A Rerun From the 1970s?

Link: https://www.nytimes.com/2019/09/18/upshot/us-economy-1970s.html

This article points out some of the commonalities between the economic recession of the 1970s, and what we are going through right now, including: strikes at GM, president seeking lower interest rates from the Fed, and increasing prices of oil from the Middle East. It goes on, however, to point out several important differences between the two periods, and how these differences affect the risks we face looking forward. One of the main differences between the 70s and today is that in the 70s there was huge inflation, which caused the problems, and today there is too-low inflation, which is causing today’s version of the problems. In terms of oil, the rising prices today from the Middle East do not affect the US as much as they did in the 70s, mostly due to the requirements of oil having decreased since the 70s, combined with the US producing much of it own oil today. All of these factors seem to suggest that the US economy is less susceptible to shocks than it had been in previous times of impending recession. Does this suggest that we might, in fact, not be heading towards a recession? Or does it just indicate the the recession will be coming from different factors than those listed above?

Fed Cutting Interest Rates Again

The Fed has just cut interest rates again, the 2nd time since July. Trump has also began encouraging the Fed to lower interest rates down to almost nothing. Typically if interest rates were to go too much lower it would be a really bad sign for the economy. They also have pumped just over $200 billion into the market. This possibly could be due to the growing worry of an upcoming recession as well as the upcoming tariffs becoming active. Actions like these are expansionary monetary policies in attempt to get the market stimulated and have consumers spend. Due to the growing number of tariffs placed on the global market the Fed may be very worried about this upcoming holiday season. Which is the where companies sell by far the greatest amount of product. 

https://markets.businessinsider.com/news/stocks/federal-reserve-meeting-september-interest-rate-decision-2019-9-1028535360

Fed Sees Three Dissents at Meeting for First Time Since 2016

On Wednesday, the Federal Reserve decided to cut interest rates by 0.25%. This was met by disagreement by 3 members of the federal reserve, the highest number since Powell became chairman. Two of the officials were against the rate cut and wanted to hold rates steady whereas one official wanted a higher rate cut. Decreasing interest rates can increase the scope of investment. However, since it is the strongest tool in the Fed's disposal, it could potentially cause problems. If they invoke rate cuts too soon it may not have that strong an effect when the economy might need the stimulus,. The differences in opinion really do reflect the uncertainty in the global economy recently including the US-China trade and Brexit. What do you think? Is this decision premeditated or is this the right course of action all things considered? 

https://www.wsj.com/articles/fed-sees-three-dissents-at-meeting-for-first-time-since-2016-11568834067?ns=prod/accounts-wsj

Slowing Growth Rates

Since 2017, the real economic growth rate for the economy has been falling. It has stayed between the 2.2-2.8% range which is below the target of 3.3% most economists believe is good.  The White House said in July "it expected the economy would grow by 3.2% this year." However, most private sector economists believe that the real figure will be around 2.2% and even fall to 1.9% in 2020. In order to reach the goal set by the White House, Trump urged for the lower of interest rate--to even negative rates--to spur the economy. The Federal Reserve chairman, Jerome Powell, believes there is no need for this change and believes the central bank will "fall in line". Although slower growth can seem troublesome at face value, I believe were are in the downside of a business cycle and the oncoming recession is eminent. All policy makers can do is try to lessen the impact of it. Also continuing trade uncertainty with China will only make things worse and lead to slower growth.

https://www.wsj.com/articles/economists-dont-see-path-to-3-growth-in-2019-11568296800

Trump to cut interest rates

In a Twitter rant last week, Trump said that he wants the Federal Reserve to slash interest rates to zero or even below zero after a series of derogatory remarks about them. This was followed by a suggestion to refinance that had no precedence. These comments are problematic because refinancing could cause problems for investors, as he is treating the national debt like mortgage which would lead to an eventual rise in interest rates and instability in the markets. The question then is whether this would be beneficial to the US economy, especially in case of a recession, how would the overall impact be? Zero interest rates would decrease cost of borrowing, but at the price of making the U.S less competitive for capital investments, as the yield would be lower and the private sector would suffer as growth would slow down. This could also mean many Americans, especially senior citizens would suffer who depend on income from bank savings, and banks could possibly pass off the higher charges to consumers by raising overdraft fees etc. This would in hindsight not be worth lowering interest rates to a negative, and could cause more harm to the economy. 

https://www.usatoday.com/story/money/2019/09/12/interest-rates-what-zero-negative-rates-would-mean-you/2293676001/

https://www.cnbc.com/2019/09/11/trump-says-fed-boneheads-should-cut-interest-rates-to-zero-or-less-us-should-refinance-debt.html

Gold surges more than 1% on global turmoil — but silver rises more

Following the drone attacks on Saudi Arabia's oil facility the price of gold increased. This was because investors flocked to gold as a safe haven-asset. Due to the attacks there was a 1.27% increase in Spot gold to $1,507 and a 0.83% increase in US gold futures to $1,512. Usually when the market is doing poor investors will put their money into gold because of its relatively stable prices, hence why it's called a safe haven investment. Not only did gold have a price increase but so did silver, it rose 2.96% to $17.94 an ounce. On another note many fear that there is another financial crisis looming and it times of economic downturn many investors like to put their funds into gold.

https://www.cnbc.com/2019/09/16/gold-surges-more-than-1percent-on-global-turmoil-but-silver-rises-more.html

US import prices fall as petroleum, food costs decline

U.S. import prices fell during the month of August for petroleum and food products. This means that inflation could stay subdued for awhile. The Department of Labor said that import prices have dropped 0.5% in the last month. The prices of imports have dropped by 2% in the last 12 months. Inflation is likely to remain moderate even though the has been an increase in consumer prices. This could allow the federal reserve to cut interest rates to limit the damage of U.S.-China trade tensions. The Fed cut rates for the first time since July. Excluding food and petroleum import prices were unchanged from the previous month.

U.S Import Prices Fall

On Friday it was published in the news that our import prices are decreasing due to the decline of petroleum and food prices. The prices were down in August of 2019 and they predicted them to rise again but instead they decreased again. This could also suggest that the inflation will stay at a moderate level and also could allow the Fed to cut down interest rates. Cutting down the interest rates would alleviate some of the stress of the china trade relations. in July the fed cut rates for the first time since 2008, and they are anticipating another interest rate cut in a couple of days. These import prices are very surprising but the most surprising part is how constant these numbers have proven to be over the past couple of months.

https://www.cnbc.com/2019/09/13/us-import-prices-fall-as-petroleum-food-costs-decline.html

Oil prices soar after attacks on Saudi facilities

Oil prices hit their highest in four months after two attacks on Saudi Arabian facilities which has knocked out 5% of global supply. At the start of trading, Brent crude jumped 19% to $71.95 a barrel, while the other major benchmark, West Texas Intermediate, rose 15% to $63.34.Prices eased back slightly after US President Donald Trump authorized the release of US reserves. State oil giant Saudi Aramco said that the attack cut output by 5.7 million barrels per day. The drone attacks on plants in the heartland of Saudi Arabia's oil industry included hitting the world's biggest petroleum-processing facility.US Secretary of State Mike Pompeo said Tehran was behind the attacks. Iran accused the US of "deceit."Later Mr Trump said in a tweet the US knew who the culprit was and was "locked and loaded" but waiting to hear from the Saudis about how they wanted to proceed. What will be effects on global supply due to such attacks? Will President Trump intervene and reinstate economic sanctions on Iran? 


https://www.bbc.com/news/business-49710820

Global Oil Prices Soaring

After an attack on Saudi Arabian oil facilities Saturday, global prices of oil and gasoline are rising fast. Saudi Arabia is the world's largest producer of oil, roughly pumping out 10% of the global supply everyday. As a result, prices crude oil prices jumped by 15% on Sunday and gasoline jumped 11%. In response, President Trump authorized the use of our emergency reserve to make up for the lack of global supply. From a macroeconomic perspective, one has to wonder the effect this will have on total output. Oil is a massive input in almost every sector, so this will raise the cost of production, and the cost of living globally.

https://www.cnn.com/2019/09/15/business/oil-prices-donald-trump-spr/index.html

US-China trade war optimism? Big companies are not buying it.

The recent gains in the stock markets have been mainly because of the positive signals from the US and China deal. However, some CEO’s are not buying it, they believe that they will feel the the pain of the trade tensions over the next six months. “...according to the third-quarter CNBC Global CFO Council Survey. The quarterly survey finds the CFO’s around the world increasingly worried about the US trade policy as a business risk factor. Chief Financial Officers also downgraded their view of the US economy from “improving” to “stable”” (CNBC). There is so much uncertainty between the US and China that CFO’s don’t really know how to react. The CNBC Global CFO Council represents over $5 trillion in market value and 35% of CFO’s said that US trade policy was the biggest external risk factor. Almost half of North American CFO’s said they are facing higher input costs and in turn are passing these on to their consumers to offset the costs. A majority of the CFO’s surveyed believed this would not affect Trump’s reelection process and that the US would not fall into another recession within the next year.  The US and China have agreed too meet again in October to try and negotiate a new plan, but CFO’s and consumers around the world are getting more worried by the day. How is this trade war affecting business investments? Will the US and China come to an agreement in October or will this trade war continue?

Trump says US ‘locked and loaded’ after attack on Saudi oil supply

In a tweet, tonight at 6:50 pm, Trump stated that the US government may know the culprit behind the strike on the Saudi oil supply. I think it will be interesting to see how this unfolds. This could easily escalate further if the US is willing to authorize strikes in retaliation. Trump makes it sound as though he is waiting on confirmation from the Saudis to determine what course of action they want to take. The initial strike on Saudi Arabia this weekend hit its second-largest oil processing facility and forced Aramco to slow production by 50%. This accounts for roughly 5% of the world's oil supply. As of right now, oil futures are up as far as 11%. Yemen rebels took responsibility for the strike but the US government seems to be blaming Iran at the moment. Iran currently dismisses these allegations.


His Tweet:
"Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!"

Article
https://www.cnbc.com/2019/09/15/trump-says-us-is-locked-and-loaded-after-attack-on-saudi-oil-supply.html

Schwab laying off employees due to interest rates

Interest rates have been a big talking point in the news as of late. However, Charles Schwab has decided to lay off 600 workers as a result of a slowing economy and "pressure from slumping interest rates". These rates have been falling because of these worries of a slowing economy and they believe these cuts were nessessary because of the income pressure from these declining rates. I was just wondering if maybe Schwab might have jumped the gun on laying off these workers. It seems the United States economy is still thriving and most of the worries come off worries of a possible slowing economy. So do you believe that laying off workers before any recession actually hits is the right move and do you believe more companies and banks will follow their lead?

Link: https://www.cnbc.com/2019/09/11/schwab-is-laying-off-600-employees-amid-hit-from-the-feds-interest-rate-cuts.html

US Job Growth Slowing Another Sign of a Recession?

This August the US added 130,000 new jobs, down 18% from July. The 130,000 is also partially inflated by the government hiring of 25,000 workers in preparation of the upcoming 2020 US Census.    It seems that the US economy is beginning to see the negative implications from the tariff war with China.  However, President Trump remains confident in the strength of the current economy. Unemployment remained constant at a very low 3.7%, and earnings growth is up 3.2% from it's mark in August of 2018. Trump is trying to urge the Fed to keep the economy growing by calling for a huge interest rate cut. I do not think that the latest report from the Labor Department on the slowing of job growth is quite enough to put the Fed in panic mode, and therefore a huge rate cut from Jerome Powell and company is very unlikely. I do think that job growth will probably continue to slow due to the uncertainty caused by the trade war with China, and a global slow down, however I think we are safe from a recession for the time being,

https://www.bbc.com/news/business-49609517?intlink_from_url=https://www.bbc.com/news/topics/c1038wnxypvt/us-economy&link_location=live-reporting-story

Surge in Treasury Yields Highlights Easing Economic Worries

U.S. government bond yields posted their biggest weekly advance in more than six years, rising for five consecutive sessions after signs of a thaw in trade tensions eased fears about the direction of the economy. Government bond yields around the world have risen in recent sessions and employers continue to add workers and raise wages, contributing to consumer confidence and spending. Easing recession fears also helped power stocks higher, with the Dow Jones Industrial Average climbing in eight consecutive sessions, its longest streak of gains since May 2018. Optimism about the economic outlook has grown, as investors have tempered bets on the pace of interest-rate cuts from the Federal Reserve. 

https://www.wsj.com/articles/treasury-yields-rise-erasing-much-of-august-decline-11568391190

Saudi Arabia faces weeks without full oil production after attack

There are some big questions being raised on whether or not Saudi Arabia will be able to bounce back from the drone strikes that took out around 5.7 million barriels of crude oil or just above 50% of daily production this past weekend. Saudi Arabia supplies more then 10% of the worlds crude oil making them the largest exporter oil, so its no surprise that this attack will send shockwaves throughout the global energy markets. The big question that we are left with is how long until Saudi Arabia is back to 100% production, and how will it affect gas prices here in the States.

France calls to block Libra in the EU

The finance minister of France has called on the European Union to block Facebook's Libra coin, a new cryptocurrency the company has begun to publicly discuss creating.  He speculates on the damage and risk for abuse of a private firm having power over facebook's 2 billion users and the risk of a breakdown in the functioning of this currency.  He also argued that "monetary sovereignty" is the right of governments and allowing a public currency to gain traction in the EU would threaten this sovereignty.  Personally I agree with him. facebook has had its fair share of legal and gray issues in the past and letting that same private firm create and issue a currency that is supposed to compete with the Euro and other major currency posses a big risk.  However part of the appeal of these currencies is governments warryness about their uses.  Historically when countries like the us have spoken out against cryptocurrencies like bitcoin it only leads to a increase in demand and a quick increase in the currencies value.  Could this stance just make matters worse?


https://www.bbc.com/news/business-49677146

Job Reports Indications for August

The Job reports published from data in the month of August gives insight to stability. The unemployment rate stayed constant at 3.7 percent which is lower than the average of slightly above 5%. The Labor force participation also increased making the unemployment rate more impressive. However, the U-6 is broader measure of employment and their calculations had unemployment rise from 7% to 7.2% last month. Another concerning area is warehousing and transportation industries loosing a combined 7,000 jobs. Economists are relating this to the trade-war with China, but regardless it's a concerning area for significant job loss, as it shows a relation with consumer spending. Unemployment over-all is in a solid place moving forward, assuming it can remain consistent over the coming months.

https://www.nbcnews.com/business/economy/jobs-report-paints-mixed-picture-health-economy-n1050681

Trump’s call for 0% interest rates

Over this past week, President Trump tweeted that he thinks the central bank should cut the interest rates to zero or even set negative interest rates.  Is this even possible? if so, what would even happen to people's money?  If this was to even happen, people trying to save their money will be the ones screwed over in this situation. "If the fed lowers its benchmark rate to zero, that would erode recent gains in savings rates immediately." What do you guys think about this? Is this even a possibility? 

https://www.cnbc.com/2019/09/11/what-trumps-call-for-zero-interest-rates-would-mean-for-your-wallet.html