How Should We Remember 9/11?

Posted on September 11, 2022 by Popular Economics Weekly

ANSWERING KENNEDY’S CALL

BuildingCommunity

I wanted to remember 9/11 when I wrote my memoir on the Kennedy era that has just been released. It was also a time of busted communities, a Vietnam War that split Americans. It was an Imperial America that wanted to make the world in its image, rather than create peaceful change that tolerated other peoples and cultures such as I worked for during the following years, after President Kennedy’s death.

I began writing this memoir about my work in public service in 2017, after wondering how it was possible that Americans had elected a president suffering a severe mental disorder. Did it mean our democracy was dying or already dead, and Americans now wanted a demagogue as president who believed that he was above all laws and the constitution?

It reminded me in many ways of the 1960s when there was just as much social unrest and different ideas of democracy. This was the era of McCarthyism and communist witch-hunting, right wing against left wing political views, the civil rights movement, and an unpopular war in Vietnam that was fracturing American communities.

We coped with the dysfunction and cynicism then by searching for communities that could mirror our values and ideals, and when we found them, to contribute to their growth.

I am writing about my years working to develop successful communities to show that it is possible to do it today in the face of so much social unrest that has created deep divisions and the possibility of future wars. 

I believe that spirit of service is alive in younger generations that also want to make their country a better place. Many of them in the Millennial and Generation Z population groups are also searching for like-minded communities that serve a greater cause, that will bring people together in common purpose rather than separate them.

The Peace Corps was such a cause I believed in. I became a Peace Corps Volunteer to work in a program that improved the lives of Turkish farmworkers. A few years later I joined the Environmental Protection Agency at its inception because it was an organization dedicated to protecting the environment with the newly enacted Clean Water and Air Acts.

My membership in the United Farmworkers Union under César Chávez later in the mid-1970s was more happenstance. A cousin of mine in the construction trades roped me into helping him rebuild the UFW’s new headquarters, and it was extremely difficult to withstand the charisma of its founder and president, César Chávez. I was soon swept up in his vision of a union formed to improve the working conditions of Mexican farmworkers.

These were organizations dedicated to improving lives that taught me the fundamentals of healthy communities, fundamentals that enabled me to continue to improve the lives in my own community and led to the formation of a new California city.

There were many others doing what I did in that era. My history is one small part of the change that has been happening in American communities, towns, and cities whose members seek to improve their lives.

Former President Obama challenged Americans to inspire the youth to a life of service in 2017 after he left the presidency; and the youth he talked about are my target audience.  He said then:

We have some of the lowest voting rates of any democracy and low participation rates that translate into a further gap between who’s governing us and what we believe. The only folks who are going to be able to solve that problem are going to be young people, the next generation. And I have been encouraged everywhere I go in the United States, but also everywhere around the world to see how sharp and astute and tolerant and thoughtful and entrepreneurial our young people are. A lot more sophisticated than I was at their age. And so the question then becomes what are the ways in which we can create pathways for them to take leadership, for them to get involved?1

President Obama’s words came from his experience as a community organizer in Chicago. And studies show that Millennials and Generation Z youth now reaching adulthood want to make the world they have inherited a better place to live. Millennials’ preferences will be influential for no other reason than they are the largest generation ever, born from 1980 to 1996, outnumbering even their Baby Boomer parents.  They are also a much more diverse and tolerant population, which is why they are picking up where we left off in their preference for making worthwhile life choices.  

“Almost two-thirds (64 percent) of Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring,” the Brookings Institution recently noted in a report by Morley Winograd and Michael Hais titled “How Millennials Could Upend Wall Street and Corporate America.”2

It cites a 2013 survey of over 1,200 U.S. adults that found Millennials to be the generation most focused on corporate social responsibility when making purchasing decisions.  Almost all Millennials responded with increased trust (91 percent) and loyalty (89 percent), as well as a stronger likelihood to buy from those companies that supported solutions to specific social issues (89 percent). A majority of Millennials reported buying a product that had a social benefit, and 84 percent of a generation that accounts for more than $1 trillion in U.S. consumer spending considered a company’s involvement in social causes in deciding what to buy or where to shop. In 2013, 89 percent of all American consumers said they would consider switching brands to one associated with a good cause if price and quality were equal. 

One 30-year-old Millennial said in 2013, the 50th anniversary of President Kennedy’s death: “Though his [Kennedy’s] goals were typically big, what he sought from individuals was often rather small. Not everyone was expected to join the Peace Corps or become an astronaut or participate in the Freedom Rides. But citizens were asked to do their part—to think about how they could improve their community or make another person’s life easier—to look past their differences and focus on our common humanity. We badly need this message again. I believe it is one that resonates deeply with young Americans who are yearning for a time when we can search for new frontiers and once again be part of the same team.3

1 http://thehill.com/blogs/pundits-blog/the-administration/330269-full- remarks-obama-at-chicago-event-discusses-future

2 https://www.brookings.edu/wp- content/uploads/2016/06/Brookings_Winogradfinal.pdf

3 https://www.huffingtonpost.com/scott-d-reich/jfk- millennials_b_4263057.html

Harlan Green © 2019

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

Posted in Politics, Uncategorized | 4 Comments

When Bad News is Good News

Posted on September 8, 2022 by Popular Economics Weekly

Financial FAQs

FREDserviceemployees

Doomsayers, such as historian Niall Ferguson, may be doing the Federal Reserve’s job by predicting a recession or worse in the coming year. Their dire warnings are causing plunging stock prices for starters. And oil prices are plummeting as well, with WTI oil prices down to $83 per barrel at this writing.

Dr. Ferguson warned last Friday that the world is sleepwalking into an era of political and economic upheaval akin to the 1970s — only worse.

“The ingredients of the 1970s are already in place,” Ferguson, Milbank Family Senior Fellow at the Hoover Institution at Stanford University, told CNBC’s Steve Sedgwick.

“The monetary- and fiscal-policy mistakes of last year, which set this inflation off, are very alike to the ’60s,” he said, likening recent price hikes to the high inflation of the 1970s.

The U.S. economy is doing well, in spite of the doomsayers, as illustrated by the FRED graph above showing employment in the service-sector that employs most American workers holding up (gray bar is last recession).

The ISM’s service-sector index that measures business conditions at companies such as restaurants and hotels rose to 56.9 percent in August from 56.7 percent in the prior month, the Institute for Supply Management said Tuesday. It is the highest level since April.

“In August, the Services PMI® registered 56.9 percent, 0.2 percentage point higher than July’s reading of 56.7 percent,” said Anthony Nieves, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee. “The Business Activity Index registered 60.9 percent; an increase of 1 percentage point compared to the reading of 59.9 percent in July. The New Orders Index figure of 61.8 percent is 1.9 percentage points higher than the July reading of 59.9 percent.”

Yet inflation is already moderating with average gas prices below $4 per gallon and both the Consumer Price Index and Producer Price Indexes down from their highs.

Such fears generated by the doomsayers—with little to go on except past history rather than present conditions—are doing as much to bring down inflation as the Fed’s hawkish comments that they will continue to push up rates until inflation is tamed.

This is also indicated by the various surveys that measure consumers’ future inflation expectations, such as put out by the University of Michigan’s sentiment survey. Future expectations of CPI inflation have averaged 3 percent since 2012 when the survey was first conducted.

“The median expected year-ahead inflation rate was 4.8%, down from 5.2% last month and its lowest reading in 8 months,” said the UMich survey’s Director and Chief Economist Joanne Hsu. “Uncertainty over expectations rose considerably, particularly among lower-educated consumers. Long run expectations came in at 2.9%, remaining within the 2.9-3.1% range seen in the past year (actually since 2012 per its chart).

So, all the bad news about a possible recession may be good news for economic growth, and consumers, if it keeps the Fed from putting too much pedal to the interest rate metal, as the saying goes. The Fed may not have to keep boosting short-term rates if they see consumers and producers pulling back as demand cools.

Such remarks from recognized pundits are enough to recall the draconian measures taken by former Fed Chairman Paul Volcker’s Fed that raised its overnight rate to 20 percent to combat the 1970’s era inflation, causing two subsequent recessions in the 1980s.

So, Fed Chair Powell’s Fed doesn’t have to fight inflation on his own. There’s help on the way from those pessimists who won’t see what is staring them in the face—an economy still recovering from the worst pandemic in 100 years.

Maybe it will keep the Fed from raising interest rates much further?

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Economy, Weekly Financial News | Leave a comment

Why Slow Down U.S. Growth?

Posted on September 2, 2022 by Popular Economics Weekly

Popular Economics Weekly

MarketWatch

Once again, all job categories were positive in the Labor Department’s August unemployment report. Professional/Business, Education & Health, Retail, and Leisure & Hospitality created 211,000 of the 315,000 nonfarm payroll jobs in August’s payroll tally.

Why does the Federal Reserve believe this is inflationary, scaring the financial markets, when there are many other factors causing the current price rises, including record corporate profits?

Total nonfarm payroll employment increased by 315,000 in August, said the BLS. Nonfarm employment has risen by 5.8 million over the past 12 months, as the labor market continued to recover from the job losses of the pandemic-induced recession. This growth brings total nonfarm employment 240,000 higher than its pre-pandemic level in February 2020.

Once again, many pundits and some economists will say this unemployment rate that rose from last month’s 3.5 percent to 3.7 percent is still too inflationary and must rise further to tame this inflation surge and cool off economic growth, when it is record corporate profits causing most of the inflation.

Hiring more workers means creating more products, which should increase supplies thus driving down prices. But if corporations can increase their prices at an even faster rate, then inflation rises.

Their record profits, reaching levels of the 1950s as a percentage of GDP, are a reflection of their ability to continue to raise prices, whereas wages and salaries increasing at 5.2 percent annually have fallen behind the inflation curve, lessening their buying power.

Economists are beginning to recognize that such high profit margins may be more responsible for what I will call the current ‘profit-price’ spiral, rather than the ‘wage-price’ spiral of the 1970s that the Fed Governors seem to be focused on.

Quoting Reuters economist Jamie McGeever:“But looked at through the prism of profits, corporate America is also in rude health, especially big business. In the second quarter this year U.S. companies raked in profits that, depending on the cut, were the highest on record, or close to levels not seen in over half a century.”

“This is an inflationary threat too, but we hear far less from policymakers about it than the risk of wages fueling a price spiral that would only be crushed by interest rate increases like those administered by former Fed Chair Paul Volcker in the early 1980s.”

It may seem evident that consumer’s ability to pay the higher prices is part of the inflation problem, but consumers have little choice with the supply shortages of even basic necessities, and profits rising at an even faster clip.

I mentioned last week the role of corporations’ double-digit, profit growth since the end of the pandemic in causing record inflation. Data show that hourly compensation is now down -2.3percent since the end of the pandemic recession after inflation.

U.S. corporate profits as a share of GDP in the second quarter rose to 12.25 percent, says McGeever, around their highest levels since 1950. Profit margins for non-financial firms rose to 15.5 percent in the same period, closing in on last year’s peak going all the way back to the 1960s.

Don’t we want businesses to keep hiring more workers to produce more goods and services? The Fed doesn’t, apparently, since it’s still focused on a completely different era when wages were rising as fast as profits. It is apparent that that is no longer the case.

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Economy, Macro Economics, Weekly Financial News | Leave a comment

Where’s the Slowdown?

Posted on August 31, 2022 by Popular Economics Weekly

Popular Economics Weekly

Calculated Risk

The Labor Department’s JOLTS report just out shows job openings are still at twice the number of job hirings. How does this justify what seems to be pundits fixation on the possibility of a recurring 1970’s wage-price spiral causing prolonged inflation? It’s one reason Fed Chair Powell has been saying we will feel more pain before the inflation surge is tamed.

The current inflation spike is nothing like what happened in the 1970’s era of stagflation with the Arab oil embargo raising energy prices, and trade unions able to match that inflation with rising wages. Hence the so-called wage-price spiral that created slow growth with high unemployment at the time.

Today in the face of such high inflation the number of job openings in the government’s JOLTS report continues far in excess of job hirings, according to the Bureau of Labor Statistics (BLS) and the unemployment rate has remained at 3.5 percent, a record low. Openings have even risen back to its high from last month’s slight drop to 10.9 million openings. This is while the Fed keeps promising to raise short-term rates until it hurts!

It’s the highest inflation rates in 40 years that the Fed is attempting to conquer. Former Fed Chair Ben Bernanke explained how the current inflation period differed from the 1970s recently in a recent NY Times article, when he said six months of higher inflation today doesn’t equal its 14 month span during the “Great Inflation” of the 1970s.

“In short, the lessons learned from America’s Great Inflation, by both the Fed and political leaders, make a repeat of that experience highly unlikely. The Fed today recognizes that it must take the leading role in controlling inflation, and it has the tools and sufficient political independence to do so. After a delay caused by a misdiagnosis of the economy in 2021, the Fed has accordingly turned to tightening monetary policy, ending its pandemic-era bond purchases, announcing plans to shrink its securities holdings and raising short-term interest rates.”

The number of job openings was little changed at 11.2 million on the last business day of July, the U.S. Bureau of Labor Statistics reported. Hires and total separations were little changed at 6.4 million and 5.9 million, respectively. Within separations, quits (4.2 million) and layoffs and discharges (1.4 million) were little changed.

The hires are blue line and job openings the black line in the above Calculated Risk graph of the JOLTS report. That’s 5.3 million more job vacancies that businesses say they want to fill.

Corporations are so flush with the highest profits ever more than 40 years, as high as in the 1950s post-WWII as a percentage of GDP, that they don’t seem to care their cost of borrowing is rising. But won’t consumers care and cut back on their spending? Probably, which means growth will continue to slow of its own accord, since consumer spending makes up some 70 percent in GDP growth.

Yet, a measure of how consumers feel about the economy right now rose to 145.4 in August from a 15-month low of 139.7 in the prior month, the nonprofit Conference Board said Tuesday.

The Index now stands at 103.2 (1985=100), up from 95.3 in July. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—improved to 145.4 from 139.7 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—increased to 75.1 from 65.6.

“Consumer confidence increased in August after falling for three straight months,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index recorded a gain for the first time since March. The Expectations Index likewise improved from July’s 9-year low, but remains below a reading of 80, suggesting recession risks continue. Concerns about inflation continued their retreat but remained elevated.”

“Meanwhile, purchasing intentions increased after a July pullback, and vacation intentions reached an 8-month high. Looking ahead, August’s improvement in confidence may help support, but inflation and additional rate hikes still pose risks to economic growth in the short term,” continued Franco.

We hope that Fed Chair Jerome Powell doesn’t believe the Paul Volcker era has returned, when Volcker raised interest rates to 20 percent to tame the prolonged inflation from the 1970s and caused two recessions before he tamed it.

We are not even in any sustained inflationary wage-price spiral, since wages have fallen slightly as a percentage of GDP ((-1.5 percent, according to MarketWatch’s Rex Nutting) who I quoted last week, whereas corporate profits have soared to post-WWII highs.

That’s why we hope Chairman Powell isn’t looking in the rear-view mirror of past history instead of his windshield to see what’s looming ahead, which is a period of naturally sinking inflation and improved supply-chains with consumers already feeling more optimistic about their future and continued corporate profits that will keep creating new jobs.

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Economy, Macro Economics, Weekly Financial News | Leave a comment

What is Real Cause of Inflation?

Posted on August 29, 2022 by Popular Economics Weekly

Financial FAQs

FREDcpiinflation

Fed Chair Jerome Powell just said Americans must now feel the pain if the Fed is to bring inflation back to its long-term 2 percent annual target. But why 2 percent? It was the inflation rate that prevailed since the end of the Great Recession, which resulted in higher unemployment and less than 2 percent annual economic growth—not enough growth to lower the unemployment rate to what it is now—3.5 percent.

And directly targeting short-term interest rates, which harms consumer spending and borrowing the most, it may be record corporate profits doing the most damage in boosting inflation and must be tamed.

In fact, it was difficult work to bring the inflation rate back to 2 percent even then, after the busted housing bubble, since the danger was too-low inflation and the danger of disinflation, or even deflation at the time, because Asian countries could produce an oversupply of consumer goods, keeping prices low and more American workers unemployed.

Now we have too high inflation because the COVID pandemic closed economies that produced those cheap supplies, so we have the supply and supply-chain problems with a Ukraine-Russian war adding to the scarcity.

In addition, corporate profits are at all-time highs. MarketWatch economist Rex Nutting highlighted the record growth in profits since World War Two:

“After-tax corporate profits rose at a 41% annual rate after inflation in the second quarter of the year and have risen at a 17% annual pace since the pandemic recession ended two years ago. Meanwhile, the inflation-adjusted purchasing power of individuals’ after-tax income has fallen for five quarters in a row.”

FRED.gov

In fact, it has been at the expense of workers’ salaries, says Nutting. The data show that hourly compensation declined at a -1.5 percent annual rate in the first half of the year after adjusting for inflation and is now down -2.3percent since the end of the pandemic recession.

So, Fed Chair Powell may be barking up the wrong money tree when he said it might cause substantial pain to consumers and businesses. What if it isn’t rising wages, but corporate profits that are enabling corporations to boost prices, rather than paying their employees more?

“Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he added.

Consumers’ personal consumption expenditures barely keep up with rising prices, which means they will have little effect on future inflation. Personal Consumption Expenditures were up just 0.1 percent in July, vs. being as high as 8.6 percent in April 2021 when their pockets were bulging with the pandemic relief payments.

So let’s not blame the consumer for the inflation that the Fed wants to tame, whoare fighting so many other battles. The new Inflation Protection Act enacting a minimum 15 percent tax rate on corporations and one percent on stock buybacks will hurt those that can afford it–record corporate profits that puts the blame game where it belongs.

The Fed should also continue downsizing their holdings of securities. Just selling some of their $4 trillion plus in Treasury securities ($4.97 trillion on June 8) could raise interest rates more gradually, thus avoiding the danger of inducing another recession.

On June 1, 2022, the Federal Reserve initiated the process of reducing the size of its balance sheet to address rising inflation. According to a May press release, the Fed will initially cap its monthly purchase of Treasury securities at $30 billion for June, July and August – for context, the Federal Reserve purchased an average of $80 billion in Treasury securities per month between March 2020 and March 2022. The cap is set to increase to $60 billion in September and will likely remain at that level through the end of calendar year 2023. The Federal Reserve will also reduce its holdings of mortgage-backed securities over the coming months.

Maybe its businesses that should be feeling more pain, rather than workers?

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Economy, Weekly Financial News | Leave a comment

Economic Growth to Resume

Posted on August 25, 2022 by Popular Economics Weekly

Popular Economics Weekly

BEA.gov

It looks like the slowdown in US economic growth may end as quickly as it began. Second quarter economic growth was slightly less negative in the BEA’s second estimate of GDP growth, because key drivers of growth have been increasing in the latest months.

The Bureau of Economic Analysis press release said, “Real GDP decreased less in the second quarter than in the first quarter, decreasing 0.6 percent after decreasing 1.6 percent. The smaller decrease reflected an upturn in exports and a smaller decrease in federal government spending that were partly offset by a larger decline in private inventory investment, a slowdown in consumer spending, and downturns in nonresidential fixed investment and residential fixed investment. Imports decelerated.”

What this means is that the red-hot job market (528,000 new nonfarm payroll jobs in July), and 1.5 percent increase in consumer spending in Q2 (that makes up some 70 percent of economic activity) have kept our economy from falling into a deeper slowdown, or recession—whatever economists want to call it.

The point is the ‘slowdown’ was so mild and corporate profits high enough that corporations continued to hire rather than fire, and consumers chose to spend rather save during the inflationary surge.

“The number of people who applied for unemployment benefits last week fell to a one-month low of 243,000, indicating layoffs remain near record lows and that a tight labor market is keeping the U.S. economy moving forward,” said MarketWatch’s Jeffrey Bartash.

The Atlanta Federal Reserve’s third quarter estimate, GDP Now estimate ranges from 1.3 to 2.5 percent growth. I will take either of those numbers, as it signals good months of growth ahead, no matter what the Fed Governors do to bring down inflation.

Continued growth depends in part on how consumers flush with savings continue to react to inflation. Most surveys of their expectations say that they don’t see a prolonged inflation, in part because it’s easy to see that the Ukraine war will eventually end that is pushing up food and energy prices, and supply-chain constrictions will ease as other countries recover from the COVID pandemic.

UnivMichigan

China is having especial difficulties in recovering from the pandemic, in part because it is run by an extremely dictatorial communist party that believes it can only hold onto power by suppressing any signs of COVID symptoms with draconian lockdowns, just as it suppresses its populace in other ways to prevent it from looking weak in the public eye.

In fact, inflation is already declining, mainly because world oil prices have plunged, and food prices may also soften with the good news that grain shipments from the Ukraine have finally begun.

U.S. consumers’ are also expecting lower inflation in a year and three years, a New York Federal Reserve survey showed on Monday, as reported by Reuters, indicating U.S. central bankers might be winning the fight to keep the outlook for price growth as they battle to tame high inflation

So, the latest data seem to show economic growth will finally have a tailwind to propel it, rather than the headwind it’s been experiencing since January.

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Economy, Weekly Financial News | Leave a comment

Goleta’s Dam Dinner Doesn’t Disappoint and Brings Record Turnout

Posted on August 24, 2022 by Popular Economics Weekly

More than 500 People Attended Scenic Event at Lake Los Carneros Dam

The return of Goleta’s Dam Dinner after a three-year hiatus brought a record turnout this past Saturday, August 20, 2022, to the Lake Los Carneros Lake dam. More than 500 people, many carrying picnic dinners and baked goods to share, flocked to the scenic spot for the #BestDamDinner they have ever had. While many who attended have been coming to the Dam Dinner since it started, we were pleased there were many first-timers as well. Whatever the case, it was the usual, simple, low-key, casual event that keeps people coming back year after year.  

Mayor Paula Perotte said, “I am so glad to see people come back to this special event. I love that there is no agenda, and it is just people breaking bread with neighbors, family, and friends.”

Stay tuned for a video of the event and in the meantime check out all the photos captured by Jay Farbman here: https://photos.app.goo.gl/zYjv19BoS9rkifCn7.

Thanks to the Goleta Valley Historical Society for partnering with the City of Goleta again to put on this community favorite. A special thanks to Pete Wolf with Big Hammer Lures for helping to plan, set up the event, and for creating the yearly Dam Dinner t-shirts once again.

We also want to thank Santa Cruz Markets for donating 50 welcoming succulent arrangements and to Devereux volunteers for creating and delivering the arrangements to the event for all to enjoy and for some to take home as well.

A big shout out also for Goleta-originated vendor Kona Ice for serving up more than 200 snow cones and Elubia’s Kitchen for selling its Dam Pupusas, Dam Tamales and Dam Tacos which were a big hit.

Successful events don’t happen without the collaboration of many partners. We also want to thank the Salt Martians for playing, MarBorg for providing the bathrooms, trash and recycling bins, Santa Barbara Face Painting, and the South Coast Chamber for sharing its tablecloths with us for the event.

We hope you had a dam good time and we look forward to seeing you next year! 

Posted in Uncategorized | Leave a comment

Inflation Not The Real Problem

Posted on August 23, 2022 by Popular Economics Weekly

Financial FAQs

FREDcpiinflation

Inflation is falling again with national gas prices below $4 per gallon while food prices are also beginning to decline.

The NY Times’ Paul Krugman has also pointed out that food prices should continue to decline per the UN’s Food and Agricultural Index.

“The FAO Food Price Index* (FFPI) averaged 140.9 points in July 2022, down 13.3 points (8.6 percent) from June,” said the FAO, “marking the fourth consecutive monthly decline. Nevertheless, it remained 16.4 points (13.1 percent) above its value in the corresponding month last year. The July decline was the steepest monthly fall in the value of the index since October 2008, led by significant drops in vegetable oil and cereal indices, while those of sugar, dairy and meat also fell but to a lesser extent.”

FAO.org

Therefore, the Fed should not be focusing on bringing it back to a 2 percent inflation rate with more draconian rate increases that have only prevailed since the Great Recession and busted housing bubble.

The above FRED graph dating from 1950 shows both the annual consumer price index at 8.5 percent and ‘sticky’ CPI price without food and energy at 5.6 percent in July, down slightly from June.

During our most prosperous times since 1980 it ranged between 2.5 to 5 percent, per the above FRED graph. That’s because profits rose in tandem with rising prices, thus encouraging businesses to hire more workers and expand further.

Since 1980 we have never had a prolonged supply problem, in other words, with retail inflation trending down ever since—until the current post-pandemic era of a Ukraine-Russia war and recovering supply chains, that is.

Why? Because there was never a shortage of supply due to modern technology’s ability to increase productivity that could flood markets with goods and services. Asia with China could produce things more quickly and cheaply that US.

Yes, all that money now raised from the government aid coursing through the economy is causing a temporary inflation problem, but much of it will be invested in future growth—like the infrastructure and inflation reduction act bills just passed.

President Biden’s $1.2 trillion infrastructure bill includes funding allocations of $89.9 billion to improve public transit, $65 billion toward better internet connectivity and access, and money for 500,000 electric vehicle charging stations, which could help address charging “deserts;” areas where it isn’t currently available.

“The infrastructure bill widely focuses on improving passenger and freight transportation, for instance, so steel and material suppliers, including companies that produce materials for buses, trains, bridges, rail, or related equipment, could see heavy activity. Makers of products supporting things like 5G infrastructure and EV stations, too, will see improved demand,” said a Forbes Magazine article on its effects.

And while there will be little inflation reduction in The Inflation Reduction Act bill just passed, the White House says the package will address inflation in two key ways: by lowering energy and health care costs for families and by helping to bring down the deficit.

“And that’s why even Democrats and Republicans, former Treasury secretaries, economists across the board have said that this bill will make a positive impact on inflation while also tackling some of the biggest and long-standing issues facing our country, like prescription drugs and like tackling climate change,” said Brian Deese, director of the National Economic Council, in an interview this week with NPR’s Morning Edition.

As important in bringing down oil prices is that oil and gas drilling is at a 7-year high. U.S. crude oil prices have dipped below $90 per barrel of late, and who knows how much lower oil prices may decline as more alternative energy sources financed by those two bills come on line to replace the need for fossil fuels?

Harlan Green © 2022

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

Posted in Consumers, COVID-19, Politics, Weekly Financial News | 1 Comment

Domestic Industrial Production Surging

Posted on August 18, 2022 by Popular Economics Weekly

Financial FAQs

FREDindustrialproduction

U.S. industrial production is the highest since 2018, continuing its climb from the two-month 2020 recession (gray bar in graph). Automobile production highlighted the surge.

This is huge, folks, and a sign that GDP growth in the third quarter may be positive after the first two quarters of negative growth in 2022. Capacity utilization rebounded to 80.3 percent in July from 79.9 percent in the prior month. Output of the U.S. industrial sector was at an all-time high, above the level hit in 2018.

Why the manufacturing surge now? President Biden’s $1.2 trillion infrastructure bill includes funding allocations of $89.9 billion to improve public transit, $65 billion toward better internet connectivity and access, and money for 500,000 electric vehicle charging stations, which could help address charging “deserts;” areas where it isn’t currently available.

“All of that’s good news for manufacturers who are already experiencing high demand, which could “continue on for months, if not years, going forward,” David Zrostlik, president of Stellar Industries, recently said in the Wall Street Journal.

The bill will also improve workers’ productivity by modernizing our transportation networks.

“The infrastructure bill widely focuses on improving passenger and freight transportation, for instance, so steel and material suppliers, including companies that produce materials for buses, trains, bridges, rail, or related equipment, could see heavy activity. Makers of products supporting things like 5G infrastructure and EV stations, too, will see improved demand,” said a Forbes Magazine article on its effects.

Retail sales also surged, which could even boost revisions to Q2 GDP from a negative to possibly breakeven says Reuters’ Wrightson/ICAP.

“Core sales in July (excluding autos and gas) were up 0.7% versus our forecast of a sluggish 0.1% increase, and the May and June levels were revised up markedly.  By themselves, this morning’s numbers should contribute to an upward revision to Q2 GDP on the order of half a percentage point.”

U.S. Manufacturing rose 0.7 percent in July after falling in the prior two months. Motor vehicles and parts output rose 6.6 percent after a 1.3 percent fall on the prior month. Excluding autos, total industrial output increased 0.3 percent. Auto assemblies were the highest since August 2020. Utilities output fell 0.8 percent in July. Mining output, which includes oil and natural gas, rose 0.7 percent, the third straight solid gain.

As important in bringing down oil prices was that oil and gas drilling is at a 7-year high. U.S. crude oil prices have dipped below $90 per barrel of late, and who knows how much lower they may decline?

Prices could ease further if Iran agrees to a new draft nuclear agreement after it backed off from its demand that the Islamic Revolutionary Guards be removed from the U.S. terrorism list, reports the NY Times, opening a potential of at least one million more barrels a day of Iranian petroleum exports (which would make up for the loss from the end of U.S. Petroleum Reserve contribution in November).

Harlan Green © 2022

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

Posted in COVID-19, Economy, Weekly Financial News | Leave a comment

The Second Year Can Be Most Difficult

Posted on August 17, 2022 by Popular Economics Weekly

Building Community Answering Kennedy’s Call

Chapter Four (excerpt)

It was becoming obvious that I wasn’t tolerating village life well by the end of my second year in Ismet Pasha, a village settled by Bulgarian Turks in the 1920s after the breakup of the Ottoman Empire. Though I involved myself as much as possible in village activities, and even donated a set of the annotated Koran in Turkish to their new reading room, I began to make longer trips to visit other volunteers to know what they were seeing and doing.

Clair, my female counterpart, had left after the first year and married another volunteer in our group. I was sad to see them leave because they were terrific workers, but Peace Corps rules were no cohabitation of partners unless already married!

I was even anxious when riding the buses for fear of being in an accident, becoming a nervous wreck who smoked a pack- a-day of their “Askerli” cigarettes in that second year. Its brand name was the Turkish word for soldier, and I never knew if it was created to provide the poorly paid Turkish soldier with something he could afford, since a pack cost 40 Kurush, $0.04 cents at the current exchange rate.

The tediousness of becoming a single volunteer was spelled by 45 days of paid vacation leave allowed by the Peace Corps during the two years of service, and semi-annual conferences that brought everyone together for progress reports.

We village volunteers were considered well paid at 60 dollars per month, the equivalent of a Turkish teacher’s salary. To put that in perspective, we could have a good restaurant meal for one dollar, and a haircut for 25 cents. In addition, we were allowed $7.50 per day of vacation allowance. I had money to travel on, as my rent for a small, one room adobe cottage was just $3 per month that second year.

Our own volunteer liaisons were made during holidays and our vacations. I and a female volunteer unfortunately overstayed our vacation time on the island of Rhodes during the winter school break because of a severe Mediterranean storm that capsized a tourist boat with the loss of 40 lives, isolating us long enough so that she was late for her assignment teaching English at a high school.

I was reprimanded for assisting in her delinquency through no fault of her own, and our Peace Corps country director at the time withdrew his offer to put me on training staff after completion of my two years. My loneliness had cost me the possibility of remaining in Turkey for a third year.

Not spending another year in Turkey was probably a good thing, as I was feeling more sad than happy as my two years of service came to an end. As difficult as it was to live in and absorb so much of a foreign culture, it was just as difficult to leave such an intensely emotional and personal experience. Turkish culture was based on very intense relationships; close emotional bonds of either love or hate in friendships as well as families, including strict behavioral guidelines we had to follow between the sexes.

We of Turkey V, the first volunteer rural community development group to serve in any Muslim country, were finally discharged in June of 1966, and it could not have been a day later for me. I had dodged attacks by Turkish sheepdogs, part of the feared and famous Anatolian Mastiff breed, ridden on horseback through sparkling winter snows under the clearest blue skies, weathered some scary illnesses, and was ready to return to western culture.

Had I made a difference, and what did the villagers end up thinking of me? There were so many highs and lows—the companionship with other volunteers that broke the tedium of village life, the vacation travel, visits to ancient, storied civilizations, and being part of such an ancient way of life that was barely changed by a few tractors and combines that sped up the planting and harvest.

Turkey in Later Years

As the Vietnam War dragged on, Americans and the American way did not look so peaceful to the rest of the world. This was one reason Peace Corps left Turkey after 10 years during which some 1600 hundred volunteers had served.

Opposition to the Vietnam War had grown in many European countries, and educated Turkish students were no exception. There were also serious gaffes by American officials, such as appointing former CIA employee Robert Comer to be the next U.S. Ambassador to Turkey. He had overseen the South Vietnamese village pacification plan, and his appointment as Ambassador to Turkey so enraged students that they overturned and burned his car during one of the many anti-war protests.

His predecessor, our own Peace Corps director, had earlier killed an elderly woman dressed in black while driving in Ankara one dark and rainy night. Because he had diplomatic immunity, he was spirited out of Turkey to avoid being charged with manslaughter.

That was not well-received by the students, either. Turkey and the Peace Corps administration agreed it was time to phase out the Peace Corps program that had lasted from 1961 to 1971, after students at several of the technical schools where Peace Corps volunteers taught held a vote and decided that the Peace Corps was no longer welcome.

My last year had been a very lonely, but productive, year, and I had no illusions that most villagers in this part of Anatolia with its semi-arid and mostly treeless environment would stay in their villages much longer. Their industrial revolution was now in full swing.

I hoped our presence there as volunteers had helped them consider us as their friends rather than obnoxious foreigners. I also hoped they saw us presenting a better, more peaceful side of American foreign policy that was more in line with the true face of the America I believed in, despite the Vietnam War.

I believe the Peace Corps Volunteers serving in Turkey did make a difference. We encouraged many of our villagers to work to develop their own land, instead of moving to the cities. Ismet Pasha’s villagers that remained were usually the most prosperous landowners that could exploit more modern farming techniques that I had helped to develop.

There was also talk of the Turks forming their own domestic volunteer corps that had a Turkish precedent. Educated Turkish males already had the option to teach in a village school instead of wearing a military uniform because Turkey had universal male military conscription. But I never knew if it was expanded into something that resembled the Peace Corps, in part because Turkey was changing so fast.

The Return to Turkey

Though today Turkey’s rural population has continued to grow, the percentage of the total population living in villages has declined because of rural-to-urban migration.

In 1970 about 67 percent of the population lived in villages. In 1980 the rural population had declined to 54 percent. Less than 21 percent of Turkey’s population still lived in villages in 2020, according to the World Bank.

That is why I was so startled on a return trip to Turkey. More than 30 years had passed since I left in 1966 and I wanted to know what remained of my work in Ismet Pasha. I had organized a tour group that landed at Istanbul’s Ataturk Airport during a national holiday. It was a shock to see the streets lined with many women covered from head to foot in traditional clothing as we were driven to our hotel. They had to be from the villages to dress so conservatively. It was evidence of the mass migration to cities and how much Istanbul, Turkey’s most European and cosmopolitan city, had changed.

I made a point of visiting Ismet Pasha during the tour, but it seemed a shell of its former self on my return. The mill that produced their flour was gone, a sign of the decline of village life. Its huge grindstone lay beside the road in front of the abandoned bakery building. The villagers no longer baked their own stone ground wheat bread that I remembered; giant kilo loaves steaming just out of the oven that I had enjoyed at meals when invited to dine with them.

The ethnic Turks who still lived in Ismet Pasha, including the son of the Mukhtar I had worked with during my two years, were doing well. Irrigation water was now plentiful from a fully developed irrigation system that watered a large sugar beet crop via elevated concrete canals that funneled water into the fields.

Ismet Pasha that had dirt roads and no electricity when I lived there, now had electricity and a paved main road that give them greater access to markets for their produce in all seasons, so their economic future looked bright.

But the village was also full of Kurds newly arrived from their homeland in eastern Turkey. They were the victims of Turkey’s ongoing war with Kurdish militants belonging to the PKK, their most radical political party that wanted an independent country of their own.

The war had dragged on for years and did not look like it would come to any resolution soon. Millions of Kurds still lived in Turkey and were forbidden to teach their language in the schools at the time.

The ethnic Turks to whom I spoke looked down on the Kurds as bad farmers, transplants that really did not fit in. The Kurds were thought of as a semi-nomadic herding culture, since many of them still lived in the mountains of Syria, Iran, and Turkey. But maybe all the good land around Ismet Pasha was taken, so there was nothing else for the Kurds forcibly transplanted from their homeland to do than raise lifestock? It looked like only families with the largest landholdings were able to take advantage of the new irrigation wells I first brought to the village.

But will Turkey ever become a sectarian democracy ruled by civil law rather than religious law? Or will they be saddled with their current devoutly religious President, Recep Tayyip Erdoğan, an aspiring President-for-life intent on imposing a more religious theocracy rather than continuing their sputtering attemp and most of the remote rural villages ts to join the European Union?

I also saw that the community development precepts I learned in Peace Corps training worked in a Turkish village, because they were much like us, a practical people who believed success in the secular world was as important as the world promised by Islam. Who knows what future might be possible for such a hardworking people?

I felt good about what I had done, and it was now time to move on to find another community I might contribute to.

Harlan Green © 2022

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

Posted in Uncategorized | Tagged , , , , | Leave a comment