Consumers Not So Confident?

Posted on June 28, 2024 by Popular Economics Weekly

The Mortgage Corner

What are we to make of the Conference Board’s latest confidence survey?

“The decline in confidence between May and June was centered on consumers aged 35-54. By contrast, those under 35 and those 55 and older saw confidence improve this month,” said Dana M. Peterson, Chief Economist at The Conference Board.

Conference Board

We are in the midst of one of the greatest economic recoveries in history—from the worst pandemic in more than 100 years. Yet most consumers lack confidence because they don’t know where to look for information on the real economy, as opposed to what is on social media or in mass media headlines.

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future. However, if material weaknesses in the labor market appear, confidence could weaken as the year progresses,” said Peterson

I believe this reflects the fact that most consumers like their current circumstances, but not outside events that may forecast the future. Why isn’t the rest of the world doing as well as Americans, say the headlines?

A lot of the confusion unfortunately comes from social media which doesn’t differentiate fact from fiction. A recent poll maintained that 50 percent of those surveyed believe we are in a recession, when real GDP growth has averaged 2 percent since the pandemic, and we are at full employment.

It reflects what I have called irrational pessimism. The other side of the coin is irrational exuberance, when excessive optimism that prices will almost always rise can cause asset bubbles.

Nobel laureate economist Robert Shiller has written about it. That’s because most market investors rely on hearsay and word of mouth, rather than research that would paint a more accurate view of market conditions.

Much of Main Street, ordinary working adults in the main, have become irrationally pessimistic for that reason. Surveys such as a recent poll by PEW Research show this.

“About three-in-ten Americans (28%) currently rate national economic conditions as excellent or good, while a similar share (31%) say they are poor and about four-in-ten (41%) view them as “only fair.”

I also believe most Americans are emotionally exhausted and still recovering from the pandemic, so they are now spending less which is slowing economic growth.

BEA.gov/CRFB

That is reflected in the major inflation indexes which were all flat in May. The Fed’s preferred Personal Consumption Expenditures (PCE) monthly inflation index didn’t rise at all on Friday in line with retail CPI prices (in blue line) reported earlier this month as seen in above graph.

When will consumers begin to realize this? Maybe in September when the Fed is now predicted to begin to lower their interest rates. That should make all of US happier!

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Our 2nd Amendment Doesn’t Protect Children

Posted on June 26, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Gun rights advocates, the NRA, and Republican Party have never been serious when calling for the enforcement of the 2nd Amendment, because they have never called for the enforcement of a child’s right of self-defense, the most vulnerable affected by gun violence, only adults’.

Otherwise, they would support U.S. Surgeon General Vivek Murthy’s first-of-its-kind advisory declaring gun violence a national public health crisis and recommending it be treated as such.

SFGate

The 40-page publication from U.S. Surgeon General Vivek Murthy released this week outlines the scope of firearm violence, its impact on victims and communities and a slew of policy suggestions for lawmakers, community leaders and health systems.

Dr. Murthy’s advisory said that firearm-related injury has been the leading cause of death for U.S. children and adolescents since 2020 — when it surpassed car accidents — and that ever-common instances of gun violence are taking not only a physical but also a mental toll on survivors, families and community members at large.

A recent national survey found that 54% of U.S. adults or their family members have experienced a firearm-related incident. And, linking gun violence to mental health, the advisory also notes that nearly 6 in 10 U.S. adults say they worry either sometimes, almost every day or daily about a loved one becoming a victim.

Some of the advisory’s recommendations — which are not enforceable — include increasing federal funding for gun violence prevention research, more community investment in educational programs and mental health resources and nationwide policy changes like an assault weapons ban and universal background checks.

AMA President Bruce A. Scott, M.D,, immediately responded to Dr. Murthy’s advisory: “Across the country, physicians everywhere treat patients and families afflicted by firearm violence. We see the physical and emotional harm firsthand, and we dread the too-often conversations with parents, spouses, and even children in which we tell them their loved one did not make it.

“Firearm violence is indeed a public health crisis in the United States, and the data now show it touches the majority of Americans. We applaud the Office of the Surgeon General for issuing this advisory and for outlining an evidence-based public health approach to addressing firearm violence,” said Dr. Scott.

I wrote a 2016 Huffington Post piece when the American Medical Association first adopted a policy calling gun violence in the United States “a public health crisis” requiring a comprehensive public health response and solution,” at their annual convention.

That was when the tide began turning in some states and a powerful new gun control group emerged called Everytown for Gun Safety, a combining of several smaller gun control groups, including Women Against Gun Violence and Mom’s Demand Action. It was when former New York Mayor Michael Bloomberg was about to launch Everytown for Gun Safety with a pledge of $50 million, but because it lacked foot soldiers merged with the women’s groups and now totals 3.5 million supporters.

Maybe that is why an eight-member Supreme Court at the time allowed a lower court ruling banning assault weapons to stand, which in effect means that the Second Amendment right to own guns does have limits. The U.S. Supreme Court left in place gun control laws in New York and Connecticut that ban military-style assault weapons like the one used in the massacre at an Orlando nightclub, rejecting a legal challenge by gun rights advocates at the time.

The New York and Connecticut laws, among the strictest in the nation, were in fact enacted after a gunman with a semiautomatic rifle killed 20 young children and six educators in 2012 at Sandy Hook Elementary School in Newtown, Connecticut. In total, seven states and the District of Columbia have banned semiautomatic rifles.

Among the stark statistics: 48,204 people have died from firearm-related injuries (including suicides, homicides and unintentional deaths) in 2022, after that number reached a near three-decade high the previous year, reports NPR.

The rate of firearm-related suicide grew by 20% between 2012 and 2022, with the highest increases among young people between 10 and 34 years old—our children!

And Nicholas Kristof wrote an earlier NYTimes Op-ed that said more Americans had died from gunfire since 1968 than in all the wars ever fought by the United States — a claim PolitiFact twice pronounced to be true.

A public health approach, Murthy said in the report, can guide the nation’s strategy and actions “as it has done in the past with successful efforts to address tobacco-related disease and motor vehicle crashes.”

Our Surgeon General has now begun a national discussion about the latest public safety menace, the epidemic of gun violence. It requires similar treatment as did the Ebola and Zika epidemics–eradication of the carriers of that violence, which means stricter licensing requirements for starters, and maybe the banning of military-style assault weapons in all states.

Can we hope as much, given the Republican Party has opposed almost any form of gun regulation, given the upcoming Presidential election?

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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“Australians Not Like U.S.”

Posted on June 25, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Huffington Post

We happened to be in Australia in 2015 when this Sydney journalist voiced his reaction to another mass killing in America. “The US is too immature a society to be allowed to play with guns.”

And as I update this column today, there were four more mass shootings on the first weekend of summer, 2024—27 injured or killed this last weekend.

We are two countries with almost identical demographics, but where the Australian minimum wage for full-time, working adults is more than $16Aus per hour and Australian’s have created a health care system that pays for all normal health care costs (as opposed to catastrophic events), though hospital care is free for every Australian citizen.

Yet we cannot control the gun violence that Australians have been able to. It is a startling contrast that I first wrote about during the Obama administration.

“Australia is not like the U.S.” said commentator Michael Pascoe in the Sydney Morning Herald in response to President Obama’s remarks on the Umpqua Community College killings by a deranged killer, whose mother kept at least 8 guns at home, in addition to the 6 guns plus ammunition carried by the shooter in the slaughter of college students and a teacher.

“We know that other countries in response to one mass shooting have managed to craft laws that almost eliminate mass shootings,” said President Obama. “Friends of ours, allies of ours, Great Britain, Australia, countries like ours.”

In fact, the US now has a gun homicide rate 370 times that of Australia’s. “Unlike the US,” said Pascoe, “we collectively decided to have a decent social safety net, the concept of a living wage and make good education freely available. Most of us are wary of those with extreme views of any kind.”

Our gun problem of course extends beyond mass violence, says the LA Times. In 2014 alone, for example, the Centers for Disease Control and Prevention recorded 11,208 people shot to death, 33,636 injured by gunfire and 21,175 who killed themselves with a gun. That’s a total of 66,019 people who were killed or injured by a gun, which comes out to 1,269 per week, 180 a day or 7.5 per hour.

Current Australian gun laws were passed after 35 were killed and 23 wounded in 1996. There hasn’t been a mass shooting in Australia since. At the heart of the new laws was a massive buyback of more than 600,000 semi-automatic shotguns and rifles, or about one-fifth of all firearms in circulation in Australia. The country’s new gun laws prohibited private sales, required that all weapons be individually registered to their owners, and required that gun buyers present a “genuine reason” for needing each weapon at the time of the purchase, as well as a 28-day waiting period while backgrounds were checked. (Self-defense did not count.) In the wake of the tragedy, polls showed public support for these measures at upwards of 90 percent.

“The US is too immature a society to be allowed to play with guns,” said Pasco. “It has never shed its Wild West mythology. Americans still use their courts to kill people, which sends a message in its own way.”

It has been known for years by those who research gun violence that more gun killings occur in households owning guns. A new survey in the Annals of Internal Medicine narrows down some of the causal relationship between guns and death by finding conclusively that having a gun in your home makes you more likely to successfully attempt suicide. The authors of the survey also found with a lesser degree of certainty that people with guns in their home are more likely to be the victims of a homicide.

According to data gleaned from State and Justice departments for the period between 2001-2011, there have, in fact, been many, many more Americans killed by gun violence than by terrorism. During that 10-year period, some 130,347 have lost their lives to gun violence, compared to the approximately 3,000 Americans killed in acts of terrorism.

“It’s all fodder for the deranged fanatics of the American gun lobby, with a bible in one hand and an assault rifle in the other. It’s fuel for the paranoid interpretation of a line in the constitution that is a blatant anachronism,” said the study

We have to be a very sick society to have allowed this to happen. We are so good at preventing foreign terrorists from attacking us, but not protecting Americans from domestic terrorists. We should understand that gun violence itself is an act of terror. And those that support unrestricted use and purchase of guns are the sponsors of domestic terrorism.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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A Greater Lawlessness–On Tyranny

Posted on June 24, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Could we re-elect a tyrant as President? It’s hard to believe the clownish behavior and blatant lies of former President Donald Trump could again put him in the Whitehouse this November.

But author and history Professor Timothy Snyder says it has all the makings of a possible return in On Tyranny, a pamphlet-size book that I first wrote about in 2017.

On Tyranny

It has 20 valuable lessons on how to avoid tyrannical governments, such as almost happened in 2017 and could happen again in Washington with one political party possibly controlling all three branches of government, now that a conservative majority controls the Supreme Court, and a Republican Party is not only quiescent to his blatant lawbreaking but in some ways has aided and abetted it.

“As they know,” Snyder begins in his Prologue, “Aristotle warned that inequality brought instability, while Plato believed that demagogues exploited free speech to install themselves as tyrants.”

We now have the greatest income inequality since 1929, and it led to the Great Recession and political polarization we have today. A President Donald Trump would not have been possible if incomes hadn’t declined so drastically for those dissatisfied white male voters from the rustbelt.

And then there was the Russian meddling in our media with thousands of bots sending out fake social media news, Tweets, and Wikileaks exploiting the hacked Democrat’s emails, not to speak of Breitbart propaganda inflaming the alt-right, all white nationalists.

Professor Snyder listed three of the most important lessons on HBO’s Bill Maher show.

#1) “Don’t obey in advance—Most of the power of authoritarianism is freely given. In times like these, individuals think ahead about what a more repressive government will want, and then offer themselves without being asked.”

How could that happen? How could West Virginians in the heart of what was formerly coal country vote more than 2 to 1 for Donald Trump over Hillary Clinton in a historically Democratic state?

This led to the rollback of environmental laws during the last Trump administration that allowed more coal mining, as well as coal-powered plants, when more than 250 coal plants have already closed with cheaper natural gas replacing coal.

It is mainly out of ignorance of what was in their best interests. Coal now occupies but a minor position in W Virginia’s economy with natural gas and renewable energies having replaced it since 1980, according to Nobel Economist Paul Krugman.

#2) “Defend Institutions—It is institutions that help us to preserve decency. So choose an institution you care about—a court, a newspaper, a law, a labor union—and take its side.”

Sound familiar? What has Donald Trump been attacking—the courts, the media (“enemies of the people”), laws that prevent conflicts of interest, and labor union laws that protect worker safety. I might add scientific facts, as he has said he believes global warming is a “hoax”. Trump in effect is attacking all the institutions that preserve decency and a functioning democracy.

“Institutions do not protect themselves. They fall one after the other unless each is defended from the beginning,” said Professor Snyder.

#3) “Above all believe in truth,” because without truth there is no trust, and without trust there are no effective laws, which leads to tyranny. And Republican candidate Donald Trump has made a point of blatant lying, meaning he wants his followers to believe whatever he says rather than objective facts such as global warming, his loss to Joe Biden in 2020, even the size of the audience that attended his last inauguration.

This can only be because his followers have acquiesced in advance, either out of ignorance of the actual facts, or because they will follow him regardless of the consequences to themselves and the nation.

We can only preserve democracy and defeat tyranny in all its forms—including fascism, racism, discrimination, propaganda, and oligarchies, if we learn from history.

“History does not repeat, but it does instruct,” says Professor Snyder in On Tyranny, a must read for anyone wanting to understand the wholesale capitulation of the Republican Party to Donald Trump.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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How Do We Solve It?

Posted on June 21, 2024 by Popular Economics Weekly

The Mortgage Corner

I speak of the housing shortage, as much as 2 million residential units—owner-occupied and rental units—according to housing economists. What is to be done with mortgage rates at historic highs and material shortages everywhere?

Much of it was the result of the busted housing bubble, and the overbuilding of some one million housing units in the early 2000s. The Great Recession followed, when millions more lost their homes. Construction activity ground to a halt and we are still playing catchup.

Calculated Risk

Sales of previously owned homes in May fell 0.7% to a seasonally adjusted annual rate of 4.11 million. The stronger-than-anticipated result was still the lowest rate since January and about 20% below the long-term average for May of more than 5 million sales said Calculated Risk. It was the lowest May number since the housing market was recovering from the immediate shock of the Covid-19 pandemic in 2020.

The supply of existing homes for sale is growing slowly. At May’s sales pace, it would take 3.7 months to sell every home on the market. That is the highest in four years, according to Lawrence Yun, the Realtor’s chief economist.

“Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months,” Yun said in a statement. “Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions.”

Just looking at the existing home sales graph, as many as 7 million homes were sold in early 2000 when the housing bubble peaked. Irrational exuberance reigned, and consumers thought housing prices could never fall. Sales rose again to more than 6 million units in early 2020 when interest rates plunged again during the pandemic.

Zillow the real estate data company, maintains from 2021 to 2022, the U.S. housing shortage grew to 4.5 million homes, up from 4.3 million, while in 2022 the number of U.S. families increased by 1.8 million, while only 1.4 million housing units were built.

It’s the same problem today. Privately‐owned housing starts (i.e., under construction) in May 2024 were at a seasonally adjusted annual rate of just 1,277,000. This is 5.5 percent below the revised April estimate of 1,352,000 and is 19.3 percent below the May 2023 rate of 1,583,000.

Today it is the direct result of the Fed’s inflation fight. High interest rates have driven up the cost of everything, since real estate is dependent on borrowing large sums of money, as any homebuyer can tell you.

It’s also hurting home builders, as Builder confidence in the market for newly built single-family homes was 43 in June, down two points from May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the lowest reading since December 2023.

“We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,” said NAHB Chief Economist Robert Dietz.

The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply, say the builders. “A more favorable interest rate environment for construction and development loans would help to achieve this aim,” said Dietz.

The Fed can see that inflation has been tamed, as much as possible, given their predictions for strong economic growth the rest of this year. I may be overdoing the bold lettering to make such an obvious truth but what else would boost the housing supply and so reduce inflation?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Retail Sales Falter–What May Follow?

Posted on June 18, 2024 by Popular Economics Weekly

Financial FAQs

American consumers are tiring after two years of no relief from higher prices and interest rates. They are now looking for bargains everywhere in the latest retail sales report from the Census Bureau.

It’s the second month of the second quarter that sales have disappointed, and consumer spending is a large part of Q2 growth.

FREDretailsales

“Advance estimates of U.S. retail and food services sales for May 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $703.1 billion, up 0.1 percent (±0.4 percent) * from the previous month, and up 2.3 percent (±0.5 percent) above May 2023,” said the U.S. Census Bureau.

This was in part because gas prices had declined -2.2 percent. Revised April retail sales declined -0.2 percent. The retail report is going to boost both stock and bond prices, which means interest rates should continue to decline. It also means consumers are spending less on travel and entertainment, parts of the service sector that have been powering most of the economic growth to date.

The biggest negative in the May retail report was a 0.4% decline in spending at restaurants. Restaurant spending has fallen in four of the past six months for the first time since the pandemic. Sales also fell at home centers, grocery stores and stores that sell furniture — a residue of rising housing prices and high mortgage rates.

Yet sales rose at internet retailers, clothing outlets and big-box electronics stores, suggesting Americans still have some money left over to pay for so-called discretionary goods, or things people want, rather than need, to buy.

But manufacturing is taking up some of the slack as overall industrial production rose 0.9% in May, the Federal Reserve also reported on Tuesday. That is the biggest gain since last July. The manufacturing component rose 0.9% in May after a 0.4% fall in the prior month. 

Part of the boost was from motor vehicles and parts output that jumped 0.6% after a 1.9% drop in the prior month. Excluding cars, total industrial output increased 0.7%, so auto sales are helping to boost growth.

What does it mean for Q2 economic growth? Estimates are still all over the map. The latest data was good enough to keep the Atlanta Fed’s GDPNow estimate of Q2 growth at 3.1 percent, up from 2.6 percent on June 6. It remained above 3 percent because a drop in PCE (consumer spending) was outweighed by a rise in second-quarter real gross private domestic investment growth (i.e., replacing inventory and buying new equipment) and second-quarter real government spending growth (on such as combatting climate change and modernizing the American economy).

Fed officials now must decide if they want to slow economic growth even more, and maybe risk a downturn come the fall. Do they want to spoil the holidays? I wonder if they will dare in this election year.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Greater Lawlessness Causes Greater Gun Violence

Posted on June 17, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

I first wrote this Huffington Post piece in 2017 after the October 1 killing of 58 people with bump stock-equipped assault rifles at a Las Vegas music festival. It was one of a series on the growing lawlessness that is tearing US apart.

Nothing has changed with the Supreme Court now deciding the executive government, in the form of its ATF agency, did not have the power to outlaw bump stocks because when equipped with same, an assault rifle didn’t fit the exact definition of a machine gun, which is illegal for civilian use.

The SCOTUS majority has caused a greater lawlessness because there is now no law or regulation to prevent the use of bump stocks in more mass killings.

“Guns don’t kill people, people kill people” has been the credo of NRA, gun lobby and most Republicans since the 1980s when gun manufacturers came up with automatic pistols, so that guns could fire more rapidly.

But Las Vegas shooter Stephan Paddock had no discernible mental illness, criminal record — or anger problems, according to his brothers. The NRA will try in vain to find a reason this inhuman act was committed when there is no reason, other than the fact that military-style weapons are legal in most of America and easily obtainable.

Paddock’s assault rifles reportedly fired 1,000 rounds in 11 minutes, which is more than one round per second (1.5 rounds, actually). How is that not a machine gun?

Only guns can kill that many people — always the most vulnerable unable to defend themselves. His brothers didn’t even know he was a gun nut who owned more than 30 weapons and was able to smuggle in 10 suitcases containing 23 of those weapons without any Mandalay Bay Hotel staff even noticing such an oddity. Who needs that many suitcases in a hotel room?

President Trump’s administration did ban bump stocks at the time. But not for long with the Supreme Court majority now stepping in to make them legal again.

No existing laws now protect children in elementary and high schools from military-style assault rifles because in Justice Alito’s words, congress must decide, which said congress hasn’t been able to do.

For shame on the conservative SCOTUS majority.

Australia, the country most like US in population, had a similar gun problem until 36 people were killed in Port Arthur, and Prime Minister John Howard was able to pass strict gun control laws in 1996, the same year of the Port Arthur massacre. There hasn’t been a mass killing since then in Australia.

Australians apparently don’t believe owning an assault rifle is the ticket to manhood. Their gun control laws are maintained by weapon buyback programs and the requirement that gun owners must belong to a certified gun club.

How did our gun laws become so lax that military-style weapons are this easy to obtain? It was a little-known Supreme Court decision authored by its most extreme ideologue, Justice Antonin Scalia, in the 1980s which said that said gun owners no longer must heed the constitutional Second Amendment stricture that owners of such guns be members of a well-regulated militia.

Our founding fathers must have put the works, “a well-regulated militia” in the Second Amendment for a reason. Las Vegas shooter Stephen Paddock was not a member of a well-regulated militia.

Harlan Green © 2024

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No More Inflation?

Posted on June 13, 2024 by Popular Economics Weekly

Popular Economics Weekly

It will probably be hard to believe for those scarred by the post-pandemic inflation scare that inflation isn’t declining, but there was no inflation increase in May for both wholesale (PPI) and retail (CPI) inflation indexes.

Yes, for the first time in two years the Consumer Prices Index was unchanged, a zero-point inflation rise. Wholesale inflation, the Producer Price Index out the next day was unchanged for the first time in one year.

FREDcpi

What does that tell us? Firstly, gas prices and housing (rents) have been declining of late after an initial uptick in the first quarter due to various shortages. Consumers are also becoming more cautious when they shop with major retailers like Target, Walmart, and grocery chains that are beginning to discount their products as shoppers look for bargains.

It will cause bonds in particular to rally because interest rates, including mortgages, finally begin to decline from their two-year highs.

FREDppi

U.S. wholesale (PPI) prices fell in May for the second time in three months — thanks partly to lower gas prices — in perhaps another sign an upturn in inflation earlier this year is fading. The producer price index actually fell 0.2% last month, the government said Thursday.

The retail and wholesale graphs illustrate the sudden drop in inflation, and the fact that the Q1 shortages were temporary. So, now it’s largely leisure activities—e.g., dining out, travel—in the service sector of the American economy, and housing rents that have kept consumers spending and the overall inflation rates higher.

This all fits in neatly with why the Fed believes it must keep interest rates high enough to slow down consumer spending even more, so that borrowing costs, for instance, remain intolerably high (i.e., with 8.5% Prime Rate). And that’s probably why last month’s retail sales were flat.

The cost of goods dropped 0.8 percent largely because of falling gas prices. Food prices also declined. The cost of services, the biggest driver of inflation, was unchanged in May after a big increase in the prior month.

The gradual slowdown in activity is obviously working. Weekly initial claims for unemployment insurance have been rising, signaling a slowdown in hiring. Initial jobless claims rose 13,000 — to 242,000 — in the week ending June 8, the Labor Department said also on Thursday.  That’s the highest level of claims since last August.

What’s keeping the Fed from cutting rates is that wages are still climbing 4.1 percent and Fed officials believe, for some reason, that the unemployment rate should rise above 4 percent—i.e., more employees must lose their jobs for inflation to decline further.

Housing rents, the main ingredient of retail CPI inflation, won’t come down until more housing is built. But that can’t happen until lower interest rates stimulate both the construction and sales of more homes!

That’s playing brinkmanship, in my opinion. It’s not taking into account the possibility of a major geopolitical surprise spooking financial markets, or consumers who are no longer flush with savings from the pandemic aid.

It could be China invading Taiwan, for instance? One can also imagine what might happen if North Korea accidentally sets off a nuclear confrontation. The Russian Navy is now also making regular visits to Cuba, and President Kennedy’s Russian missile crisis is not a very distant memory.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Greater Lawlessness Causes Great Recessions

Posted on June 11, 2024 by Popular Economics Weekly

Financial FAQs

I began writing about Republicans’ disregard for laws in 2012 after the Great Recession of 2007-09, in which as many as 8 million jobs were lost. But not the Republican Party’s lawlessness, though it has always been the party of the wealthiest oligarchs fighting for lower taxes and downsizing of the IRS that monitors their tax shelters.

There were always lawbreakers in both political parties, but I never thought it possible that Republicans would allow a convicted felon to take over their party, who is now their presidential candidate, and who advocates programs that could cause another Great Recession.

Larry Summers, former treasury secretary under the Bill Clinton administration who also has served as the top White House economic adviser for former President Barack Obama, told The Atlantic as cited in MSN.com, of economic policies Trump wants to enact that could increase inflation, if re-elected, and perhaps lay the groundwork for another recession.

“These included compromising the independence of the Federal Reserve Board, enlarging the federal budget deficit by extending his 2017 tax cuts, raising tariffs, rescinding Biden policies designed to promote competition and reduce ‘junk fees,’ and squeezing the labor supply by restricting new immigration and deporting undocumented migrants already here,” The Atlantic wrote in an article published last Sunday.

But that is just the beginning. Trump wants to weaken regulatory oversight by appointing more political appointees if elected that would carry out his agenda, a major cause of the Great Recession, who could neutralize officials and whole departments that enforce regulations, a major cause of the Great Recession under President GW Bush.

There were many causes of the Great Recession, but front and center were the GW Bush administration appointing officials who consciously downgraded governmental powers of enforcement so that regulators such as the SEC looked the other way when Goldman Sachs, for instance, sold funds that they then secretly bet against would fail.

Real laws were broken then — from conflicts of interest to outright fraud that were never prosecuted. The 2010 congressional hearings unveiled much of the double dealing that was rationalized by Goldman Sachs’ buyer-beware code — its clients should be sophisticated enough to know that Goldman would try to maximize its own profits, before those of its clients.

Saez/Piketty

A culture of greater lawlessness can be traced back to the early 1980s when President Ronald Reagan trumpeted that government was the problem and more private enterprise the solution for greater prosperity.

The number of convicted criminals in those administrations tells part of the story. President Reagan’s administration was marked by multiple scandals, resulting in the investigation, indictment, or conviction of over 138 administration officials, the largest number for any U.S. president.

And Salon.com had documented 34 incidents of law-breaking in just the first 4 years of G.W. Bush’s Presidency, the most blatant being unmasking covert CIA operative Valerie Plame, and its fabricated claims that Iraq had weapons of mass destruction.

Former President Trump is the latest example with dozens of convicted felons in his administration that he pardoned while still President.

“Deficits don’t matter” was the infamous chant of Bush VP Dick Cheney. At a time when economic inequality had risen to levels last seen in the 1920s, these administrations wanted to divert attention from a vanishing social safety net by proposing the ago-old Darwinian solution — the free market. For only the fittest will survive in a world ruled by self-interest, rather than laws and regulations.

The United States, beginning in the 1980s once again became the most ardent advocate and practitioner of the oldest form of capitalism, now a primitive relic of 18th century enlightenment. This is but one part of our aging democracy that U.S. hegemonists put up as the model for western civilization. But it is a very imperfect model for the rest of the world as well.

A 2002 survey of 38,000 people in 44 countries by the Pew Center for the People and the Press found what they think of our American Way. “Since 2000, favorability ratings for the U.S. have fallen in 19 of the 27 countries where trend benchmarks are available … pluralities in most of the nations surveyed complain about American unilateralism,” says the study. They think we disregard their interests in pursuit of our own self-interest.

Few dispute that our capitalistic economic system has won the day. It produces great wealth, particularly for those at the top of the wealth pyramid. Robert Reich’s book, The Future of Success said it best: “By the end of the (20th) century, the richest 1 percent of American families, comprising 2.7 million people, had as many dollars to spend after taxes as the bottom 100 million.”

It is also no coincidence 25 states have now passed anti-union Right to Work laws that are also the poorest states with the highest income inequality, lowest educational achievement, and receive the most in public subsidies. Taking incomes and wealth away from those states’ workers can only make them poorer in relation to other states and regions that is a continuing drain on public finances.

It is the real lesson of our greater lawlessness. By choosing to break laws and regulations that govern economic activity, some regiond are being pushed back to levels of past centuries, including holding the minimum wage at $7.25 per hour. Workers will only produce more and better products and services when they have the incentive to do so.

In the end, such greater lawlessness means a disregard for everyone but one’s own clan or tribe, a greater selfishness. No country can remain prosperous with such a breakdown in social welfare. That is the lesson learned from the Great Depression and Great Recession. Policies that ignore economic as well as civil laws and well-being, that continue to divert incomes and wealth to the wealthiest, impoverish all of US.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

Posted in Keynesian economics, Consumers, Economy, Politics, COVID-19 | Tagged , , , , | Leave a comment

Where’s the Recession–Part II?

Posted on June 7, 2024 by Popular Economics Weekly

Financial FAQs

The unemployment report for May had little weakness, further evidence that the recent Harris poll results—in which 55 percent of those surveyed believed the US is in a recession—doesn’t reflect reality.

In fact, total nonfarm payroll employment increased by 272,000 in May, higher than the average monthly gain of 232,000 over the prior 12 months. The unemployment rate rose to 4.0 percent from 3.9 percent, slightly higher than the pre-pandemic levels of 3.5 percent when the average inflation rate was under 2 percent, as portrayed in the truncated FRED graph below (gray line is 2020 pandemic recession), that many seem to remember so fondly .

More jobs were added to payrolls in almost all sectors. Health-care providers added 68,000 jobs last month, hotel, restaurants and other leisure companies hired 42,00 new workers, and government employment rose by 42,000.

It’s more evidence, in my opinion, of a collective amnesia that several historians have maintained. Many Americans don’t want to remember the horrors of one million dead from COVID-19; and haven’t been able to move on in one of the greatest economic recoveries since the Great Depression.

It’s the main reason government employment has risen for state and local jurisdictions as well where most of the infrastructure modernization is taking place.

FREDunemployment

There were some signs of a weakening labor market. A survey of households showed a 408,000 decline in the number of people who said they were employed, the biggest drop since the end of 2023. The size of the labor force also shrank by 250,000 for the first time in four months. That explains why the jobless rate hit 4 percent after 27 straight months below that number.

But that doesn’t explain the Harris results, whereas prices remaining high and inflation still hovering in the 3 percent might. No one likes rising prices that boost the cost of everything, and the shock of the sudden rise in prices after the pandemic had to be almost as traumatic as the pandemic itself.

But it was mostly due to the worldwide shutdown of supply chains. Long Beach, California once had more than 50 container ships waiting offshore to unload their cargo that totaled as much as $2 trillion in value during the shutdown. That’s a lot of goods that couldn’t get to markets, a supply shortage that is the major reason for the price shocks. So the Harris poll may be measuring the effects of that emotional shock.

What else can explain its divergence from how the US economy is behaving in the post pandemic recovery with its record job creation? More Americans are working than ever.

Professional, scientific, and technical services added 32,000 jobs in May, higher than the average monthly gain of 19,000 over the prior 12 months, said the report. Employment increased in management, scientific, and technical consulting services (+14,000) and in architectural, engineering, and related services (+10,000). Specialized design services lost 3,000 jobs.

To repeat, the Harris poll said:

· 55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.

· 49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.

· 49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.

“What Americans are saying in this data is: ‘Economists may say things are getting better, but we’re not feeling it where I live,’” said John Gerzema, CEO of the Harris Poll. “Unwinding four years of uncertainty takes time. Leaders have to understand this and bring the public along.”

What will it take for more Americans to accept the fact that the US economy is doing very well and more Americans are working then ever? It probably doesn’t help that a very divisive presidential campaign is beginning to heat up.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

Posted in Weekly Financial News, Keynesian economics, Consumers, Economy, Politics, COVID-19 | Tagged , , , , | 1 Comment