shows he will dump DDT when necessary. It’s not that he wants Biden; he just wants his Republicans to not look foolish so they will get reelected.

DDT wants stimulus checks to be up to $2,000, but White House staffers talked him out of the idea. Keeping the stimulus checks low will guarantee a struggling economy when Biden takes over as president and keep McConnell semi-satisfied. Under DDT and McConnell, poverty jumped 2.4 percent in the past five months, the highest annual increase since the 1960s. The shift from 9.3 percent in June to 11.7 percent in November added 7.8 million to the poor while people with a high school education or less—DDT’s supporters—faced a 5.1 increase in unemployment. McConnell figures these people will keep voting for Republicans because they get their falsehoods from conservative media.

To avoid a weekend shutdown today, the House passed a two-day Continuing Resolution to the budget by 360-60 which passed the Senate with a voice vote. Congress has until midnight on Sunday to pass a real budget and a real stimulus bill if DDT passes the C.R

Another Christmas Grinch, Sen. Ron Johnson (R-WI), has twice blocked the stimulus bill. Johnson said:

“I’m not heartless. I want to help people. I voted to help people.”

A favorite Johnson strategy is accusing others of lying while he tells his own falsehoods. During Johnson’s committee hearing earlier this week  focusing on conspiracy theories about evidence-free election fraud, he blew up at Sen. Gary Peters (D-MI), accusing Peters of having “lied repeatedly in the press that I was spreading Russian disinformation.” In the past, Johnson did exactly that about Hunter Biden, the son of the president-elect, in a ploy to get votes for DDT. In the midst of the budget and COVID-19 crisis, Johnson devoted three hours to pushing election fraud lies with three witnesses totally lacking credibility. Peters responded:

“This is not about airing your grievances. I don’t know what rabbit hole you’re running down. This is terrible what you’re doing to this committee… Whether intended or not, this hearing gives a platform to conspiracy theories and lies. It is a destructive exercise that has no place in the United States Senate.”

Some of the falsehoods from Johnson’s witnesses were already rejected in tens of courts; others had no basis. With no evidence, Johnson kept claiming fraud had occurred although the one expert witness maintained it did not. The only reliable witness, Chris Krebs, knew the election had no widespread fraud: he was the leader of the DHS cyber security agency until DDT fired him a few days after losing because Krebs wouldn’t say he found fraud. At the hearing, Krebs talked about how the lies about election fraud were worsening the climate of threats against elections workers, causing a “chilling effect” in future elections. Peters said some threats against Krebs were so serious that they had “to make some arrangements for your security to be here today to testify in person.”

Two days after Sen. Rand Paul (R-KY) supported Johnson’s view of election fraud, that the 2020 election was “stolen” from DDT, he objected to people voting in the Georgia election for two U.S. senators on January 5. He believes Republicans need to block a large voter turnout because it helps Democrats. Paul said:

“They’re mailing out a solicitation to vote by mail. This is not in the state law. I’m very, very concerned that if you solicit votes from typically non-voters, that you will affect and change the outcome. So I’m very worried that the Democrats will control all three branches of government.”

Conservatives control the third “branch of government”—the Supreme Court—because DDT controlled the executive and legislative branches during his first two years in the Oval Office. Paul announced Republicans can have a majority of the legislative branch only if a segment of eligible voters, especially Blacks, are disenfranchised. Paul may formally reject the electoral votes during the January 6 joint session of Congress.

The U.S. Army is refusing to follow Michael Flynn’s request for a declaration of martial law to force reelections in battleground states where DDT lost. On Newsmax, Flynn said:

“[DDT could] order the—within the swing states, if he wanted to—he could take military capabilities, and he could place those in states and basically re-run an election in each of those states.”

The response from Army Secretary Ryan McCarthy and Army Chief of Staff Gen. James McConville:

“There is no role for the U.S. military in determining the outcome of an American election.”

Despite Flynn’s claim that “it’s not unprecedented,” there is no record of a U.S. president declaring martial law for a new election. Flynn, a QAnon member, secretly worked with Russia after DDT’s election and before his inauguration to subvert President Obama. His business was also paid to secretly encourage the extradition back to Turkey of a longtime Turkish dissident living in Pennsylvania for 20 years. DDT gave Flynn the same pardon President Gerald Ford gave Richard Nixon, absolving Flynn of “any and all possible offenses” arising from Mueller’s investigation, any related grand jury proceedings, and all charges based on “facts and circumstances, known to, identified by, or in any manner related to the investigation of the Special Counsel.”

In the past week, Steve Schmidt, formerly John McCain’s campaign manager, shifted his voter registration to Democrat, because of DDT’s and the GOP behavior:

“It was a joke in a lot of ways, but it was a coup. It was a failed coup. And the way you get to a second coup in most countries is by having your first unsuccessful one.”

Schmidt described the Democratic Party as the only one that “stands for the ideas and ideals of American liberty.” He declared, “I’m a single-issue voter now. I believe in democracy.”

December 18: daily U.S. cases – 254,680; deaths – 2,794. Thirty-three more days to go.

September 7, 2020

Labor Day: DDT Makes Almost Everyone a ‘Loser’

Last week, an Atlantic article addressed Dictator Donald Trump (DDT in his description of captured, wounded, and killed military members as “losers” and “suckers.” Today, the fourth Labor Day since DDT was inaugurated, over 90 percent of the people in the United States are “losers.” Labor Day is meant to celebrate but under DDT:

Workplace safety has been destroyed: OSHA’s website no longer provides names of people dying in workplace accidents, and safety protections are rolled back for oil rig and coal industry workers.

The number of workers eligible for overtime pay has been cut in half, and workers are losing the ability to unionize and collective bargain.

Only half of workers for companies employing fewer than 50 people has access to 401(k)s, belying DDT’s claim that the stock market helps workers.

COVID-19 can’t be blamed for all the bad economy: the recession, defined by two quarters of negative growth, began last February before the virus’ onslaught. DDT also did nothing to stop the pandemic for months. He used the infections and deaths in blue states, hoping the problems would help him get elected. The economy was already too weak to overcome the pandemic’s effects, especially with a collapsing healthcare infrastructure. The tie of people’s health insurance to their employment devastated the economy after almost one-third of workers lost their employment or were furloughed.

The RNC attempt to “sell” the economy failed:

Employment: The stable economy in 2017 taken over by DDT in 2017 had a good record for consecutive monthly job growth, compared to Barack Obama’s assuming the presidency at the worst of the Great Recession. Almost 7 million jobs were created during Obama’s last three years in office; DDT’s first three years shrank 394,000 jobs to 6,585,000 jobs. Job growth in July, 4.7 million new jobs, shrank to 1.7 million in July and 1.4 million August, many of them temporary census takers to be laid off in a month or two. The number of permanently laid-off workers instead of temporary layoffs or furloughs increased to 3.4 million in August from 2.9 million in July. Of the 25 million jobs lost in the spring, only 10 million returned through July, a loss of 5.7 new jobs since DDT was inaugurated.  

Monthly unemployment numbers: In his ongoing attempts to pretend the economy is better than it is, DDT is “adjusting” the monthly unemployment figure by publishing the “additive” seasonal adjustment for first time unemployment claims. The change lowering numbers by about 21 percent. For example, the 881,000 claims for the last week of August, the first to use the system, would normally have been the usual over one million figure. About 29 million workers currently receive weekly unemployment out of a past workforce of approximately 154 million.

Economic growth: In Obama’s final three years, the economy (inflation-adjusted gross domestic product) grew 2.5 percent in 2014, 3.1 percent in 2015, and 1.7 percent in 2016—an average of 2.43 percent per year. DDT’s first three years showed an average of 2.5 percent per year—2.3 percent in 2017, 3.0 percent in 2018, and 2.2 percent in 2019. He had promised 4 percent or more per year.

Wage growth: Hourly earnings adjusted for inflation grew 3.3 percent during Obama’s final three years. DDT’s first three years were slightly less in the hourly earnings increase at an average of 3.2 percent. Any spike in wage growth now comes from disproportionate job losses for low-wage workers. Workers in the bottom 25 percent were half of the job losses whereas the top half of earners comprised one-third of the layoffs. Meanwhile, the ratio of CEO compensation to worker pay rose from 293 to 1 in 2018 to 320 to 1 in 2019.

The system may reverse as millions of lower-paid employees are being brought back, and the well-paid jobs, including those at tech companies, are disappearing. In the last four weeks, almost seven million people filed initial unemployment claims while the number of people on unemployment insurance dropped by four million, from 31 million to 27 million. Many of the people who got their jobs back, however, are in retail, restaurants, and lodging—the lower-paid end of services. It’s the next disaster.

Stock market: DDT’s S&P 500 climbed 51 percent from the day of his inauguration to August 25, 2020. It has gone down since then. The S&P 500 rose 182 percent during Obama’s two terms—about 52 percent during his second term.

Gains for the wealthy: The “K-shaped recovery,” a sideways “V” giving money to the rich and taking from the other 99 percent, was worsened by DDT’s 2017 tax cuts in which over half the people made less money in 2018 than in 2016. The almost 87 million taxpayers making under $50,000 lost $307 compared to President Obama’s last year. DDT’s policies benefit the top 7 percent: households with incomes over $200,000 rose by over 20 percent, and those making over $10 million skyrocketed by 37 percent to 22,112 households. Losing revenue from the tax cuts mostly for the wealthy adds at least $1.5 trillion to the national debt. During the pandemic, the combined wealth of more than 600 billionaires in the U.S. jumped by $792 billion, taking their collective net worth to $3.7 trillion.

National debt: The federal accumulated debt is projected to be larger next year than the overall economy for the first time since 1946—107 percent of the 2023 gross domestic product. This fiscal year’s debt ending this month expected to be $3.3 trillion reaches 16 percent of GDP, a level not seen since 1945. Federal spending skyrocketed to 32 percent of GDP for the current fiscal year. Tens of millions of people unemployed and countless businesses struggling or gone dropped revenues, down 16.3 percent from last year and 18 percent from 2015. The Congressional Budget Office estimates declines in both revenues and spending for the upcoming fiscal year, beginning October 1 with an expected 8.6 percent of GDP next year.

Deferred payroll taxes: If businesses defer the 6.2 percent employee portion of taxes for Social Security and Medicare, workers will see more money in their paychecks until the end of the year before they are forced to pay double that amount—12.4 percent—for over three months until the “deferment” is repaid. Ideally, people could save the overage in their paychecks for repayment, but realistically, many of them won’t. The needy unemployed won’t have any extra money from the deferred payroll tax because they have no paychecks. DDT is ordering this deferment for the 4.5 million federal employees, both civilian and military. Businesses describe DDT’s plan in his signed measure as “unworkable” and don’t plan to implement the order. Workers may also be able to opt out of the deferral program although the possibility is uncertain. More problems come from situations in which employees no longer work for the company as well as the government struggling to collect back-due tax balances next year.

DDT has said, if reelected he plans to eliminate the payroll tax entirely. If he carries through with his threat, the Social Security Trust Fund will be empty by 2023. The question is whether he can carry through with his plan without congressional approval. 

High U.S. trade deficit: On the campaign trail, DDT promised to produce a speedy decline in the U.S. trade deficit. July saw a 12-year high in this deficit after a surge in imports, the largest since July 2008. The negative trade balance in 2020’s first seven months is $340 billion. Over 300,000 U.S. jobs have been lost to outsourcing and imports since DDT’s inauguration, perhaps more because the figure reflects only job losses approved for Trade Adjustment Assistance (TAA) retraining and other benefits. The Economic Policy Institute reported DDT’s trade agenda and handling of the pandemic “wiped out much of the last decade’s job gains in U.S. manufacturing.” Robert Scott, EPI senior economist and director of trade and manufacturing stated, “Nearly 1,800 factories have disappeared under Trump between 2016 and 2018.” He added the annual increase in the U.S. trade deficit since 2016 reduced GDP growth by about 0.25 percent annually for each of the three years.

New stimulus bill: One reason Senate Majority Leader Mitch McConnell (R-KY) refuses help for states and cities during the pandemic comes from not “bailing out” blue states having budgetary problems from the pandemic. Deep-red Louisiana has a 46 percent decline in revenue and asked for $500 billion, $350 billion more than DDT offered. If McConnell sticks to his guns, the U.S. economy could contract by three percent and lose another four million jobs.

The Federal Reserve has decided to keep interest rates low, benefiting banks and allowing people to borrow more money while putting more people in debt and raising inflation. The higher prices and lower savings rates will hurt many people, especially elders. The delinquency rate for mortgages just hit the biggest quarterly rise in the history of surveying. More facts about the collapsing economy here and here

During his inauguration speech, DDT promised to provide for the “forgotten men and women of our country. These are some of the results. DDT now says a Biden/Harris administration would destroy the U.S. economy. It’s too late; people are already losers.  

March 9, 2020

Markets—Stocks, Bonds, Oil—in Crisis

Reminiscent of the 2008 crisis, a full-flown trading panic sent the New York Stock Exchange shooting downwards as the Dow Jones dropped over 2,000 (7.8 percent) to the same level as 30 months ago, and the Standard & Poor and Nasdaq each lost over 7 percent. The radical drops during the first few minutes after the bell rang to open stock trading caused a 15-minute trading hiatus for all trading. The automatic trigger mechanism was created during the 1987 recession, and it’s only the second time since then that the stoppage has gone into effective, the last time in 2008 during the Great Recession. It’s the first time since 2008, during The Great Recession, that the trigger mechanism was utilized.  [Floor trader Peter Tuchman watches the stock numbers drop during the opening bell on the New York Stock Exchange on March 9, 2020. Timothy A. Clary/AFP via Getty Images.) 

The losses were predictable. Global markets began shrinking over the weekend, setting up the scene for the losses in the U.S. London’s FTSE returned to three years ago by falling 8 percent, Japan’s Nikkei index went down over 5 percent, and Australia’s stocks lost over 7 percent.

Bonds also hit an historic low as investors sold stocks to because of covid-19 and the oil war. All yields fell below 1 percent for the first time ever: the 10-year Treasury bond is 0.62 percent, and the 30-year yield dropped almost 2 percent to crawl back up to 1.08 percent. 

 

 

 

 

 

The covid-19 pandemic has roiled the global markets, but the slumps were also caused by Saudi Arabia’s initiating an oil war with Russia which caused prices to collapse 30 percent to the level of the 1991 Gulf War. Despite a glut of oil on the market, the Saudis won’t scale back production after Russia flooded the market. Finishing down 24 percent, Brent was $34.44 per barrel and West Texas International crude at $31.13 per barrel. Dictator Donald Trump (DDT) blew aside the destructive impact from uncertainty and fear by praising oil prices to save money at the gas pump. Lower oil prices also slash inflation that may match the 2008 financial crisis.

Last Friday, Russia refused an agreement with OPEC on cuts in oil supplies to bolster prices. Price drops hurt Venezuela and Iran, already suffering from U.S. sanctions. Highly indebted U.S. oil companies will have added pressure, and more of them may go out of business with ensuing decline in production. Oil producing states such as Texas have laid off workers. Canada will be hard hit, and developing companies such as Nigeria, Angola, and Brazil will face economic slowdowns. Shares of the Saudi national oil company, Saudi Aramco, dropped by 9 percent. If the Saudis increase output to make up for lower prices, prices in the world will continue to collapse, already about one-third this year.

Last week,  J.P. Morgan told clients that markets indicate a 90 percent chance of a recession, meaning six continuous months of economic contraction. Hits to the economy come from almost empty airplanes and hiring freezes. Middle-class people will stay at home to eat instead of patronizing restaurants and buy cheaper products.

DDT keeps talking about how strong “the economy” is, but people’s economic life and livelihood are not “the economy.” DDT’s policies on taxes, tariffs, education, healthcare, the environment, etc. have badly hurt most people’s finances. The 34 percent addition to the deficit negates the idea that the economy is booming, as are the frequent drops in the prime rate. Since his inauguration, DDT has run the government as if the U.S. was already in a recession. Education enriches the economy, but it’s cut in DDT’s budget as are service. Taxpayers have already paid $28 billion to bail out farmers because of DDT’s tariffs, and DDT wants to take the Affordable Care Act away from most people in a case before the Supreme Court. Climate change takes more money from taxpayers, but DDT and his administration ignore its problems of floods, wildfires, hurricanes, and tornadoes. The economy hurts most people.

Years before the 2008 financial crisis, Sen. Elizabeth Warren (D-MA) warned about a vulnerable economy with trends of “shady subprime lending, rising household debt, a mortgage market where lenders didn’t bear the risk of their loans.” [Note: I sensed disaster coming too, but I’m not an expert.] Warren wrote another post less than a year ago about an eminent disaster:

“I see a manufacturing sector in recession. I see a precarious economy that is built on debt—both household debt and corporate debt—and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble. Seventy-one million American adults—more than 30% of the adults in the country—already have debts in collection.”

She added that consumers were getting squeezed by “a generation of stagnant wages” and the rising costs of basic goods and services. The solution for U.S. households is to take on debt at historic levels with student loans, credit card debt, auto loans. Warren also wrote about corporate debt:

“Leveraged lending—lending to companies that are already seriously in debt—has jumped by 40 percent since Trump took office.”

This leveraged debt helped consumer debt to tank the economy in 2008. Like subprime mortgages, new corporate loans are “poorly-underwritten loans with minimal protections that are then packaged and sold to investors.”

The recession for U.S. manufacturing sector, tied to DDT’s trade wars, began in the beginning of 2019. Warren wrote, “For the first time ever, the average hourly wage for manufacturing workers has dropped below the national average.” Her solution was reducing household debt by canceling some debt and raising the minimum wage to $15 per hour; creating regulations to decrease heavily leveraged corporate lending; and investing trillions of dollars into new environmental research, production, and exports to strengthen manufacturing.

Instead, DDT kept wages low, blocked regulations, stopped investing in the country, and cut taxes for the wealthy and big business.

DDT is fond of comparisons to him with biblical figures such as Cyrus, David, Abraham, Moses, the apostles, Jesus, and even Queen Esther. Running out of Judeo-Christian figures, DDT quote-tweeted an image of himself as Nero and wrote, “Who knows what this means, but it sounds good to me!” Former ethics director Walter Schaub replied:

“It means Rome is burning and you’re fiddling around a golf course, Nero.”

When he was young, the emperor Nero had lavish palaces, threw wasteful parties, slept around, and went on the stage. In 64 A.D., he announced his plan to destroy Rome and build it back up in his preferred architectural style. The Senate refused, and Rome began to burn for nine days. According to legend, the extravagant emperor Nero “fiddled while Rome burned,” but violins didn’t come into existence until many centuries later. Nero’s first biographer claimed he sang while Rome burned. Other biographers asserted that witnesses saw Nero set the fire or hired thugs to do it. Nero committed suicide four years later after fleeing Rome and discovering that he was condemned to death as a public enemy. The people celebrated his death. [Left: A float depicting DDT as Nero in the traditional Carnival parade in Mainz, Germany, on Feb. 24. Michael Probst/AP]

The United States is burning, and DDT plays golf and blames the Democrats.

March 3, 2020

DDT’s Economy before Covid-19

As the new coronavirus, covid-19, continues its creep across the world, the economy—which had many cracks before the health crisis—may take a bit hit.

Financial markets: Last week, U.S. stocks’ drop of at least 10 percent had not been seen since 2008 in the great recession at the end of George W. Bush’s second term. Damage is being done to retirement accounts, especially if interest rates are again cut, and consumer confidence. Stocks went up this week but only because governments and banks promised to take care of the problem.

Retail: Reduction in discretionary spending influences an area providing for over two-thirds of U.S. economic growth. A covid-19 outbreak in the U.S. would also drive people to online outlets, threatening jobs in a sector showing no employment growth in 2019.

Travel and hospitality: Cancelation of conferences and meetings have already led to a drastic decline in global travel and tourism, hurting airlines, lodging, casinos, restaurants, concert/sports venues, and other businesses with close contact.

Technology: Factory shutdowns in China and neighboring countries already restricted supply of technology products and parts, necessary for huge companies such as Apple and Microsoft. Almost 80 percent of small and medium-sized industrial plants in China are still closed.

Automobiles: Lack of parts from China hurts the U.S. industry already suffering from DDT’s tariffs.

For the one argument to vote for him, Dictator Donald Trump (DDT) bragged about creating the “best economy” people have ever known—low unemployment rate, lies about new jobs, and the high stock market. Even before the onslaught of covid-19, DDT’s economy was going downhill. He pushed through the tax cuts with promises for a GDP up to six percent but averaged $1 trillion deficit per year, twice President Obama’s last year. He hasn’t even hit three percent GDP growth for a year: 2.3 percent last year, 2.9 percent in 2018, and 2.4 percent his first year. President Obama hit over 4 percent in four different quarters. Goldman Sachs now estimates GDP for the first quarter of 2020 at 1.2 percent. Ed Hyman, Evercore ISI Chairman and widely followed economist on Wall Street, predicts 0.0 percent GDP for both second and third quarters of 2020. 

An update from early November showing DDT’s growing economy problems:

  • Private-sector investment had negative growth for most of 2019 as big business stores profits offshore and buys stocks in their companies.
  • Job growth of almost 2.1 million in 2019 was below that of 2018 and among the worst since 2011 when the country was crawling out of a big recession. DDT’s best year of 2018, with 2.31 million new jobs, was still under jobs gains during any of Obama’s last three years.
  • About 1 in 7 U.S. men between 25 and 54 (over 14 percent) aren’t employed, higher than the year before the economic disaster in 2007. Many of them don’t appear in unemployment statistics because they gave up looking for work. Most do not have college degrees and live in a handful of rural, low-income regions across the country.
  • Median household income rose only $1,400 during DDT’s first two years, compared to the $4,810 increase during President Obama’s last two years.
  • Wage growth dropped in states that didn’t have minimum-wage increases, and median wage for “blue collar” workers has gone down 12.3 percent since 1979. The $7.25 minimum wage, established 11 years ago, just shrank to $6.05 after adjusted for inflation.  U.S. households are poorer than before the 2007 financial crisis.
  • The median wage of a full-time male worker is still more than three percent below what it was 40 years ago. DDT’s change in the overtime rule means that eight million workers will receive lower wages, $1.4 billion less than under the 2016 rule.
  • The typical US male worker needs one additional week every year to support a family of four compared to the 30 weeks in 1985 that gave him the money. Now a man needs $54,441 for expenditures compared to the $13,227 required in 1985. Women are worse off, requiring 45 weeks in 1985 compared to 66 weeks in 2018.
  • Median household income in Democratic districts is $61,000, compared with $53,000 for Republicans.
  • Conservative policies are responsible for millennials’ huge college debt, stagnant wages, unaffordable health care, climate change problems, and massive federal deficits.
  • Nine of the last ten recessions began under Republicans: 1953, 1958, 1960, 1969, 1973, 1981, 1990, 2001, and 2007. The only Democratic one was in 1980, resulting from the oil crisis in the late 1970s.
  • In the employment figures that DDT praises, 57 million workers, one-third of all employed people, have gig economy jobs without any benefits such as health insurance. People in those jobs, as well as other ones that don’t provide sick leave, are likely to spread covid-19 by working while sick and having contact with a large number of people.  
  • In two years, the uninsured rate increased from 10.9 percent to 13.7 percent, and life expectancy dropped in the first two years after DDT was inaugurated—in 2017 the highest rate of midlife mortality since World War II.
  • Almost 60 percent of people in the U.S. cannot cover an emergency expense of $1,000 such as a car repair
  • In a Monmouth University poll, only 12 percent of people in the U.S. said their families had “benefited a great deal” from recent economic growth, and only 18 percent said that middle-class families had benefited a lot from Trump’s economic policies. 

DDT wants people to overlook his soliciting foreign interference to get elected, incessantly lying, obstructing justice, and destroying the lives of people through his domestic and foreign policies. His demand for votes based on a continuation of Obama’s economy ignores the indicators of a coming recession.

  • The manufacturing purchasing managers’ index dropped to 47.2, its lowest level since June 2009. Unemployment has increased in Ohio and Pennsylvania for the past six months, and Michigan and Wisconsin manufacturing unemployment has eroded.
  • Manufacturing cut 12,000 jobs in December; mining shed 8,000; and transportation and warehousing dumped 10,000. US Steel shuttered its Detroit plant and laid off 1,545 workers. Two hundred workers lost their jobs earlier last year.
  • Shipment volume dropped 9.4 percent in January 2020 compared to an already weak January the previous year. The decrease was for the 14th month and the steepest since October 2009. In December, the Celadon Group, with 3,000 drivers and 2,700 tractors, became the largest truckload carrier to file for bankruptcy, and barge operator American Commercial Lines, with 3,500 barges mostly the Mississippi River, declared bankruptcy in January. Two of the largest US railroads, CSX and Union Pacific, dropped revenues and reported massive layoffs from weak transportation.
  • Car sales have declined since 2016 to below their level in 2000, and new-vehicle registration in California, the biggest U.S. market, dropped 5.5 percent in 2019. New-vehicle sales have dropped to
  • Five percent of auto loans are delinquent.
  • Credit card delinquencies increased in 2019 to 8.36 percent. Subprime credit-card delinquency rates are at an all-time high.
  • One in nine borrowers of student debt, now over $1.5 trillion, were reported 90+ days delinquent or in default in 2019. This figure might be understated because half of student loans aren’t in the repayment cycle because they are in deferment, grace periods, or forbearance. Delinquency rates are projected to be about twice as high when those loans enter the repayment cycle.
  • The size of the stock market relative to the size of the economy is at its highest level ever, showing that it’s overvalued. Because of stock over-evaluation, asset managers expect a recession this year or in 2021.
  • Capital spending by S&P 500 companies grew less than 1 percent in the third quarter and would have fallen without Apple and Amazon because uncertain business environment causes companies to cut back on spending.

GOP Iowa Sen. Chuck Grassley encouraged DDT and his economists, including Peter Navarro, to read about parallels to the booming 1920s in Dan Henninger’s Wall Street Journal op-ed by Dan Henninger. The economic growth, when Congress cut taxes three times in a time of huge income inequality, was followed by the financial crash and almost a decade of deep fiscal depression. Herbert Hoover, elected in 1928, loved tariffs that damaged an already declining economy and signed the Smoot-Hawley Tariff law in 1930, a policy that severely restricted trade and strained the economy by raising import taxes.

After a cash shortage in financial institutions last September, the Federal Reserve flooded the market with overnight “repos,” repurchase operations by purchasing $60 billion a month in short-term Treasury bills. Banks buy them overnight and sell them back the next day at a higher price to meet federal requirements for minimum reserves. 

The economy would have shown greater signs of tanking without the Federal Reserve acting as if the U.S. were in a recession instead of a sound economy. The agency practiced quantitative easing, buying assets such as bonds. The last time the government did this to get out of the great recession, the Fed stopped the practice as soon as the economy recovered. Now, the Fed is purchasing bonds at a $60 billion per month–$720 billion a year or about three-fourths of a trillion dollars—more debt for future generations. This system moves more wealth to the top, away from most people.

The Fed has also cut interest rates several times since DDT was inaugurated, most recently the 0.5 percent this morning which dropped the rate to below 1.25 percent—the largest cut since 2008. The purpose is to encourage people to spend, an unlikely behavior during a health crisis.

A recent Pew research poll found that “[s]even-in-10 U.S. adults say the economic system in their country unfairly favors powerful interests.” William D. Cohan wrote that covid-19 gave investors the reason for grabbing their profits in a shaky economy and DDT an excuse to blame the stock market on something other than his economic policies that “widened the gulf between the rich and poor” to the biggest divide since the Gilded Age of 150 years ago.   

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
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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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