Amid significant fall in investment
US economy slows in second quarter
US economic growth slowed in the second quarter of the year, largely as a result of falling investment, amid a slowing global economy and rising trade tensions.
Gross domestic product (GDP) grew at an annual rate of 2.1 percent compared to an expansion of 3.1 percent in the first quarter, with business investment falling for the first time since 2016.
Non-residential fixed investment, which reflects spending on things ranging from software and research to equipment and structures, fell by 0.6 percent, compared with a rise of 4.4 percent in the first quarter.
Data released earlier this month by the US Federal Reserve show that this trend is likely to continue in the coming months. Industrial production declined by 1.9 percent in the first quarter and by 1.2 percent in the second.
Other drags on growth were a fall in exports, down at a rate of 5.2 percent, a decline in residential investment at an annual rate of 1.5 percent—the sixth negative quarter in a row—and a draw-down in inventories, which cut 0.85 percentage points from the overall result.
The data on investment and industrial production show that the pro-corporate tax cuts carried out by the administration at the end of 2017 have failed to produce the resurgence forecast by Trump. They have simply provided more money for corporate stock buy-backs and other forms of financial speculation.
Trump wants still more money to be made
available to Wall Street, maintaining his
demand that the Fed make significant cuts in
interest rates. The issuing of the GDP data saw another push in that direction, with Trump tweeting that the second quarter result was “not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck.”
In another indication of a slowing US economy, the growth figure for 2018 was revised down from 3 percent, which the Commerce Department had previously reported, to 2.5 percent.
Attention will now focus on next week’s meeting of the Fed’s Open Market Committee, which is expected to announce a cut in its base interest rate of 0.25 percentage points. But it is doubtful whether that will be enough to satisfy Trump’s demands that still more cheap money be made available to the financial oligarchy.
There are also indications that the administration is, on top of its trade war measures, considering intervening in currency markets to try to push down the value of the dollar. Bloomberg has reported that a meeting held in the White House on Tuesday between Trump and his economic team, called mainly to discuss trade, also raised this prospect.
Speaking to the business channel CNBC yesterday, White House economic adviser Larry Kudlow said the administration had “ruled out any currency intervention.” But several hours later in a White House briefing of reporters, Trump left that option open.
“I didn’t say I’m not going to do something” on the dollar,” he said. “The dollar is very strong… it’s a beautiful thing in one way, but it makes it harder to compete.”
Trump has attacked the European Central Bank for lowering the value of the euro—a charge strenuously denied by ECB President Mario Draghi—in order to improve the position of the euro zone in the struggle for global markets. Earlier this month he tweeted that Europe and China were engaged in a “big currency manipulation game,” which he called for the US to match or “continue being the dummies.”
According to the Bloomberg report, White House trade adviser Peter Navarro, a well-known anti-China hawk who has also issued strident denunciations of what he says is an undervalued euro, was one of those advocating currency market intervention. This was opposed by Kudlow and Treasury Secretary Steven Mnuchin. However, according to one source, Trump has yet to make a firm decision not to intervene.
Any moves in this direction threaten to set off a global currency war on top of the trade war that is starting to significantly impact global growth because of the uncertainty it creates for business investment decisions.
The impact of the trade conflict along with rising geo-political tensions, including the prospect of a no-deal Brexit, was highlighted at Thursday’s press conference held by Draghi, at which he reported on the state of the European economy.
While pointing to relatively strong consumer demand, he said the manufacturing industry was getting “worse and worse.” One of the key factors in the strengthening of recessionary trends, above all in the Germany, the key euro zone economy, is the sharp fall in exports.
The worsening situation in manufacturing on a global scale is highlighted by the major “restructuring” of the auto industry, where tens of thousands of jobs are being axed. This week the Japan-based producer Nissan announced it was slashing 12,500 jobs, 10 percent of its workforce. The cuts are part of what has become an increasingly desperate struggle by auto companies for market share as international sales contract and the companies try to position themselves in the development of new technologies.
The job destruction in the auto industry is only
one of the more significant expressions of
growing downward trends in the world
economy.
China has announced its lowest annual growth rate in 30 years; the International Monetary Fund has cut its forecast for global growth to the lowest level since the financial crisis; the euro zone economy is facing mounting problems—business confidence in Germany has been described as being in “free fall” and the British economy, already experiencing low growth, is bracing for the shock of a hard, no-deal, Brexit.
The situation is no better in medium-sized economies such as Australia, where the central bank has cut its interest rate to just 1 percent, far below the level it reached during the global crisis, forecasting more to come in what is becoming an increasingly desperate effort to provide economic stimulus.
Viewed within a longer time frame, these developments indicate that the upturn in the world economy in 2017 was not a turning of the corner, but merely a fluctuation in the development of the historic crisis that opened up with the financial crash of 2008.
The US GDP data indicate that these global trends are impacting the American economy. In the past, such developments might well have resulted in calls for coordinated efforts to spark an economic revival. In the present conditions, they will fuel even greater conflict.
Pressuring the Fed to lower interest rates may be politically savvy, but it might also bring devastating consequences.
The White House/Wikimedia Commons
Twenty-first century voodoo economic theories pushed worldwide by populist politicians are speeding the world to the edge of a global downturn. One by one, democratically elected leaders are taking down their smart economists and promoting their own questionable—and politically motivated—ideas about interest rates and banking practices.
Turkey and the United States are the latest nations whose presidents are pressuring or pushing out their reliable economic advisers, replacing them with ideological loyalists. These presidents’ makeshift monetary mumbo-jumbo is aimed at achieving short-term economic and political gain. As a result, corrections and recessions may be temporarily delayed, but continually loom right around the corner.
From Ankara to Washington, heads of state are demanding that their previously apolitical national bankers cut interest rates to grow their economies, spur investment and combat unemployment. The message to central bankers is clear: Drop the cost of money or lose your job. It’s not an idle threat.
India recently forced out its central banker. In the United Kingdom, Brexit factions want to overhaul and push around the Bank of England. Globally, from Mexico to the European Central Bank, folks tasked with figuring out state finance are under inordinate political pressure.
Turkish President Recep Tayyip Erdoğan tag-teamed with his favorite government official, Finance Minister Berat Albayrak, to fire the country’s well-respected central banker, Murat Centinkaya. It’s important to note that Albayrak is Erdogan’s son-in-law and fully willing to leverage his Pace University MBA to support Erdogan’s unfounded economic hypothesis that high interest rates were “hurting” Turkey’s economy. The central banker’s policies may have hurt Erdoğan’s popularity, but the banker’s monetary policy was helping the Turkish lira recover. Once Erdoğan fired him, the Turkish currency tanked.
In the United States, the president’s son-in-law and senior adviser is busy elsewhere and leaving Trump and other allies to insist on the right number of basis points for the next Federal Reserve interest rate cut. The president’s inability to just drop rates by fiat has led to his frontal assault both on the Fed Chairman Jerome Powell and to public snits demanding action. For the record, the Fed has a modern independent tradition, operating relatively free of political interference and presidential threat. But these are not normal times and suddenly the same president who insists that he alone can fix America’s problems asserts that he alone should be deciding on the Fed’s interest rate cuts.
At the Hoover Institution, where I work, a recent “Strategies for Monetary Policy” conference concluded that the Fed’s success at managing monetary policy now and in the future would be dependent on its successful ability to tie strategy, tools and communications coherently together. Trump has consistently undermined this approach and, instead, made monetary policy both personal and political.
On the personal side and over the last year, Trump has called Fed Chairman Powell both “loco” and “the biggest threat” to our national economy. He has ridiculed him, scapegoated him, threatened him and, despite the law, has long tried to fire him. In this regard, Trump clearly has Erdoğan-envy. He also envies China’s Xi Jinping.
Trump has said outright that he wishes for what he sees as Xi’s absolute authority over monetary policy, stating that Xi Jinping is “his own Fed,” making it possible for China to be “pumping money into their system” as they continue “lowering interest rates very substantially.”
Shy of Xi’s perceived total power over China’s money, Trump is attempting to end-run Powell by appointing ideologically aligned and policy amenable candidates to the policymaking Fed’s Board of Governors. These new appointees are expected to push for freer-flowing money, regardless of traditional monetary policy practice, learned warnings, and the limited options and tools available to the Fed if things suddenly go very bad for the economy. Damn the potential policy consequences, they say, and prime Treasury to throttle printing presses full speed ahead.
Cheap or free money is usually a sure way to stoke the economic growth furnace. When printing more money and lowering the cost of borrowing by cutting interest rates to near zero become the main tool of economic stimulus, economists tell us that the resulting stock market rise and economic growth numbers are artificially achieved and impossible to maintain.
Trump, however, is focused on making an economic reelection argument to the American people. He touts that his success is reflected in sky-high stock-market valuations, low unemployment, corporate tax cuts, lowered mortgage rates and the cheap money available for corporate borrowing and stock buybacks.
Unfortunately, as during any economic boom, these devices make sure an overheated economy is stimulable, but unsustainable. Trump needs the Fed to lower interest rates so “we’d be like a rocket ship.” Politically, he may be right, but even rocket ships sometimes blow up on the launch pad.
AMERICA: THE RICH GET MUCH RICHER AND THE MIDDLE CLASS GETS
BLUDGEONED…. Illegals get the jobs!
*
“Today’s society benefits those who shaped it, and it has been shaped
not by working men and women, but by the new aristocratic elite. Big banks, big tech, big multi-national corporations,
along with their allies in the academy and the media—these are the aristocrats
of our age.
They live in the United States, but they
consider themselves citizens of the world” Sen. Josh
Hawley
"But
what the Clintons do is criminal because they do it wholly at the expense of
the American people. And they feel thoroughly entitled to do it: gain power,
use it to enrich themselves and their friends. They are amoral, immoral, and
venal. Hillary has no core beliefs beyond power and money. That should be clear
to every person on the planet by now." ---- Patricia McCarthy
- AMERICANTHINKER.com
"The tax overhaul would mean an unprecedented windfall for
the super-rich, on top of the fact
that virtually all income gains during the period of the supposed
recovery from the financial crash of 2008 have gone to the top 1 percent
income bracket."
*
Millionaires projected to own 46
percent of global private wealth by 2019
While the wealth of the rich is growing at a
breakneck pace, there is a stratification of growth within the super wealthy,
skewed towards the very top.
By Gabriel Black
Despite a booming economy, many U.S. households are still just
holding on
https://mexicanoccupation.blogspot.com/2019/05/the-recovery-that-never-happened-except.html
"One of the
premier institutions of big business, JP Morgan Chase, issued
an internal report on the eve of the 10th anniversary of the 2008
crash, which warned that another “great liquidity crisis”
was possible, and that a government bailout on the scale of that
effected by Bush and Obama will produce social unrest, “in light of
the potential impact of central bank actions in driving
inequality between asset owners and labor."
Jim Carrey: America ‘Doomed’ If We Don’t Regulate Capitalism"
The American phenomenon of record stock values fueling an ever greater concentration of wealth at the very top of society, while the economy is starved of productive investment, the social infrastructure crumbles, and working class living standards are driven down by entrenched unemployment, wage-cutting and government austerity policies, is part of a broader global process."
OBAMA: SERVANT OF THE 1%
Richest one percent controls
nearly half of global wealth
Wealth
concentration increases in US.
https://hotair.com/archives/2019/02/13/deja-vu-auto-loan-delinquency-hits-new-record-high-um-reason/
Three Ways to Avoid
Death of Dollar – and America
AMERICA: THE RICH GET MUCH RICHER AND THE MIDDLE CLASS GETS
BLUDGEONED…. Illegals get the jobs!
*
Why do the
billionaire class all want wider open borders and hordes more “cheap” labor
illegals? It’s all about keeping wages depressed for greater profits!
*
“Today’s society benefits those who shaped it, and it has been shaped
not by working men and women, but by the new aristocratic elite. Big banks, big tech, big multi-national corporations,
along with their allies in the academy and the media—these are the aristocrats
of our age.
They live in the United States, but they
consider themselves citizens of the world” Sen. Josh
Hawley
*
*
"This is how they will destroy
America from within. The leftist billionaires who
orchestrate these plans are wealthy. Those tasked with representing
us in Congress will never be exposed to the cost of the invasion of
millions of migrants. They have nothing but contempt
for those of us who must endure the consequences of
our communities being intruded upon by gang members, drug
dealers and human
traffickers. These people have no intention
of becoming Americans; like the Democrats who welcome them, they have
contempt for us." PATRICIA McCARTHY
“Behind the ostensible government sits enthroned
an invisible government owing no allegiance and acknowledging no responsibility
to the people. To destroy this invisible government, to befoul the unholy
alliance between corrupt business and corrupt politics is the first task of the
statesmanship of today.” THEODORE ROOSEVELT
*
"But
what the Clintons do is criminal because they do it wholly at the expense of
the American people. And they feel thoroughly entitled to do it: gain power,
use it to enrich themselves and their friends. They are amoral, immoral, and
venal. Hillary has no core beliefs beyond power and money. That should be clear
to every person on the planet by now." ---- Patricia McCarthy
- AMERICANTHINKER.com
*
“The couple parlayed lives supposedly spent in
“public service”
into admission into the upper stratosphere of American wealth, with incomes in the top 0.1 percent bracket. The source of this vast wealth was a political machine that might well be dubbed “Clinton, Inc.” This consists essentially of a seedy money-laundering operation to ensure big business support for the Clintons’ political ambitions as well as their personal fortunes."
into admission into the upper stratosphere of American wealth, with incomes in the top 0.1 percent bracket. The source of this vast wealth was a political machine that might well be dubbed “Clinton, Inc.” This consists essentially of a seedy money-laundering operation to ensure big business support for the Clintons’ political ambitions as well as their personal fortunes."
*
"The tax overhaul would mean an unprecedented windfall for
the super-rich, on top of the fact
that virtually all income gains during the period of the supposed
recovery from the financial crash of 2008 have gone to the top 1 percent
income bracket."
*
Graph from the Economic Policy Institute
Decades of decaying capitalism have led to this accelerating
divide. While the rich accumulate wealth with no restriction, workers’ wages
and benefits have been under increasing attack. In 1979, 90 percent of the
population took in 70 percent of the nation’s income. But, by 2017, that fell
to only 61 percent.
*
Millionaires projected to own 46
percent of global private wealth by 2019
While the wealth of the rich is growing at a
breakneck pace, there is a stratification of growth within the super wealthy,
skewed towards the very top.
At the
end of 2014, millionaire households owned about 41 percent of global private wealth,
according to BCG. This means that collectively these 17 million households
owned roughly $67.24 trillion in liquid assets, or about $4 million per
household.
By Gabriel Black
*
The massive increase in the value of
the stock market, which only a small segment of the population
participates in, means that the top 10 percent of the population controls
73 percent of all wealth in the United States. Just three
men—Jeff Bezos, Warren Buffet and Bill Gates—had more wealth than the
bottom half of America combined last year.
America
Created Just 20,000 Jobs in February...and those all went to foreign
born!
Exclusive–Mo Brooks:
‘Masters of the Universe’ Want More Immigration to ‘Decrease Incomes of
Americans’
*
Consequently,
the pumping of ultra-cheap money into the financial system,
fueling speculation and parasitism, together with ever-widening
social inequality, is not a temporary measure but must be made permanent.
*
The
declining living standards of the working class are feeding directly into
the retail apocalypse and mass layoffs of retail workers will
only exacerbate the issue.
Workers’ wages have seen little to no
growth in the last four decades, and any economic growth experienced
since 2008 has gone to
*
“US household net worth sees biggest fall since crisis”
*
“Trump Touts Legal Immigration System for
‘Our Corporations’ at Expense of
American Workers “– JOHN BINDER
Trump’s shift from a
wage-boosting legal immigration system to one that benefits corporations and
their shareholders coincides with recent big business lobby influence over his
White House, at the behest of advisers Jared Kushner and Brooke Rollins.
*
“Trump Abandons ‘America First’ Reforms: ‘We
Need’ More Immigration to Grow Business Profits” JOHN BINDER
*
Additionally, Koch spokespeople at the donors’ conference said the
network has its sights set on pushing amnesty for millions of illegal aliens
this year.
Despite a booming economy, many U.S. households are still just
holding on
https://mexicanoccupation.blogspot.com/2019/05/the-recovery-that-never-happened-except.html
"One of the
premier institutions of big business, JP Morgan Chase, issued
an internal report on the eve of the 10th anniversary of the 2008
crash, which warned that another “great liquidity crisis”
was possible, and that a government bailout on the scale of that
effected by Bush and Obama will produce social unrest, “in light of
the potential impact of central bank actions in driving
inequality between asset owners and labor."
“Our entire crony capitalist system, Democrat and Republican
alike, has become a kleptocracy approaching par with third-world
hell-holes. This is the way a great country is raided by its elite.”
---- Karen McQuillan THEAMERICAN THINKER.com
“Behind
the ostensible government sits enthroned an invisible government owing no
allegiance and acknowledging no responsibility to the people. To destroy this
invisible government, to befoul the unholy alliance between corrupt business
and corrupt politics is the first task of the statesmanship of today.” THEODORE
ROOSEVELT
Jim Carrey: America ‘Doomed’ If We Don’t Regulate Capitalism"
The American phenomenon of record stock values fueling an ever greater concentration of wealth at the very top of society, while the economy is starved of productive investment, the social infrastructure crumbles, and working class living standards are driven down by entrenched unemployment, wage-cutting and government austerity policies, is part of a broader global process."
The father
of US Treasury Secretary Steven Mnuchin just completed the most
expensive purchase of a living artist’s work in US history, spending
over $91 million on a three-foot-tall metallic sculpture. Ken Griffin,
the founder of hedge fund Citadel, recently dropped $238 million on a
penthouse in New York City, the most expensive US home ever purchased.
And Amazon’s Jeff Bezos, the world’s richest man, has invested $42
million in a 10,000-year clock.
Decades of
decaying capitalism have led to this accelerating divide. While the rich
accumulate wealth with no restriction, workers’ wages and benefits have been
under increasing attack. In 1979, 90 percent of the population took in 70
percent of the nation’s income. But, by 2017, that fell to only 61 percent.
"This is
how they will destroy America from within. The leftist
billionaires who orchestrate these plans are wealthy. Those tasked
with representing us in Congress will never be exposed to the
cost of the invasion of millions of migrants. They have nothing
but contempt for those of us who must endure the consequences of our
communities being intruded upon by gang members, drug dealers and
human traffickers. These people have no intention
of becoming Americans; like the Democrats who welcome them, they have
contempt for us." PATRICIA McCARTHY
In 2014
the Russell Sage Foundation found that between 2003 and 2013, the median
household net worth of those in the United States fell from $87,992 to
$56,335—a drop of 36 percent. While the rich also saw their wealth drop during
the recession, they are more than making that money back.
Between
2009 and 2012, 95 percent of all the income gains in the US went to the top 1
percent. This is the most distorted post-recession income gain on record.
OBAMA: SERVANT OF THE 1%
Richest one percent controls
nearly half of global wealth
The richest one percent of the world’s population now controls
48.2 percent of global wealth, up from 46 percent last year.
The report found that the growth of global inequality has accelerated
sharply since the 2008 financial crisis, as the values of financial assets have
soared while wages have stagnated and declined.
THE WALL STREET BOUGHT AND OWNED DEMOCRAT PARTY
SERVING BANKSTERS, BILLIONAIRES and INVADING ILLEGALS
“Our entire crony capitalist system, Democrat and Republican
alike, has become a kleptocracy approaching par with third-world
hell-holes. This is the way a great country is raided by its elite.”
----Karen McQuillan AMERICAN THINKER
THE CRONY CLASS:
Income inequality grows FOUR TIMES FASTER under
Obama-Biden and their bankster regime than Bush.
“By the time of Bill Clinton’s election
in 1992, the Democratic Party had completely repudiated its association with
the reforms of the New Deal and Great Society periods. Clinton gutted welfare
programs to provide an ample supply of cheap labor for the rich (WHICH NOW
MEANS OPEN BORDERS AND NO E-VERIFY!), including a growing layer of black
capitalists, and passed the 1994 Federal Crime Bill, with its notorious “three
strikes” provision that has helped create the largest prison population in the
world.”
“Our entire crony capitalist system, Democrat and Republican
alike, has become a kleptocracy approaching par with third-world
hell-holes. This is the way a great country is raided by its elite.”
----Karen McQuillan AMERICAN THINKER
///
(THERE'S A REASON WHY GEORGE S OROS RUNS OBAMA'S BID FOR A
THIRD TERM FOR LIFE).
THE REAL ECONOMY:
US “retail apocalypse” expected to exceed annual high with more
than 1,100 store closures announced in one day.
The declining living standards of the working class are
feeding directly into the retail apocalypse and mass layoffs of retail workers
will only exacerbate the issue. Workers’ wages have seen little to no growth in
the last four decades, and any economic growth experienced since 2008 has gone
to the wealthiest of the wealthy.
Why do all global billionaires
want wider open borders, amnesty and no E-VERIFY?
AMERICA: THE ECONOMY IS RIGGED
BY COGRESS SO THE RICH BECOME SUPER RICH.
The American middle class gets the tax bills
for Wall Street’s crimes and bottomeless bailouts!
Wealth
concentration increases in US.
*
*
The latest research on wealth inequality by University of
California economics professor Gabriel Zucman underscores one of the key social
and economic trends since the global financial crisis of 2008. Those at the
very top of society, who benefited directly from the orgy of speculation that
led to the crash, have seen their wealth accumulate at an even faster rate,
while the mass of the population has suffered a major decline.
*
The past 40 years have seen the consolidation of a plutocratic
elite, which has subordinated every aspect of American society to a single
goal: amassing ever more colossal amounts of personal wealth. The top one
percent have captured all of the increase in national income
over the past two decades, and all of the increase in national
wealth since the 2008 crash.
*
“Our
entire crony capitalist system, Democrat and Republican alike, has become
a kleptocracy approaching par with third-world hell-holes. This
is the way a great country is raided by its elite.” ---- Karen
McQuillan AMERICAN THINKER
BILLIONAIRE BETO “BETOMATIC” O’ROURKE
PROCLAIMS AMNESTY FOR 40 MILLION INVADING “UNREGISTERED” DEMOCRAT VOTING
ILLEGALS.
No word on America’s homeless, housing or
jobs crisis for Legals!
Déjà
Vu? Auto-Loan Delinquency Hits New Record High For, Um … Some Reason
https://hotair.com/archives/2019/02/13/deja-vu-auto-loan-delinquency-hits-new-record-high-um-reason/
Is this a failure of the labor market? Or is it a rerun on a
smaller scale of the financial crash that created the Great Recession?
According to the Federal Reserve of New York, a record
number of Americans are three months or more behind on their car payments — even
worse than during the crash in the previous decade:
A record 7 million Americans are 90 days or more behind on their
auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even
more than during the wake of the financial crisis.
Economists
warn that this is a red flag. Despite the strong economy and low unemployment
rate, many Americans are struggling to pay their bills.
That seems incongruous in an economy where growth has spread out
across the spectrum. Job creation has picked up, wages have increased in real
terms at the best rate since before the Great Recession, and the overhang of
discouraged workers finally appears to be evaporating. Still, the New York Fed
blames this on a lack of widespread impact from the economy:
“The
substantial and growing number of distressed borrowers suggests that not all
Americans have benefited from the strong labor market,” economists at the New
York Fed wrote in a blog post.
Maaaayyyyybeee, but there’s something else going
on here too. In the same blog post, the NY Fed also notes that the
delinquencies are mainly
coming from subprime loans:
The flow into serious delinquency (that is, the share of
balances that were current or in early delinquency that became 90+ days
delinquent) in the fourth quarter of 2018 crept up to 2.4 percent,
substantially above the low of 1.5 percent seen in 2012.
In the chart
below, we disaggregate the delinquency rate by the borrower’s credit score at origination.
The relative performance between each credit score group stands out
immediately; but the increase in delinquency is most obvious among the loans of
the two groups of lower-score borrowers, shown by the blue and red lines in the
chart below. Borrowers with credit scores less than 620 saw their transitions
into delinquency exceed 8 percent in the fourth quarter (annualized as a moving
sum), a development that is surprising during a strong economy and labor
market. Meanwhile, the delinquency transitions among those with the highest
credit scores have remained stable and very low. In aggregate, the increasing
share of prime loans has partially offset the deteriorating performance of the
subprime sector.
That increase in the percentage of prime lending as a hedge
against subprime risk has only happened recently. Over the last several years,
subprime lending increased significantly, including in the auto-loan
market. By 2013, subprime
auto lending had increased 18.8%, while subprime auto-loan securities had grown
63.5%. Many of those loans carried high
interest rates, sometimes as high as revolving credit-card rates. Did people
expect to marry credit risks to high interest rates and not get defaults?
The Washington Post buries the scope of that risk towards the
end of their article:
He noted
that non-prime and subprime auto loans increased from 28 percent of the market
in 2009 to 39 percent in 2015, a reminder of how aggressively lenders went
after borrowers who were on the margin of being able to pay. More lenders are
giving people six or seven years to repay now vs. four of five years in the
past, according to Experian, another tactic to try to make loans look
affordable that might not otherwise be.
That’s a more accurate look at the aggressive nature of subprime
lenders, which also has echoes of the housing bubble and its 2008 collapse. The
NY Fed blames this mainly on “auto finance reporters,” but this chart shows a
more nuanced picture:
Half of all auto-finance reporter loans are subprime, which
accounts for $75 billion in outstanding debt. However, 25% of all auto loans
written by large institutions are also subprime — and that accounts for over
$97 billion in outstanding debt. Those “too big to fail” institutions
apparently didn’t learn any lessons, and neither did the investors who are buying
securities based on subprime debt. And how much backstop are the auto finance
reporters getting from the large banks?
The only potential good news is that auto-loan debt isn’t large
enough to knock out financial institutions — on its own, anyway. Does anyone
want to bet that subprime lending in the housing markets hasn’t followed along in
the same manner, though?
Three Ways to Avoid
Death of Dollar – and America
Little remains of the vast edifice of family, community and
faith relationships that once unified and anchored the American way of life.
These things have not disappeared from the horizon. They are still important,
but they have deteriorated. There is no more consensus about what they mean,
and they no longer serve as anchors of certainty.
One final anchor remains that does unite Americans. This
anchor survives despite everything. Now, even this seems targeted for
destruction.
The Last Anchor That Unites Everyone
It seems almost irreverent to affirm, but this last anchor
is the American dollar. Money is not supposed to be a social anchor. Other more
immaterial things—moral, principles, social bonds—should play this role.
However, today money bridges the seemingly unbridgeable chasms that polarize
the nation in a way nothing else can.
It is not just money. What unites Americans across the
board is the dollar, which is accepted everywhere either in its physical or
virtual form. No one questions its dominant role. As the world’s reserve
currency, it keeps global trade running while everything else falls apart. When
the other anchors fail, the dollar is always there to spend ways out of a
crisis.
Calling the dollar the last anchor does not mean that money
should or does run everything. The dollar is much more than a simple unit of
currency. It has immense symbolic importance since it is attached to notions of
national sovereignty, power and the American way of life. The dollar sustains
the myth of an America that will never fail. Thus, its fall is unimaginable to
many Americans who cannot visualize the country without it.
A Culture of Intemperance
However, there is a darker side to the dollar. It
facilitates the frenetic intemperance of a culture that
rejects limits. People want everything instantly and effortlessly, and the
dollar is ever-ready to supply the means to buy fleeting happiness. The
government offers its dollar subsidies to keep people dependent and happy. So
many others seem willing to sustain this frenzied lifestyle by contracting debt
of all types—private, corporate and governmental.
And the dollar is the ideal instrument for this frenzy. It
is stable, flexible and plentiful. What sustains the dollar is the world’s
willingness to buy U.S. Treasury bonds as a stable investment. There seems to
be no limit to the frenetic appetite for these debt dollars worldwide.
However, the dollar cannot solve the nation’s problems no
matter how many trillions are thrown at them. Like any currency, the dollar is
only as strong as the society that sustains it. With the decline of America’s
institutions, it is inevitable that the dollar too will face a decline—perhaps
radically and dramatically.
This dollar decline could happen in three different ways,
especially in these erratic times.
The Post-2008 U.S. Is Unprepared for New
Economic Crises
First, it can be destroyed by overconfidence. The grand
myth holds that the dollar cannot be destroyed because it has never been
destroyed before, despite several close calls.
There is no logic to this affirmation. All things temporal can
be destroyed, especially if they are neglected. However, the argument does
carry some weight in a culture that is run on emotions and feelings.
The fact is that the dollar is surviving on borrowed time.
The 2008 crisis provoked world finance leaders to use every tool in their
toolboxes to fix the crisis. Programs of zero or even negative interest, quantitative easing and other
vehicles have all run their course with limited effects. Overconfident
Americans need to take notice of dangers on the horizon.
Risks still abound in today’s global economy with trade
wars and political tensions. Many economic observers say that should a major
crisis hit the world economy, the financial systems could go down. And there
are very few new tricks that can be employed to stem the grave damage since the
root causes are not being addressed.
The mantra that the dollar is indestructible is hardly
reassuring.
The Very Real Debt Threat
The second factor that could cause the dollar’s decline is
debt in all its forms, especially American sovereign debt. When the world no
longer wants to buy American debt, the crushing burden of high interest rates
will have disastrous consequences for the nation.
The present governmental debt shows no sign of diminishing.
People have gotten used to the idea of annual $800 billion deficits. It will be
the new normal over the coming years as no Senator or U.S. Congressman wants to
take things off their shopping lists or face the firestorm of public opprobrium
for urging fiscal restraint.
Also, corporate debt now
stands at nearly $9 trillion. The quality of investment-grade bonds has
deteriorated with many in or bordering on junk category. This debt could
trigger defaults, bankruptcies, burst bubbles of immense proportions, all of
which will weigh heavily on the dollar.
Similarly, personal debt has climbed back to pre-2008
crisis levels.
Indeed, ours is a world awash in debt of all sizes, types,
and nations. As the world’s reserve currency, the dollar cannot escape the
reverberations of a world financial crisis when major players default.
Sidelining the Dollar as the World’s Reserve
Currency
The final threat is more deliberate and targeted. As the
preferred unit of currency in commodity markets, the dollar is under direct
attack today through a new European Union mechanism called a Special Purpose Vehicle (SPV).
Everyone knows that no currency (or even basket of
currencies) can replace the dollar as the world’s reserve currency. However,
the European Union, China, Russia and Iran are seeking to create a
clearinghouse that will run circles around U.S. sanctions against the Islamic
Republic of Iran. They are setting up a credit system that will allow the
barter trading of commodities without the use of American dollars.
In this way, the dollar can come to be challenged and
sidelined by many major countries in international trade, and potentially even
losing its privileged status.
The Collapse of the Postwar Order
Any of these three ways can drag down the U.S. dollar from
its post-World War II throne. This would be disastrous since it would hasten
the collapse of the postwar order with no replacement save chaos and
disorder.
However, the greatest catastrophe would be for American
society. The collapse of America’s last anchor will increase the fragmentation
and polarization of the nation. All these three ways are avoidable if
America’s political leaders would apply themselves energetically and without
further loss of time toward addressing the root causes of the threats the
nation faces. It would involve the need for great restraint, sacrifice and new
national priorities.
The real problem facing America today is much more a moral
problem than an economic one. Society needs anchors, especially moral
anchors to unify the nation. When those anchors are gone, the nation is left
rudderless in a sea of chaos.
John
Horvat II is a
scholar, researcher, educator, international speaker, and author of the
book Return to Order:
From a Frenzied Economy to an Organic Christian Soceity--Where We've Been, How
We Go Here, and Where We Need to Go. He lives in Spring Grove, Pennsylvania, where he is the
vice president of the American Society for the Defense of Tradition, Family and
Property.
No comments:
Post a Comment