Political Economics

[G M]

https://www.zerohedge.com/markets/how-bernanke-broke-world

[Crafty_Dog]

I'll readily take Scott Grannis over that:

https://scottgrannis.blogspot.com/

[DougMacG]

This is quite a controversy.  "Trump appointed" economist David Malpass, head of the World Bank, friend of Scott Grannis(?), said he wasn't a climate scientist when pressed to do more on "climate change".
-----------------------------
https://fortune.com/2022/09/22/david-malpass-world-bank-president-climate-change-al-gore-not-a-scientist/

Malpass apologized for his late September remarks downplaying the effect humans and fossil fuels have on climate change,

https://www.msn.com/en-us/money/markets/malpass-survives-climate-gaffe-but-the-world-bank-e2-80-99s-fossil-fuel-policy-may-not/ar-AA12ZMDc
------------------------------
[Doug] One might ask, how is the focus on climate change working out as it relates to temperatures, energy supplies and world finances?

That this man is still head of the World Bank should go down as a Trump accomplishment.  The only un-woke world agency.

[DougMacG]

In hindsight, Trump was the best economic President since Reagan.  But 370 economists signed a letter Nov 1, 2016 trying to stop his election.

https://www.wsj.com/public/resources/documents/EconomistLetter11012016.pdf

Had they succeeded, they would be right.  He was dangerous, ignorant, doesn't listen to experts and would have destroyed the country as far as they knew.

What we know in hindsight is that he knew more than these Ivy League trained experts, and was better than all the alternatives, Hillary, Biden, Obama, Klain, Bernanke, Yellen, et al.
-----------------------------------

The letter:  [with added comments]

We, the undersigned economists, represent a broad variety of areas of expertise and are united in
our opposition to Donald Trump. We recommend that voters choose a different candidate [Hillary!] on the
following grounds:
 He degrades trust in vital public institutions that collect and disseminate information
about the economy, such as the Bureau of Labor Statistics, by spreading disinformation
about the integrity of their work. 

[All these statistics are flawed, cf. Unemployment rate ignores workers laving the workforce.]
 He has misled voters in states like Ohio and Michigan by asserting that the renegotiation
of NAFTA or the imposition of tariffs on China would substantially increase employment
in manufacturing. [Funny, now they love him in Ohio and Michigan.]
In fact, manufacturing’s share of employment has been declining since
the 1970s and is mostly related to automation, not trade.
[The renegotiation of NAFTA was successful - and no one else could have done it.]

 He claims to champion former manufacturing workers, but has no plan to assist their
transition to well-compensated service sector positions. Instead, he has diverted the
policy discussion to options that ignore both the reality of technological progress and the
benefits of international trade.

 He has misled the public by asserting that U.S. manufacturing has declined. The location
and product composition of manufacturing has changed, but the level of output has more
than doubled in the U.S. since the 1980s. [Manufacturing BOOMED under his policies.]
 He has falsely suggested that trade is zero-sum and that the “toughness” of negotiators
primarily drives trade deficits.
 He has misled the public with false statements about trade agreements eroding national
income and wealth. Although the gains have not been equally distributed—and this is an
important discussion in itself—both mean income and mean wealth
have risen substantially in the U.S. since the 1980s.

 He has lowered the seriousness of the national dialogue by suggesting that the
elimination of the Environmental Protection Agency or the Department of Education
would significantly reduce the fiscal deficit. A credible solution will require an increase
in tax revenue and/or a reduction in spending on Social Security, Medicare, Medicaid, or
Defense.
 He claims he will eliminate the fiscal deficit, but has proposed a plan that would decrease
tax revenue by $2.6 to $5.9 trillion over the next decade according to the non-partisan
Tax Foundation.  [Oops, they were wrong, revenues increasd!]
 He claims that he will reduce the trade deficit, but has proposed a reduction in public
saving that is likely to increase it.

 He uses immigration as a red herring to mislead voters about issues of economic
importance, such as the stagnation of wages for households with low levels of education.
[Oops, stagnation of wages ended under his policies.]
Several forces are responsible for this, but immigration appears to play only a modest
role. Focusing the dialogue on this channel, rather than more substantive channels, such
as automation, diverts the public debate to unproductive policy options.

 He has misled the electorate by asserting that the U.S. is one of the most heavily taxed
countries. While the U.S. has a high top statutory corporate tax rate, the average effective
rate is much lower, and taxes on income and consumption are relatively low. Overall, the
U.S. has one of the lowest ratios of tax revenue to GDP in the OECD. 
[Oops, the top rate is what dissuades additional investment.]

 His statements reveal a deep ignorance of economics and an inability to listen to credible
experts. He repeats fake and misleading economic statistics, and pushes fallacies about
the VAT and trade competitiveness.  [And Democrats give us the straight truth!]

 He promotes magical thinking and conspiracy theories over sober assessments of feasible
economic policy options. 
Donald Trump is a dangerous, destructive choice for the country. He misinforms the electorate,
degrades trust in public institutions with conspiracy theories, and promotes willful delusion over
engagement with reality. If elected, he poses a unique danger to the functioning of democratic
and economic institutions, and to the prosperity of the country.
[Oops, we had the greatest prosperity gains under Trump in decades.]
For these reasons, we strongly recommend that you do not vote for Donald Trump.

Signed,  [I'll spare you the 9 pages of signatures, but they all got it wrong.]

[DougMacG]

https://www.ftportfolios.com/retail/blogs/economics/index.aspx
excerpts:
The [2.6%] growth in the third quarter was led by net exports, particularly in the goods sector, where exports surged and imports fell.  However, don’t expect that to continue.  The dollar has strengthened substantially versus other major currencies and so will limit future purchases by foreigners while making foreign goods relatively inexpensive for Americans. 
...
Moving forward, it’s hard to be optimistic about growth in consumer purchasing power when “real” (inflation-adjusted) earnings are falling and consumers have reduced the extra balances they had in bank accounts due to massive government stimulus checks in 2020-21. 

We like to follow personal consumption, business investment, and home building, combined, which we call “core” GDP.  This excludes the effect on real GDP of government purchases, inventories, and international trade, all of which are very volatile from quarter to quarter and which are hard for the US to rely on for long-term growth.  The problem is that although overall real GDP increased at a 2.6% annual rate in Q3, core GDP rose at a meager 0.1% pace.  That’s a growth rate in core GDP that we usually see just before, during, or just after recessions.  No bueno. 

The construction industry already appears to be in a recession of its own.  Home building declined at a 26.4% annual rate in Q3, the sixth consecutive quarterly drop and the largest decline since COVID first hit the US.  Commercial construction fell at a 15.4% annual rate, also the sixth consecutive negative quarter and the weakest since COVID first hit. 

Meanwhile, inflation remains a problem.  ... These figures signal that monetary policy still needs to tighten to bring inflation back down and a monetary policy tight enough to do that is likely to eventually cause a recession. 
-----------------------------------------------------------

Or as Joe Biden would say: "Great economic report today.  Things are looking good!"
https://www.nbcnews.com/nightly-news/video/gdp-grows-2-6-as-midterms-approach-151751237610

[DougMacG]

In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law.

https://www.cbo.gov/system/files/2022-08/58357-Graham.pdf

Funny way of saying No Inflation Reduction.

[DougMacG]

https://www.nbcnews.com/business/consumer/credit-card-interest-rates-hit-record-high-rcna56373

Who does that hurt?  Do you know any rich people carrying high credit card balances?  By definition, no.

[DougMacG]

https://hotair.com/tree-hugging-sister/2022/11/15/bidenomics-update-household-debt-increased-at-fastest-pace-in-15-years-n511209

Worst - since the first time Pelosi Reid Schumer took Congress.

[DougMacG]

https://reason.com/2022/11/17/republicans-need-an-actual-plan-to-grow-the-economy/

[Crafty_Dog]

https://geopoliticalfutures.com/wp-content/uploads/2022/11/2022_Economy_Inflation.pdf?utm_source=GPF+Customers&utm_campaign=283b45cd51-20221116_PL_New_Econ_Reality_SR&utm_medium=email&utm_term=0_fa39571b29-283b45cd51-264975290&mc_cid=283b45cd51&mc_eid=415e14f76b

Can you guys see this?

[DougMacG]

https://geopoliticalfutures.com/wp-content/uploads/2022/11/2022_Economy_Inflation.pdf?utm_source=GPF+Customers&utm_campaign=283b45cd51-20221116_PL_New_Econ_Reality_SR&utm_medium=email&utm_term=0_fa39571b29-283b45cd51-264975290&mc_cid=283b45cd51&mc_eid=415e14f76b

Can you guys see this?

Yes.  Thank you.

[Crafty_Dog]

November 23, 2022
View On Website
Open as PDF

    
New US Barriers Against Russia’s Economy
Black Friday has a new meaning for the Kremlin.
By: Antonia Colibasanu

Harvest festivals are not unusual around the world, but the American holiday of Thanksgiving is in a league of its own. Over time it has shed its religious roots and become a largely secular holiday celebrating family and togetherness. Many elements of Thanksgiving are little known outside of North America, but around the world businesses and consumers know what comes next: Black Friday, marking the start of the Christmas shopping season. According to myth, after a year of operating at a loss (“in the red”), stores would sell discounted merchandise for large profits (“go into the black”) on the Friday after Thanksgiving. Retailers everywhere have been importing the holiday since the early 1990s. With the end of the Cold War, the American business model triumphed, and countries everywhere had to adapt.

American Triumph

The U.S. and Western Europe promoted their particular capitalist model after World War II, and it worked because it ensured safe, reliable and relatively cheap trade and investment within a network secured by U.S. warships and British insurers. Originally the General Agreement on Tariffs and Trade, this network became the World Trade Organization in the 1990s. Designed in accordance with Western rules, it served as a platform for the growth of global trade and, subsequently, for Western influence over the world economy. For a country to enjoy the benefits of WTO membership, all other members must recognize its status as a functioning market economy. In theory, a market economy is one in which supply and demand direct the production of goods and services. State intervention is minimal. As one would expect, this assessment is somewhat political.

After the Cold War, WTO membership was essential for a country to trade globally. For the West and especially the U.S., welcoming new members meant greater influence. It brought in countries like Russia and China, thinking they would get on board with the U.S.-led liberal order. In the strongly unipolar age of the 1990s and early 2000s, alternatives were scarce.

This is how Black Friday made it to places like China and Russia. Beijing formally asked to join the WTO in 1995 and was admitted in 2000. Western markets, especially U.S. consumers, benefited from access to cheap Chinese goods. China had to reform, reduce tariffs and promise further liberalization. It did not go as far as the West wanted, but it did copy the Black Friday concept. China’s is called Singles’ Day, celebrated on Nov. 11. It was not originally a shopping holiday, but since the late 2000s, it has morphed into the largest shopping day in China.

Russians preserved the name but changed other features. First, Russia’s Black Friday does not have to be on a Friday, nor is it limited to one day. Second, the discounts are not so great; stores usually mark up prices a few weeks before the season and then cut them – sometimes to levels still above the normal price – for the Black Friday (or Black November) season. Despite the war in Ukraine, sanctions and the flight from Russia of most Western brands, the holiday is alive and well in the country.

A Black Day for Russia

However, not everything is business as usual. On Nov. 10, the U.S. revoked its recognition of Russia’s market economy status, and on Nov. 11, it started imposing import duties on Russian goods. (That the latter came on the same day as Singles’ Day is probably a coincidence, not a straightforward warning to Beijing.)

The U.S. recognized Russia as a market economy two decades ago, following years of Russian lobbying. But Washington maintained its position that state subsidies in the form of cheap energy gave Russian goods an unfair advantage, and it continued to block Russia’s entry into the WTO. By the time Russia finally acceded to the WTO in 2012, 18 years after formally requesting admission, Russia’s economy and energy strategy were already directed toward Europe, WTO member or not. Still, WTO membership was important for Russian producers in search of new markets. It was equally important for Russian consumers, who could buy foreign goods at lower prices after import tariffs were cut. However, Russia was in the process of opening its market to imports when it annexed Crimea in 2014. Moscow imposed counter-sanctions on EU agricultural products in response to Western sanctions and effectively abandoned WTO trade rules.

Washington’s decision to no longer recognize Russia’s market economy status follows a U.S. Commerce Department investigation into sales of Russian urea ammonium nitrate fertilizer in the U.S. “at less than fair value.” The investigation concluded that “extensive” government involvement was giving Russian companies an unfair advantage. Moscow can challenge the U.S. decision in the WTO. Conversely, the U.S. could go further and seek Russia’s expulsion from the body. In the meantime, the change in status will not have much effect on Russian trade. (The U.S. accounts for just 4 percent of Russia’s foreign trade.) But the reversion to non-market status is the latest U.S. sanction against Russia since the latter invaded Ukraine at the end of February, and marks an escalation in the global economic war.

Significance and Signals

WTO expulsion is possible, but the more significant sanction would be convincing the European Union to also lift its recognition of Russia’s market status. About 40 percent of Russia’s non-energy foreign trade goes to the EU, several times the value of U.S.-Russian trade.

The move is also significant as a signal to Beijing. Just days after the U.S. revoked Russia’s status, the nonpartisan U.S.-China Economic and Security Review Commission recommended in its annual report to Congress that the U.S. investigate whether China is engaged in predatory trade practices. A ruling against China could justify Washington’s revocation of its market economy status, which would hurt its economy much more than the move hurt Russia’s. The U.S. would suspend so-called normal trade relations, which Congress approved in 2000 when China joined the WTO.

Finally and most importantly, the U.S. move must be considered in the context of Russian overtures for negotiations with the United States. Given Russia’s unwinnable battlefield position, its incentive to strike a deal is high. It would enable Russia to hang on to Crimea and the four oblasts in eastern and southern Ukraine that it has claimed, and it would enable Russian President Vladimir Putin to say his regime had successfully defended Russians in eastern Ukraine over the long term. The U.S. may well want to offer Russia a dignified exit from the war, and what better time than Thanksgiving? But Washington first has to convince Ukraine to sit down and give things away to Russia. The WTO sanction, then, is a signal from the U.S. to Russia that it is still willing to escalate.

The U.S. knows sanctions alone will not end the war. However, the two sides are locked in an economic war, and the U.S. needs to ensure that sanctions leakage and Russia’s search for new allies do not weaken the U.S. position. The U.S. is also in the process of restructuring the global system it created, contributing in effect to its balkanization. In an earlier age of globalization, the U.S. introduced the world to Black Friday. Its next contribution may be a new global economic order.

[DougMacG]

41% of small businesses can't pay rent this month.

https://justthenews.com/nation/states/center-square/report-41-small-businesses-cant-pay-rent-month

What Biden calls full employment, "strong economy".  What Obama called the new normal.  https://gop-waysandmeans.house.gov/what-magic-wand-do-you-have/

[DougMacG]

https://asiatimes.com/2022/11/supply-side-inflation-and-its-cures/

[Crafty_Dog]

A couple of minor quibbles, but as far as the big picture goes IMHO this is dead on.

[DougMacG]

https://asiatimes.com/2022/11/supply-side-inflation-and-its-cures/

A couple of minor quibbles, but as far as the big picture goes IMHO this is dead on.

Agree.  He introduces a lot of important facts, truths and insights, and for his prescriptions/ solutions, the author is entitled to his opinion.  )

I like that he breaks with the overwhelming media and Fed view that inflation will broken with tightening alone, aka 'slowing the economy'.  He rightly points out, crushing or even slowing the economy only makes things worse.

He focuses on differences between 1979 and now.  I would focus on the similarities, keeping the differences in mind.

Author writes:

"The demand-side inflationary shock from fiscal policy ran headlong into a supply-side barrier."

  - What he calls "fiscal policy", taxes and spending, should be called 'spending'.  Don't mask or dilute the problem.  It's the spending, federal government spending.

"The demand-side inflationary shock from fiscal policy ran headlong into a supply-side barrier.
 US industrial capacity could not meet the demand surge."

  - Of course it couldn't keep up.  They were sending out a trillion at a time, all at once, with NO new goods or services produced.  If anything, fewer goods and services are produced when money is paid with no regard to production.  All in the context of the other Biden et al unforced errors, shutting down oil and gas with the result that has on other industries, while discouraging capital investments and labor.

On the plus side is this, analysis we don't ever seem to see outside the forum:

"In 1979, the Federal Reserve’s monetary tightening addressed the manifest problem of excess credit creation driven by inflation expectations. But the Volcker monetary tightening was only one half of a successful policy combination inspired by Robert Mundell: tight money to reduce inflation and deep tax cuts to promote growth.

The 1981 Kemp-Roth tax cut reduced the United States’ top marginal personal rate to 40% from 70% and drew out reserves of labor and entrepreneurship."

  - The only question today is, what is the equivalent policy we need NOW to address the constraints on production today?   [Let's discuss this further.]

Idea number one from the author: 

"Restoring incentives for US oil and gas production"

  - [Doug]  No.  It's more complicated than that.  We don't need to favor oil and gas.  We need to stop discriminating against it, except in the real pursuit of lower emissions.

Biden administration is blaming the oil and gas industry for not making long term investments where they can in drilling, fracking, pipelines, right while same government wages a long term war against them.  The individual policy actions aren't the problem, like canceling Keystone XL and ANWR.  It is the larger government regulatory war against them, symbolized by these actions, that is killing off badly needed new investment.

There will be a transition away from fossil fuels, if we allow it.  But if we don't want to kill off the economy in the meantime, fossil fuels are a necessarily part of the transition, and Biden and Democrats in power and the voters who put them in power must admit it.

For one thing, wind and solar both require matching capacities of oil and gas for backup.  Not emergency backup, but for the more than half the time everyday that wind and solar are not producing.

Oil and gas doesn't need special incentives.  It needs full recognition that it is a vital national and world interest until a better alternative is fully available.

Our only chance out of this a month ago was to defeat Biden and the Democrats in the midterms, and we didn't.  Now our only chance is for Democrats to change their minds, from the Dem voters up to the leaders, who all just doubled down on inflation and stagnation. 

We want a vibrant economy.  We want abundant energy.  And we want federal spending returned to sanity, roughly a trillion a year lower than the current trend line, not higher and higher.

If both parties can't agree on that, it ain't gonna happen.

[DougMacG]

"the typical American household has lost more than $7,000 owing to inflation and rising interest rates."
   - Economist E.J. Antoni

https://www.dailysignal.com/2022/12/13/average-american-family-has-effectively-lost-7100-biden-economist-says/?utm_source=feedly&utm_medium=rss&utm_campaign=average-american-family-has-effectively-lost-7100-biden-economist-says

https://pjmedia.com/news-and-politics/matt-margolis/2022/12/13/how-much-has-bidenflation-cost-you-you-probably-dont-want-to-know-n1653230

Makes people want to vote for ... ... more of the same!
--------------------------------------------------------------
Update, another measure, Inflation only, excludes the cost of higher interest rates too, another cost of inflation.  Still, 500/month is 6000 per year.  Who can afford that?

https://www.cnn.com/business/live-news/stock-market-cpi-ftx/h_09e705d0af5b5ab4ff01006cbf5fec5b

"While that nearly $400 extra needed per month isn't as bad as the $493 needed per month when inflation soared to 9.1% in June, the high prices are still wearing down Americans and their finances.

[Crafty_Dog]

Biden Has the Economy Back on Track
His policies have helped the country weather a global economic storm and invest for the long term.
By Janet L. Yellen
Dec. 14, 2022 5:36 pm ET


The global economic storm unleashed by a once-in-a-century pandemic and a brutal land war in Europe has caused three years of economic disruptions in the U.S. and around the world. These are turbulent times, but the policies of the Biden administration have propelled the American economy to one of the fastest recoveries in modern history. Because of President Biden’s plan, we have improved the economic well-being of American families and workers and strengthened the economy’s resilience in the face of significant global headwinds.


Since his first day in office, Mr. Biden’s goal has been to get the U.S. economy back on its feet and invest for the long term. In January 2021, the nation was facing some of the darkest days in its modern history. Approximately 3,000 Americans were dying from the novel coronavirus every day. The public-health crisis triggered an economic calamity, with millions of jobs lost and the country still haunted by fresh images of long lines outside food banks and unemployment offices. With the vaccines’ effectiveness untested, the country faced the tail risk of an economic downturn that matched the Great Depression.

Yet the worst didn’t materialize. Fears of a protracted economic crisis—in which millions of homes, businesses and livelihoods would be lost, many never to return—didn’t become reality. Instead, the American Rescue Plan and vaccination campaign helped spur the fastest pace of job creation in American history.

Importantly, the recovery avoided the scars that are typically inflicted during recessions and borne in their aftermath. Foreclosures and evictions fell and remain below pre-pandemic levels, as did bankruptcies and debt collection. By one measure, child poverty plunged to a record low last year. And early this year the uninsured rate reached an all-time low.

Now the Biden administration’s task is to navigate the economy’s transition from rapid recovery to stable and sustainable growth. Historically, these transitions haven’t been straightforward. But the task became significantly more challenging when Vladimir Putin launched his brutal invasion of Ukraine, which sent global energy and food prices skyrocketing.

The Biden administration’s top economic priority is to tackle inflation. The Federal Reserve has the primary responsibility, but we are taking complementary actions to expand supply and provide cost relief. While the future path of the economy remains uncertain, there are signs that the supply-demand imbalances that have been boosting inflation are now easing in many sectors of the economy.

Energy has been a key focus of the administration’s work. Most recently, the U.S., along with allies and partners, implemented an innovative policy to cap the price of Russian oil and stabilize energy prices. We have also shored up crude-oil supply through the president’s release of 180 million barrels of oil from the Strategic Petroleum Reserve. Today, average U.S. retail gas prices are about $1.50 a gallon lower than this summer’s peak.


We are seeing signs of progress in other areas where we’ve taken action, even as we redouble our efforts. Freight shipping rates and wait times at many U.S. ports have fallen, in part due to the Biden administration’s work to ease supply-chain bottlenecks. Late last month, there were no container ships waiting outside the Ports of Los Angeles and Long Beach, down from more than 100 at the start of this year. The administration has also provided targeted relief to families to help with rising costs of living. Thanks to the Inflation Reduction Act, millions of Americans will save on their energy, health-insurance and prescription-drug costs.

More broadly, recent economic reports indicate that the U.S. economy remains resilient. It’s growing amid a global slowdown and tightening financial conditions. The labor market is strong, with the unemployment rate near a 50-year low. Household balance sheets remain healthy, consumer spending is robust, and credit-card delinquencies are low.

As the economy emerges from the global economic storm, the U.S. will be in a uniquely strong position to capitalize on the future. This fall, I toured the country to see the early results of a trifecta of historic long-term investments that the Biden administration has made: a generational investment to modernize crumbling roads and bridges, a major expansion of American semiconductor manufacturing, and the most aggressive action on the climate crisis and long-term energy security in our nation’s history.

Together, these investments are expanding the American economy’s productive capacity while enhancing its resilience. Already, companies have announced tens of billions of dollars in investments in new production and manufacturing facilities that will extend America’s global competitiveness and expand economic opportunity. This ranges from Taiwan Semiconductor Manufacturing Co.’s announcement last week of a $40 billion investment in Arizona to the emergence of a new electric-vehicle “battery belt” across the South and Midwest.

Times can be tough, but Americans are tougher. From the depths of the crisis, we have bounced back—and the president’s economic plan has bolstered the U.S. economy’s resilience to today’s global challenges. Looking to the future, I am confident that our long-term investments, enabled by the historic legislation Congress has enacted over the past two years, will advance America’s global economic leadership in this decade and beyond.

Ms. Yellen is U.S. Treasury Secretary.

Advertisement - Scro

[Crafty_Dog]

Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant near Gruenheide, Germany, on March 22, 2022. (Christian Marquardt - Pool/Getty Images)
US NEWS
Elon Musk: Auto Loans Could Be Source of ‘Biggest Financial Crisis Ever’
By Liam Cosgrove December 16, 2022 Updated: December 17, 2022biggersmaller Print


The automotive market may be under stress as several experts call for a massive wave of repossessions in early 2023, with prominent figures like Tesla founder Elon Musk and Ark Invest’s Cathie Wood sounding the alarm about the potential impact on financial markets.

“Potentially the biggest financial crisis ever,” Musk posted on Twitter Friday in response to a tweet by Wood and a series of tweets from the CEO of a car dealer group about the potential auto loan crisis.

Reports by the anonymous Twitter account CarDealershipGuy revealed an “extremely alarming” trend among auto lenders. The CEO behind the account claimed that many lenders are ignoring red flags associated with loan applicants who are already “underwater” on a prior auto loan.

“This morning I discovered something extremely alarming happening in the car market, specifically in auto lending,” CarDealshipGuy, who authors a newsletter for auto market insights, wrote on Twitter, catching many people’s attention.

“I’m now convinced that there is a massive wave of car repossessions coming in 2023.”

He went on to explain that many people had no choice but to buy a costly car during the pandemic. He said car values have been falling recently, with some dropping by nearly 30 percent year on year.

“And these same people that took out these big loans are now ‘underwater.’ Basically, they owe banks more on these cars than they are worth,” he stated, adding that the banks are well-aware of the problem.


CarDealershipGuy, who wished to remain anonymous, told The Epoch Times that many of these underwater borrowers are attempting to purchase additional vehicles, despite having unpaid debts on their prior auto loans. He is hearing that 35 to 40 percent of new subprime applicants already have outstanding debt, he said.

Normally, banks would consider this a warning sign and refuse the loan, but the dealer said that 65 percent of his associated lenders are issuing the loans anyways.

“I’ve been in the business for a decade and this is completely unprecedented.”

When asked about whether large institutional banks are involved in this lending, he said, “Some of the big household names that you and I know are participating in this.”

He described the dynamic further on Twitter.

“The lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!” wrote the dealer. He hypothesizes that banks are making this choice strategically, assuming that customers will default on their previous loan—issued by a competing bank—but continue making payments on the more recent one.

He referred to the dynamic between competing banks as “dog eat dog style.”

Declining Values
CarDealershipGuy’s Twitter thread caught the attention of Cathie Wood, head of the investment management firm Ark Invest, who expressed concerns about “the impact of declining residual values on the $1+ trillion auto loan market.”

Wood, who manages assets over $14 billion as of September, added that this crisis might be exacerbated as more consumers opt to purchase electric vehicles, further diminishing the prices of gas-powered cars.

Elon Musk responded to Wood’s tweet, echoing the same concerns.


Musk has been an outspoken critic of the Federal Reserve’s hawkish interest rate policy, posting on Twitter last month that the ”Fed needs to cut interest rates immediately.” Since the start of the year, the U.S. central bank, led by Chairman Jerome Powell, has raised its overnight lending rate from near-zero to over 4 percent.

Ticking Time Bomb
As The Epoch Times covered in November, the post-COVID boom and corresponding chip shortage caused car prices to explode throughout 2020 and 2021.

Car dealers were forced to overpay for their merchandise and, in turn, overcharged banks that were providing auto loans. Lucky Lopez, a Las Vegas-based auto loan broker, told The Epoch Times that loans originated throughout 2021 far exceeded the values of the underlying vehicles.

“The dealers started calling banks, ‘Hey man, I gotta sell this for 150 percent, 160 percent of LTV [loan-to-value] … Can you do this?’ and banks that traditionally wouldn’t, started doing it,” Lopez said, paraphrasing the industry dynamics he had witnessed.

For perspective, the online loan broker LendingTree quoted the average LTV ratio for an auto loan in 2019 at 87 percent.

Lopez is also calling for a massive wave of lender repossessions, which could spell trouble for the automotive market. After repossession, cars typically go to auction, but banks are reluctant to commit to an auction sale, where it’s difficult to fetch even 100 percent of a car’s value.


As a result, banks have largely refused sales and continue to delay the auction process, according to Lopez.

The lack of sales is causing a supply glut, which is a ticking time bomb, according to former adviser to the Federal Reserve Bank of Dallas Danielle DiMartino Booth.

“This massive overhang of inventory continues to grow on a weekly basis because the lenders don’t want to recognize the loss on the loans,” Booth said in an interview on the Forward Guidance podcast.

She predicts that regulators will step in at some point and question why lenders haven’t liquidated the cars and force them to sell. Booth added that this “is what regulators did in the housing crisis.”

“They’re going to make them clean those loans off their books, and then we’ll see used car prices fall.”

[DougMacG]

https://www.powerlineblog.com/archives/2022/12/sorry-about-those-jobs.php

[DougMacG]

The percentage of prime age men not in the workforce has doubled since the late 1970s.

https://www.cnn.com/videos/business/2022/12/15/labor-force-men-women-yurkevich-dnt-contd-cnntm-vpx.cnnbusiness

Here's why:
https://mises.org/wire/why-are-so-many-men-leaving-workforce

there are at least six million men of "prime age" (age 25-54) who are out of the workforce for various reasons. Historically, this number has been getting larger at a rate faster than growth of total men in that age group. That is, fewer than 3 percent of prime-age men were "not in the workforce" in the late 1970s, but 5.6 percent of men in this group were out of the labor force in 2022. That translates into approximately 7.1 million men according to the Census Bureau's count of men "not in labor force."
...
the reasons driving the lion's share of missing men to leave the workforce appear to be illness, drug addiction, a perceived lack of well-paying jobs, government welfare, and the decline of marriage.
---------
(Doug). I would suggest a combination of these reasons, government support payments and under the table (gig) work that keeps the eligibility of the govt programs, SSI for example.

[DougMacG]

14% over two years, $10,000 thrown away,
and they still vote Dem.

Hatred of Republicans and economic comm sense is expensive!

But rest assured, with more of the same planned, things will get worse.

https://nypost.com/2022/12/22/the-pain-isnt-goin-away-inflation-cost-households-an-extra-10k/

[DougMacG]

https://confoundedinterest.net/2022/12/23/let-it-blizzard-home-sales-slumped-35-in-november-the-biggest-decline-on-record/

Everything's fine, really!

[DougMacG]

The question of the day is the question of our lifetime and the question for almost every thread on the forum. I was going to ask it on the border thread but it fits just as well in political economics.

What does it take for Democrat voters to be offended by the results of democrat policies?

It doesn't matter that I don't like their policies and I don't like their results. When are their voters outraged and aghast?  That's what I want to know.

https://nypost.com/2022/05/26/team-biden-might-be-purposefully-crushing-the-middle-class/

Higher prices are crushing the middle class and you don't need a newspaper to see it.

Who bleeping cares?  No really, who cares?

Another 2 trillion of spending past this past week.  With Republican help! If you don't care now, when will you care? Maybe that is the question. When will you care? When it's too late? Aren't we there yet?

[Crafty_Dog]

The Labor-Force Participation Rate Is the Economic Indicator of Our Day
By DAVID L. BAHNSEN
December 26, 2022 6:30 AM

The share of working-age adults participating in the labor force tells us more about the economy and our culture than ever before.
The labor-market data revealed by the Bureau of Labor Statistics the first Friday of each month has become a sort of blood-sport for both political junkies and market watchers. The political angle is easy to discern — a bad jobs report is deemed bad for incumbent politicians, and a good jobs report is inversely deemed good. The possibility of a disconnect between cause and effect here is ignored; the headline number is used to create or support a narrative and there is heavy political cheerleading attached to the data (one way or the other).

Market watchers have a different agenda. For years the basic assumption was that a strong jobs report indicated a strong economy, and therefore positive ramifications for markets. If more people were employed, it stood to reason that more people were buying goods and services, and therefore corporate profits should be growing. Associating good news in employment with good news in the economy seemed almost tautologically true for decades (with the same being true of the inverse — that bad news on the employment front was bad for the economy and corporate profits).

It is only a by-product of highly interventionist monetary policy that the opposite is now considered conventional wisdom. Low unemployment is considered inflationary (it is not) and the Fed is deemed to be the primary agent for countering inflation (it is not). Therefore, as current thinking goes, a positive jobs report is bad for financial markets because it implies ongoing Fed tightening while job losses are associated with a “cooler” economy — ergo, a Fed pivot. Up becomes down and left becomes right when the Federal Reserve is granted the role of deity in economic stewardship.

A casualty in politics-centered or Fed-centered analysis of jobs data is focusing on the cultural reality of our labor force. The labor-force participation rate (those working combined with those actively looking for work as a percentage of the non-institutionalized, working-age population) was steady and reliably around 66 or 67 percent for years before the financial crisis. The number dropped to between 62 and 63 percent after that and only started to trend higher after the deregulation and tax reform of 2017–18. That, of course, was upended by Covid and the 2020 shutdowns.



As we now know, the economic pain of the shutdowns reversed quickly, and not only did economic activity resume by late 2020, with strong GDP growth in 2021, but the unemployment rate dropped quickly. Indeed, the narrative of 2021 shockingly became one of inadequate access to workers instead of millions looking for work. One problem was seemingly solved, but another problem was seemingly created.

That problem is the failure of the labor-force participation rate to return to normal. At approximately 62 percent, we sit 1.5 percentage points below pre-Covid levels despite the economic normalization that has taken place in almost all other categories. While 1.5 percentage points may seem like a small number, with a working-age population of about 260 million people, it means we are about 4 million people below the trend-line number from before Covid. And paradoxically, this comes with more job openings than we have people looking for jobs.



The inability to return to pre-Covid levels in the workforce since economic reopenings began is only the latest episode of the nearly 15-year story of lower labor-force participation since the financial crisis. The majority of the reduction can be found in men over the age of 55, though young adults post–high school are also less likely to work than they used to be.


One of the most underrated explanations of 2021 inflation is found in the reduction of workers available to produce needed goods and services in a supply-constrained economy. Total consumption and aggregate demand never rose above pre-Covid levels, but supply and available workers stayed below them. From truck drivers to package handlers to food-and-beverage to hospitality, the supply of workers has been below the need, and prices have correspondingly increased.

The White House is well aware of this challenge and is apparently looking at ways to throw money at it. Increasing benefits and transfer payments to incentivize people back to work risks exacerbating the problem. Transfer payments without a work requirement will result in more people not working. Incentives still matter.

More concerning than the broad economic impact of the reduced labor-force participation rate is the cultural impact. The American ethos values the dignity of work and sees purpose, meaning, and hope in productive activity. Not only does our economy desperately need the full weight of American ingenuity, innovation, and productivity, but our souls do as well. In a time of increased alienation, isolation, and desperation, a larger labor force would mean a greater number of people engaged in meaningful activity with attendant duties and responsibilities. It would allow for less substance abuse, less emotional angst, and more pursuits of passions.

The unemployment rate (those unemployed divided by those in the labor force) can be a deceptive metric if the labor-force participation rate is shrinking. Our goal must be not only maximum employment of those looking for work, but also that more people who are able to participate in the labor force actually do so. A society of self-government that values human dignity does not encourage late entry to or early exit from the labor force. A labor-force participation rate equal to our pre-2008 levels is attainable, but not without a resurgence of values focused on productivity. The end result would be far more meaningful than what we find in a GDP calculation.

[DougMacG]

Easy come, easy go - except for that first part.  Those trillions we're really hard to earn and save and invest, and easy for them to lose for you.

Source: CTUP
Could the economy and stock market have performed any WORSE than these past 12 months? You'd have to go back to 2008 to see bigger losses. 

Americans lost an estimated $13.5 trillion in their net household wealth after adjusting for inflation. The chart below shows the nominal and real returns on the three major stock indices and the return on bonds.


              Nominal  Real

Nasdaq  -33%      -38%

S&P       -20%      -25%

Dow       -9%        -15%

Bonds    -12%.   (-18%?)

(Doug). I would add REITs, down 26% nominal, 30+% after inflation

(CTUP) Wait. We thought all these trillions of dollars of government spending were supposed to STIMULATE the economy. 
------------
(Doug). They lied to you.  Worse than anything Santos ever said.

Lesson learned?  No!  First act coming into the new year is 2 trillion more of discretionary spending.

Good f'ing grief.  We.Learned.Nothing.

P.S. Michigan Democrat Rashida Tlaib, used her 'proxy' to vote “present” - when she wasn’t there.

You can't make this stuff up.

[Crafty_Dog]

"Contributing to inflation"?  When wages lag inflation?  Seriously?
===============================================

Stay for Pay? Companies Offer Big Raises to Retain Workers
Recent record-high wage gains for workers who remain in their jobs are a factor contributing to inflation

Employers are giving existing employees more merit and other pay increases, to defend against poaching by rivals and avoid the drain of training new workers.
PHOTO: RACHEL WOOLF FOR THE WALL STREET JOURNAL
By Gabriel T. Rubin


 and Sarah Chaney Cambon


Jan. 2, 2023 5:30 am ET

Workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation.

Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping.

Faster wage growth is contributing to historically high inflation, as some companies pass along price increases to compensate for their increased labor costs. Prices rose at their fastest pace in 40 years earlier in 2022. Inflation has cooled in recent months but remains high. Federal Reserve officials are closely monitoring wage gains as they consider future interest-rate increases to slow the economy and bring down inflation.

Employees who changed companies, job duties or occupations saw even greater wage gains of 7.7% in November from a year earlier. The prospect that employees might leave for bigger paychecks is a main reason companies are raising wages for existing employees.

Many workers aren’t feeling the pay gains, though. Wages for all private-sector workers declined by 1.9% over the 12 months that ended in November, after accounting for annual inflation of 7.1%, according to the Labor Department.

Workers in sectors such as leisure and hospitality can easily find job openings that might pay more, making it more enticing to switch jobs, said Layla O’Kane, senior economist at Lightcast.

“If I can see that the Burger King down the street is offering $22 an hour, and I’m making $20 an hour at the Dunkin’ Donuts that I work at, then I know very clearly what my opportunity cost is,” she said. “Employers are reacting to that and saying, ‘Well, we’re going to increase wages internally because we don’t want to lose the staff that we’ve already trained.’”

Employee bargaining power has increased as the economy rebounded from the pandemic, likely emboldening some employees to ask for wage increases from their current employers, Ms. O’Kane added.

Alexandria Carter, a billing specialist and accountant at an insurance company in Baltimore, received a promotion and a small pay bump earlier in 2022. After her year-end performance review, she received another 7% pay increase to reward her for her progress, and her bosses told her about their plans for her to keep moving up in the company.

That was a contrast with some previous jobs she has held, where praise and pay raises were less forthcoming.

“They were telling me that I’m excelling in my position, and I just got it,” she said. “To have that recognition and that they notice the work I’ve put in and to be rewarded, it’s just nice.”

There are signs wage gains are beginning to ease as the tight labor market loosens a bit. Average hourly earnings were up 5.1% in November from a year earlier, slowing from a recent peak of 5.6% in March. Many analysts expect wage growth could cool further in coming months.

In industries with high demand for workers, “companies are prepared for wage growth to match inflation,” said Paul McDonald, senior executive director at Robert Half, a professional staffing company. “As inflation comes down, it will be more in line with what wage growth has been.”

The consumer-price index, a measurement of what consumers pay for goods and services, climbed 7.1% in November from a year earlier, down from 7.7% in October. The pace built on a trend of moderating price increases since June’s 9.1% peak.

[DougMacG]

One more time for year end highlights, searchable:

https://pjmedia.com/news-and-politics/matt-margolis/2022/10/20/top-democrat-admits-all-of-us-knew-their-partys-policies-would-cause-inflation-n1638723

These policies, this spending, causes inflation.

How could it not?  More money.  Chasing fewer goods.

Direct quote: 
“Well, let me make it very clear. All of us are concerned about these rising costs, and all of us knew this would be the case when we put in place this recovery program. Any time you put more money into the economy, prices tend to rise,”     - Rep. James Clyburn (D-S.C.), House Majority Whip, Oct 20, 2022

[DougMacG]

Further to the discussion in the out of control spending:

"As Daniel J. Mitchell points out, there is evidence of a displacement cost, as rising government spending displaces private-sector activity and means higher taxes or rising inflation in the future, or both. Higher government spending simply cannot be financed with much larger economic growth because the nature of current spending is precisely to deliver no real economic return. Government is not investing; it is financing mandatory spending with resources of the productive sector. Every dollar that the government spends means one less dollar in the productive sector of the economy and creates a negative multiplier cost."

https://confoundedinterest.net/2022/11/14/keynesian-policies-have-left-high-debt-inflation-and-weak-growth-inflation-remains-near-40-year-highs-and-19-straight-months-of-negative-real-wage-growth/

[DougMacG]

"Almost half of young adults are living at home; the highest rate since the Great Depression"

"According to data from the US Census Bureau, nearly half of young Americans between the ages of 18 and 29 are not living on their own but with their parents."

https://www.audacy.com/wwjnewsradio/news/national/almost-half-of-young-adults-are-living-at-home

https://www.census.gov/data/tables/time-series/demo/families/adults.html

But their vote counts same as their parents.

[ccp]

"groundbreaking" look at the real data not simple census date
the Democrats and many economists point towards

https://www.c-span.org/video/?522780-1/the-myth-american-inequality

I doubt this will be discussed on Chuck snot Todd or George snot Brooke Shields husband or major snob Chris Wallace, PBS , NPR etc

the data evaluation is not useful to crats propaganda
so it is ignored

Krugman will shrug

[Crafty_Dog]

So frustrating that quality work like this is solely on the radar screen of serious policy wonks.

[Crafty_Dog]

The Economist this week
Highlights from the latest issue



The Economist
Sometimes news charges at you, sometimes it creeps up. Our cover story this week is about news in the creeping category. In the past two years America’s Congress has passed three bills, on infrastructure, semiconductor chips and greenery. They’re complicated and they have misleading names such as the “Inflation Reduction Act”, which isn’t really about inflation (and certainly won’t reduce it). What matters, though, is that these bills will together lead to spending of $2trn on remaking America’s economy.

The idea is that, with government action, America can reindustrialise itself, bolster national security, revive left-behind places, cheer up blue-collar workers and dramatically reduce its carbon emissions all at the same time. It is the country’s most ambitious and dirigiste industrial policy for many dec­ades. In a series of articles beginning this week The Economist will be assessing Joe Biden’s giant bet on transforming America.

The president is taking an epoch-making polit­ical gamble by acting on so many fronts. But the only way to build a majority in Congress was to bolt a Democratic desire to act on climate change on to hawkish worries about the threat from China and the need to deal with left-behind places in the American heartland. On its own, each of these concerns is valid. But the political necessity to bind them together has led America into a second-best world. The goals will sometimes conflict, the protectionism will infuriate allies and the subsidies will create inefficiencies.

A giant plan that has so many disparate objectives does not simply succeed or fail. Its full consequences may not become clear for many years. But, as our coverage will show over the coming months, it is sure to change America profoundly

[DougMacG]

https://theconservativetreehouse.com/blog/2023/02/14/consumer-price-index-increases-0-5-in-january-6-4-annual-inflation-rate/

Take a look at the compounding loss of value, a dollar today turns into almost nothing in a very short time.

[G M]

https://theconservativetreehouse.com/blog/2023/02/14/consumer-price-index-increases-0-5-in-january-6-4-annual-inflation-rate/

Take a look at the compounding loss of value, a dollar today turns into almost nothing in a very short time.

I am so old, I remember when it was temporary!

[Crafty_Dog]

I repeat my distinction between monetary inflation and price increases.

Inflation is a monetary phenomenon.  As such it means a generalized increase in prices.

Yet what we have here are highly uneven price increases, with food prices increasing far more than other sectors.

There being a world-wide scarcity of food, and food being an absolute necessity, of necessity food prices go up.  This is not a monetary phenomenon.

Also see https://scottgrannis.blogspot.com/ especially the Jan 24 entry.

[DougMacG]

No Joe, THIS isn't normal.  And it's not sign of a recovery.  It is sign of policy
and Presidency failure.

Credit card debt spiraling!

https://www.cnn.com/2023/02/16/economy/us-household-debt-fourth-quarter/index.html

Funny (or not funny) that consumers would want more credit card debt while interest rates are spiraling upward.

Real wages have tumbled for two years while the cost of essentials keeps going up.

How is 'four more years' going to ring after two more like this?

[DougMacG]

I repeat my distinction between monetary inflation and price increases.

Inflation is a monetary phenomenon.  As such it means a generalized increase in prices.

Yet what we have here are highly uneven price increases, with food prices increasing far more than other sectors.

There being a world-wide scarcity of food, and food being an absolute necessity, of necessity food prices go up.  This is not a monetary phenomenon.

Also see https://scottgrannis.blogspot.com/ especially the Jan 24 entry.

Right.  Yet here are the wrong people imposing more of the wrong policies on us:

https://www.ft.com/content/fba4dd36-eedc-4bec-a63a-113581a21141

Crashing the economy over money  doesn't solve too few goods produced, energy, food, tradesmen services etc.

Robert Mundell was right.  Only a two prong approach will work, and repealing and repairing laws and policies that hinder production is not within the purview of the Fed.

President Numbnuts needs to pull his head out and smell the coffee

Food and energy in particular, what about ANWR?  What about nuclear?  It was in the Dem platform.  What about pipelines?  Fracking on federal lands?  How about privatizing federal lands?  How about restraints on spending?

Everything about mitigating the damage requires admitting he was wrong and siding with Republicans.

Old Joe isn't capable of it.

[DougMacG]

While bachelors in diversity repair or produce nothing.

https://www.thecollegefix.com/high-paying-trade-jobs-left-unfilled-as-college-value-declines/

[DougMacG]

https://issuesinsights.com/2023/02/17/the-cbo-exposes-bidens-5-45-trillion-lie/

[DougMacG]

https://www.wsj.com/articles/more-auto-payments-are-late-exposing-cracks-in-consumer-credit-3cbc2382?mod=hp_lead_pos5

Worst economy since Obama Biden

https://tippinsights.com/three-quarters-report-suffering-hardship-from-bidenflation-i-i-tipp-poll/

Credit card debt skyrocketing, car loans defaulting, I keep asking my Democrat buddies,

"What do YOU like best about the Biden economy?"

Mutterings of Trump, election denying and Jan 6 don't really answer the question.

[ccp]

"Mutterings of Trump, election denying and Jan 6 don't really answer the question."

like Bill Maher pointed out
typical lib response when they are confronted with facts showing they are wrong

time to straw man the answer

NEVER an admission of being wrong - never no matter what

[DougMacG]

Paul Mirengoff at Substance:
(formerly of powerline)

"The U.S. came out of World War I with massive problems. The economy fell into a deep recession. According to one speaker (or at least my notes), unemployment rose to more than 10 percent, GDP fell by 15 percent, and the Dow Jones average dropped more than 30 percent.

Race relations were terrible. Blacks suffered due to Woodrow Wilson’s rollback of civil rights. Lynching and race riots — usually in the form of whites attacking blacks — were not uncommon.

Revolutionary sentiment, inspired by the the success of the Bolsheviks, was in the air. Labor unrest and work stoppages were the order of the day. And, to top it all off, the country was experiencing a pandemic worse than the one we recently came out of.

The Harding-Coolidge administration addressed the nation’s economic woes by cutting both taxes and spending. It also established the Bureau of the Budget to keep close tabs on federal spending.

Facing resistance from Democrats and progressive Republicans led by Sen. La Follette, the administration was able, initially, to reduce the top tax rate only from the low 70s to a little more than 50 percent. After Coolidge was elected in 1924, Republicans eventually got it down to around 25 percent. But even with the more modest cuts of the Harding years, together with the decrease in federal spending, the economy quickly came out of recession.

The Roaring 20s followed. They roared loudly enough that even with the sharp reductions in taxation, federal tax revenues increased during the decade (and the taxes paid by the bottom 10 percent decreased as a percentage of all taxes paid). Car ownership became the rule not the exception. So did electrification. This was a period of unprecedented prosperity.

The boom of the 1920s ended seven or eight years after it began, which is normal. The stock market underwent a huge correction and panic ensued, which is also normal.

The response of the Hoover administration, and later that of FDR, was exactly the opposite of the Harding-Coolidge response. The government increased taxes, increased spending in the hope of stimulating the economy, and unlike Harding and Coolidge, pressured employers to keep wages high.

We all know the outcome. What might have been a very serious but fairly short-lived recession turned into a depression that plagued America for the better part of a decade.

The Harding-Coolidge era wasn’t just one of prosperity. It was also a time of improved, albeit unsatisfactory, race relations. The two presidents reversed both the tone and some policies of Wilson. Harding pushed for anti-lynching legislation, but racist Democrats blocked this effort."
------------------
(Doug)
Two periods of time. Two different sets of policies. Two different outcomes.

Lower tax rates and lighter government control lead to great prosperity.

And the opposite.  Leftist economic policies have lousy results - even when they're enacted by Republicans.

[Crafty_Dog]

Jude Wanniski wrote of this very well in his "The Way the World Works".

[DougMacG]

https://www.morningstar.com/news/marketwatch/20230224436/worrying-about-the-economy-has-overtaken-covid-as-the-main-driver-of-anxiety-in-america-poll

[DougMacG]

Economist Veronique de Rugy

https://reason.com/2022/09/01/the-biden-administration-is-taking-from-the-poor-and-giving-to-the-rich/

The Biden Administration Is Taking From the Poor and Giving to the Rich
From student debt cancellation to green subsidies, the White House is giving handouts paid for by hardworking lower-wage Americans.
VERONIQUE DE RUGY | 9.1.2022 2:30 PM

If you had any doubts that those in power have dropped the pretense of fighting for the working class, you can dispense with them after President Joe Biden administration's latest concessions to the laptop class. From student loan forgiveness to subsidies for people who drive pricey electric cars and profitable semiconductor company CEOs, this administration is working hard to shower its friends with handouts paid for by hardworking lower-wage Americans.

We learned of the most outrageous handout of them all, of course, when Biden announced that he will—unilaterally, mind you, and for no apparent reason that I can see—extend the pause on student loan payments until the end of the year and forgive up to $10,000 for those persons making less than $125,000 a year. This generosity with other people's money extends up to $20,000 for Pell Grant recipients.

As David Stockman, a former director of the Congressional Office of Management and Budget, reported recently, "Only 37% of Americans have a 4-year college degree, only 13% have graduate degrees and just 3% have a PhD or similar professional degree. Yet a full 56% of student loan debt is held by people who went to grad school and 20% is owed by the tiny 3% sliver with PhDs."

Picture two young married lawyers who together earn just under $250,000 and are on their way to making even more money in the future. They will be able to collect from Uncle Joe a nice bonus of $40,000, taken from the pockets of the many people who didn't go to college—perhaps because they did not want to take on debt—and from those who have responsibly already paid back their debt.

It's no wonder that so many left-leaning economists and policy wonks have loudly criticized this so-called student loan forgiveness. The Washington Post, for instance, editorialized that the decision is "regressive," "expensive" and "likely inflationary," nullifying "nearly a decade's worth of deficit reduction from the Inflation Reduction Act."

Meanwhile, Jason Furman, who headed former President Barack Obama's Council of Economic Advisers, napalmed the plan in a brutal Twitter thread. He explained that, thanks to Biden's move, interest rates would have to rise by an additional 50 to 75 basis points to counteract the added inflationary effect. Furman made clear that he regards this outcome as remarkably unfair and regressive.

Then there's the Inflation Reduction Act's gusher of green subsidies, many of which disproportionately benefit wealthier Americans. Take the extension of the tax credit of up to $7,500 for the purchase of new electric vehicles. For those buying used EVs, the tax credit is now $4,000, little consolation for people who can't afford the luxury of buying electric cars, which remain much pricier than their gasoline-powered alternatives. The bill hopes to address this issue by making expensive EV cars ineligible for the credit, but it counteracts this provision with a requirement that only cars assembled in the United States are eligible.

To underscore how disconnected policymakers are from average Americans, the vehicle credits are limited to those making less than $150,000 annually (single filing) and $300,000 (joint filing), presumably to avoid criticism for subsidizing the rich. That still leaves about 93 percent of individuals or 97 percent of households able to seize the subsidy. And given that it's mainly been taxpayers with annual incomes over $100,000 using the credit in the past, this subsidy will mostly still serve a swath of fairly well-off people.

But politicians are not just showering higher-income individuals with subsidies; they do the same for companies. A quick look at the semiconductor subsidies in the CHIPS Act reveals that the well-publicized $52 billion giveaway will benefit well-connected and rich companies.

We could go on and on with more examples, such as Democrats' incessant demand to restore remarkably regressive state and local tax ("SALT") deductions to their pre-2017 heights. The only persons who will gain are high-income earners—and their big-spending elected officials—in high-tax blue states. They lost parts of these deductions when the Trump tax cuts were implemented, and they want them back.

If you're surprised by any of this, you haven't been paying attention to Democrats' recent record. Few are even pretending to be the party of anyone other than the privileged laptop class.

[DougMacG]

At some point these failures are going to give Marxism a bad name. 
(We might want to defeat it here!)

https://www.americanthinker.com/blog/2023/03/south_africa_is_in_freefall.html

From the article:
"As a predicate to this post, it’s important to note that, since 1994, when the all-white government finally ended, all South Africa’s presidents have come from the African National Congress, a communist front group. It’s also important to note that South Africa, although in chaotic fashion, has been bowing down before “green colonialism.” As I use it, that phrase means that economically fragile countries destroy their energy infrastructure to suit the climate delusions coming from affluent western nations."

(Doug).  They didn't have to replace apartheid racism with Marxism. There were plenty of better models out there.  Economic freedom, for example.

[G M]

At some point these failures are going to give Marxism a bad name. 
(We might want to defeat it here!)

https://www.americanthinker.com/blog/2023/03/south_africa_is_in_freefall.html

From the article:
"As a predicate to this post, it’s important to note that, since 1994, when the all-white government finally ended, all South Africa’s presidents have come from the African National Congress, a communist front group. It’s also important to note that South Africa, although in chaotic fashion, has been bowing down before “green colonialism.” As I use it, that phrase means that economically fragile countries destroy their energy infrastructure to suit the climate delusions coming from affluent western nations."

(Doug).  They didn't have to replace apartheid racism with Marxism. There were plenty of better models out there.  Economic freedom, for example.

They should follow what African country's model?

[DougMacG]

The best real world economies at the time they could have modeled were:
Hong Kong, New Zealand, Singapore, US, Switzerland, UK, Ireland, Canada, Australia, Japan and Netherlands.

As a practical matter, they could have kept the South African economic system while extending all rights whites had to blacks.

But no.  They chose poverty, anti-freedom and failure - like we are doing here, now.

[Crafty_Dog]

https://www.theepochtimes.com/the-economic-upheaval-has-just-begun_5105225.html?utm_source=Opinion&src_src=Opinion&utm_campaign=opinion-2023-03-08&src_cmp=opinion-2023-03-08&utm_medium=email&est=qd3li39Jqynfh3ixSyueXtuPcQVgNzCFtQAg4HkOKNitkF4foAzhQdSQ71QxkZTKc70S

A “Help Wanted” sign is displayed at a restaurant in Arlington Heights, Ill., on Jan. 30, 2023. (Nam Y. Huh/AP Photo)
Jeffrey A. Tucker
By Jeffrey A. Tucker
March 7, 2023Updated: March 8, 2023
biggersmaller Print



This weekend, a good man who owns a landscaping business came up to the microphone during a question-and-answer period following my speech at an event. He posed a simple but sincere question. He has endless demand for his services. He has all the capital he needs. He has a thriving business with a bright future. How come he can’t get workers to actually do the work? Why is this happening?

My answer was correct, if probably too abstract. The labor markets are a mess. Vast millions are in professions to which they don’t belong. They were drawn there by capital that flowed to sectors to which it shouldn’t have. This began in 2008 with zero-interest-rate policies, which massively subsidized capital-goods-producing industries and boosted speculation in information and professional technological sectors.


Other sectors in the overall structure of production were gradually starved of both capital and labor. That greatly upset the time balance of production, pushing the focus of investors toward laptop jobs and away from hands-on work in the consumer-goods industries. The imbalance worsened as time went on but became wildly unstable during pandemic lockdowns.

Here was a period of zero interest rates plus aggressive money printing that exceeded $6 trillion in 18 months. At this point, the two classic casualties of loose money—malinvestment and monetary depreciation—colluded. Facebook (Meta), Google (Alphabet), Microsoft, Amazon, and all their associated downstream partners blew up to an unsustainable size.

The labor problem was exacerbated by controls on migration such that normal workers became hard to come by; meanwhile, millions flooded across the Southern border.

While last year and this year we started to see some rebalancing, we are nowhere near complete with this process. The companies that ballooned in size during lockdowns aren’t back where they were in 2019. The firings so far amount to a small fraction of what needs to happen to draw workers from the right side to the left side of the yield curve. That’s to say, workers need to move from do-nothing Zoom jobs in unprofitable professional ventures toward where they are desperately needed, in services and hospitality.

This signals a gigantic cultural change. An entire generation has been raised with skewed expectations about economic life. They don’t need skills. They only need a ticket to get into the door of a high-end firm and the rest takes care of itself. That’s already starting to change. Full-time employment is now leaving information tech and entering into real work in sectors focused on consumer services.

Why is it taking so long? Simply put, this amounts to a perceived downgrading of social status for millions of people. They shouldn’t care, but they do. For 15 years, they’ve been fed a steady diet of social media baloney in which status and influence are the desiderata of life itself. They know no other way. The idea of cooking, cleaning, bartending, serving tables, taking orders, doing data entry, and working in customer support is anathema; lawn care is out of the question.

As a result of these persistent imbalances, we have very strange dislocations everywhere in sight. In my neck of the woods, there are excellent restaurants with plenty of capital and customers. Their weekends are booked up even before they open. But they can’t open on Monday through Wednesday. They can’t find workers!

This isn’t normal. Labor is supposed to operate like capital, flowing to the highest-valued uses. Wages should reflect that, too. No one has to operate the economy like a machine to make this happen. The signaling systems of the market are an ongoing process that’s always pushing out inefficiencies and discoordination in favor of efficiency and coordination.

But one of those signals is the interest rate. It isn’t just a payment from lenders to borrowers. It’s a mechanism directing capital to its highest-valued uses. Without external intervention, a low interest rate should signal a buildup of savings resulting from deferred consumption and growing prosperity. That serves as a signal to invest in products that are more long term: paying returns only years down the line.

This is how the interest rate operates as an allocator not only of capital but also time. A central bank that games the system with low lending rates essentially forces savings into existence that aren’t actually there. This results in unsustainable capital-sector ventures that thrive only temporarily at the expense of consumer-goods sectors.

This scenario you can find in any industry tutorial on economics and finance, but there are many unknowns in practice. One unknown is for how long can an artificial boom persist before resources run out and the boom turns to bust? One year? Five years? We’ve just lived through the longest boom in modern history, likely dating all the way back to the turn of the millennium when central banks massively ramped up the use of their powers for political purposes.

During this whole time, we’ve mostly had low and non-painful rates of inflation. It all seemed to work, until it suddenly stopped working. That was in January 2021. Since then, we’ve experienced about a 16 percent depreciation of the dollar (in terms of its purchasing power of goods and services). This affects savings, salaries, and wages, meaning a relentless trend toward great impoverishment.

Inflation works like taxes. It’s a transfer from the public to the authorities. Even worse, as the policy has changed and interest rates have risen, federal expenditures on debt payments are rising ever higher, putting an even greater burden on taxpayers.


January’s inflation numbers looked awful across the board, confirming what many of us suspected last year. It’s embedded and not temporary. To root it out requires that the Federal Reserve continue on its present course of ever-higher rates. This is following the largest and fastest increases on record over two years. Still more is necessary to reach that terminal rate. After all, remember that they began at zero! There are few signs that the Fed will back off and call it a day, and many think that it will keep at it for the better part of a year.

Household finance is in a terrible mess. The gap between credit card debt and personal savings has never been this vast. And debt services rates are rising, too, headed toward 20 percent.

The implications of this for the labor sector could be monumental, the shock of a generation. My friend who asked the question is going to continue having a hard time getting hands on deck for a long time. But eventually, the rebalancing has to occur. We’ve lived through many years of wild illusions about what’s possible. Post-pandemic realities are hitting very hard and they are nowhere near done with us yet.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.