Tag: economy

Yellen Says the US Can Afford to Fund Wars in Gaza and Ukraine

Treasury Secretary Janet Yellen insisted on Monday that the US could “certainly” afford to fund the war in Ukraine and Israel’s onslaught on Gaza as the White House is looking for more military aid for both conflicts.

Yellen’s comments came a day after President Biden said the US could fund both wars. “We’re the United States of America for God’s sake, the most powerful nation in the history — not in the world, in the history of the world. The history of the world. We can take care of both of these and still maintain our overall international defense,” he said on 60 Minutes.

Yellen said the House needs to elect a new speaker so the new funding could be authorized. “We do need to come up with funds, both for Israel and for Ukraine. This is a priority,” she said. “It’s really up to the House to find, seat a speaker and to put us in a position where legislation can be passed.”

The White House has also discussed the possibility of rolling funding to arm Taiwan into the potential spending package. But Yellen did not mention Taiwan, and other Biden administration officials have made clear this week that Ukraine and Israel are the priority.

“America can certainly afford to stand with Israel and to support Israel’s military needs and we also can and must support Ukraine in its struggle against Russia,” Yellen said.

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Ticking Time-Bomb: Food Inflation Is Crushing Millions Of Low Income Americans

In 1906, Alfred Henry Lewis stated, “There are only nine meals between mankind and anarchy.”  The sentiment was expressed right on the heals of a banking crisis which led to the Panic of 1907.  The event was widely blamed on a liquidity crunch, and this same crisis was used as a rationale for the creation of the Federal Reserve Bank in 1913-1916.  Of course, it is the central bank and its ability to generate fiat money from thin air (unbacked liquidity) that has led the US to the stagflationary disaster we face today.  The “solutions” offered by establishment elites are often worse than the problems they are supposed to solve.  

The total inflationary damage done to Americans consumers since 2020 varies according to who you ask.  Stats from the Federal Reserve and government are muddled in a series of creative mathematics in order to make the situation look much better than it is.  CPI is not a valid indicator of true inflation given it is watered down with over 80,000 items and services, and many of them are not necessities for the common US household.  If we look only at necessities like housing, food and energy, the economic picture looks increasingly bleak.

Food, as Alfred Lewis noted, is particularly vital to civil cohesion.  The human body can in fact survive up to three weeks without a meal, but the vast majority of people in the first world are not acclimated to such conditions and might just panic after one or two days without sustenance.  

The potential for this scenario might sound exaggerated to those in a higher income bracket, but it’s important for these people to understand that a 25%-50% increase in food costs for them is not the same as a similar increase for people on a low or fixed income.  For example, food price increases for the average middle-class to upper-middle-class households amount to around 11% of their annual income in 2023.  However, for people in the low income bracket, food costs now amount to 31% of their annual income.  That’s a pile driver to the wallet.

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NY Times’ Paul Krugman says ‘inflation is over’ — if you exclude food, gas and rent

Paul Krugman’s assertion that “the war on inflation is over” if you exclude food, energy, shelter, and used cars is being mocked online.

The Nobel Prize-winning economist and New York Times columnist posted the comment on his X social media account on Thursday.

“The war on inflation is over,” Krugman wrote in the caption, adding: “We won, at very little cost.”

Krugman attached a graph titled “CPI ex food, energy, shelter and used cars” that showed a declining rate stretching from 7% in January of last year to slightly below 2% in September.

The reaction on X to Krugman’s post was scathing, with critics noting that the Labor Department’s consumer price index (CPI) — the most widely used by economists to gauge prices faced by consumers — factors in those day-to-day living expenses.

“This is fantastic news for all Americans who don’t need food, a place to live, or fuel & electricity,” wrote Tim Murtaugh.

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Mexican cartels are fifth-largest employers in the country, study finds

Organised crime groups in Mexico have about 175,000 members – making them the fifth-biggest employer in the country, according to new research published in the journal Science.

Using a decade of data on homicides, missing persons and incarcerations, as well as information about interactions between rival factions, the paper published on Thursday mathematically modeled overall cartel membership, and how levels of violence would respond to a range of policies.

The authors argue that the best way to reduce the bloodshed would be to cut cartel recruitment – whereas locking up more members would actually increase the murder rate.

“More than 1.7 million people in Latin America are incarcerated, and adding more people to saturated jails will not solve the insecurity problem,” wrote the authors.

The number of homicides in Mexico more than tripled between 2007 and 2021 – when the government reported 34,000 victims, or nearly 27 victims for every 100,000 inhabitants – making it one of the deadliest countries in Latin America.

At a national level, two organised crime groups – the Sinaloa cartel and the Jalisco New Generation cartel – battle for domination. But analysts have identified 198 armed groups in Mexico, many of which are subcontractors to bigger players but also undertake local turf disputes.

The paper, titled Reducing cartel recruitment is the only way to lower violence in Mexico, was cautiously welcomed by security analysts in the field. “It is a first of its kind,” said Victoria Dittmar, a researcher for the Insight Crime thinktank, who did not take part in the study. “I haven’t seen any other estimates of how many people we believe are somehow related to criminal groups.”

But Dittmar said the figure would depend on the definition of a cartel and what constitutes membership, since working for a crime faction is very different to being formally employed.

“It can be very difficult to say who is a member of a criminal organisation, and who isn’t,” said Dittmar. “What about a politician that receives money? Or someone who cooperates with the group just once?”

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How the Federal Budget Deficit Doubled in a Single Year

It’s not totally unprecedented to see the federal budget deficit double from one year to the next, as it seems to have done this year.

But those occasions, at least in the past 50 years, have always corresponded with bad stuff happening to the national economy. Deficits surged in the late 1970s and early 1980s thanks to high inflation and a series of recessions. The budget deficit doubled between 2002 and 2003 thanks to a recession and as the War on Terror kicked off. And it skyrocketed again during the crises that bookended the 2010s: the mortgage crisis and the COVID-19 pandemic.

This year will likely be added to that list. The Congressional Budget Office last week projected that the federal government will post a deficit of $2 trillion when the current fiscal year ends on September 30.

At first blush, that might not appear to double last year’s budget deficit of about $1.4 trillion, but keep in mind that last year’s total included roughly $400 billion for President Joe Biden’s student loan forgiveness plan—funds that were never spent because the Supreme Court struck down the proposal, as the CBO notes.

Compared to those other historical examples, however, this year seems like an outlier. Unemployment is low, the economy has been growing steadily, and inflation has significantly abated. America does not seem to be in a crisis at the moment, but the government’s balance sheet certainly is.

And it is that way, in large part, because of the government’s own programs—as opposed to, say, an external event like a pandemic or a mortgage crisis. The drivers of this year’s rising deficit are four-fold, and three of them are the result of decades of poor policymaking: rising interest costs on the $33 trillion national debt, higher Social Security outlays, and more Medicare spending. As Axios points out, those three categories added more than $390 billion to the deficit relative to last year—a tremendous jump in a single year.

The fourth category is falling federal income tax revenue, which is responsible for about $171 billion of the added deficit this year versus last. That’s likely a blip and not a long-term problem—federal tax revenue was unexpectedly high a year ago, and bigger swings in annual revenue tallies seem to be becoming more common, as The Wall Street Journal explained in May.

That’s not the case for the other three categories driving this year’s deficit, all of which are going to keep getting worse for the foreseeable future.

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Is the Gig Economy on the Verge of Destruction?

The gig economy as we know it is on the verge of destruction. Gig work, otherwise known as freelance work, was once held up as an entry into the entrepreneurial economy for many people seeking to dip their toes in, but that economy is currently threatened by people who do not understand its vitality for freelance entrepreneurs. There is now a push, from policy makers and a few gig contractors who think it is in the best interest of gig workers and gig employers, to professionalize the gig economy.

A recent article in the Wall Street Journal interviewed gig contractors and policy makers, who explained what professionalizing the gig economy would look like if demands are met. The article describes the policies they seek to enact, which eliminate the incentives that make the gig economy attractive for those who enjoy its flexibility and freelance work options. The new mandates will undoubtedly raise business costs for employers and inadvertently shut out the people the gig economy should help: unskilled college students with little to no real work experience, retirees, stay-at-home parents, and, of course, budding entrepreneurs. Professionalizing the gig sector will bog it down with unnecessary new requirements that will destroy it.

One gig worker the Wall Street Journal interviewed said, “It is possible to transform the gig economy into a profession that is dignified for workers.” Really? Another gig delivery driver with the right idea about the gig economy told the reporter that “the flexibility and income allow him the time and funds for other pursuits, and he does not want to mess that up.” The gig economy in its current state is an oasis for regular folks who seek entrepreneurial channels to earn extra money or supplement their nine-to-five careers. The push to turn this economy into something vastly different will disemploy food delivery drivers, artists, tutors, musicians, coders, fitness coaches, construction contractors, and other gig workers.

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The Child Poverty Rate In The United States Has More Than Doubled

If you take an honest look at the numbers, the obvious conclusion is that the U.S. economy is rapidly going in the wrong direction.  Delinquency rates are soaring, sales of previously owned homes have declined by more than 32 percent over the past two years, inflation is starting to rise at a frightening pace again, large companies all over America are laying off workers, and we just witnessed the largest decline in real median household income in more than a decade.  Sadly, it is often the most vulnerable members of our society that get hit the hardest when economic times get rough.  According to the Census Bureau, the child poverty rate in the United States more than doubled from 2021 to 2022…

The U.S. poverty rate according to the Supplemental Poverty Measure (SPM) was 12.4% in 2022, a rise of 4.6 percentage points from 2021. The poverty rate for children more than doubled year over year, from 5.2% to 12.4% — a record increase.

There is no way to spin that number to make it look good.

So why did this happen?

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“We Need To See Pain… Unemployment Has To Jump 40–50%”

The moves in commodity prices have not been lost on one of our favouite bears, Jeremy Grantham. The famed British hedge fund manager spoke virtually to a conference in Sydney yesterday, where he lived up to his billing by saying that US equities were in an AI hype-driven speculative bubble, the probability of a US recession is 70% and that he would be “very careful with real estate all over the world” given that a multi-decade bull market in bonds has driven valuations to “crushingly high multiples of family income”. Grantham singled out commodities as the investment bright spot by suggesting that we now live in a “world of shortages” and that “we are not going to be rolling in commodities ever again.” “We don’t have enough metal to green the world economy… we don’t have enough lithium, cobalt, nickel or copper.”

On the same day that Grantham was speaking, property developer Tim Gurner was also giving his two cents worth at a conference across town. Gurner sparked outrage on the platform formerly known as Twitter by saying that “unemployment has to jump 40 – 50 percent in my view. We need to see pain in the economy… We need to remind people that they work for the employer, not the other way around… Tradies have definitely pulled back on productivity. They have been paid a lot to do not too much in the last few years, and we need to see that change.”

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“Bidenomics” Is A Fraud Based On Deliberately Misrepresented Stats

Economic issues are some of the most politically abused issues, often because the data politicians exploit is easy to present out of context. The vast majority of the public doesn’t spend their time immersed in the intricacies of monetary policy, unemployment stats and the processes of inflation vs deflation. They hear a soundbite on the news or social media once in a while, assume it must be true and then go on with their day.

This is how economic crisis events always seem to take the population by surprise – the establishment tells people all is well and no one questions the narrative in the face of numerous warning signs. Sometimes, the populace continues to believe that everything is fine despite the financial framework burning down around them, all because the “experts” continue to convince them that recovery is “right around the corner.”

There are numerous incentives for government officials and mainstream economists to mislead the citizenry with tales of imminent prosperity in the midst of instability. Primarily, the goal is to keep the middle-class population as docile as possible so that they don’t revolt until it’s too late (the middle class being predominantly conservative, and the greatest threat to any corrupt regime). Understand that economics is the root of power, and economic perception is the key to influencing the masses.

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Cash-Strapped Consumers Resort To “Dumpster Dining” To Save On Grocery Bill

Despite the Biden administration’s cheerleading that “Bidenomics” is the economic savior of the middle class — most Americans will disagree there has been an economic revival amid the worst inflation storm in a generation that has sent negative real-wage growth negative for more than two years, forcing consumers to deplete personal savings and rack up record amounts of credit-card debt in a high-interest rate environment.

We have shown many households are in rough financial shape. Dollar Tree executives confirmed weeks ago that mid/low-tier consumers are trading down from other more expensive retailers to their stores for groceries. This means Walmart has become too expensive for some consumers.

Even before we noted “Consumers Trade Down From Walmart, Dollar Tree Becomes Supermarket For The Working Poor,” we found a trend on TikTok that showed an increasing number of Americans in March were resorting to dollar stores for groceries to save money. We tilted that note “Dollar Tree Dinners”: TikToker Goes Viral After Showing People How To Cook For $35 A Week.

Last week, we were the first to point out that Google searches for “pawn shop near me” just erupted to record highs, indicating that consumers are in rough shape.

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