Trade War Cutting Global Growth?

Recently the IMF stated that they believe that the United States and China trade war will cut the global growth to its slowest pace since 2008. It does seem that if this trade war remains unresolved, the global growth could get even worse. The United States and China are the two largest economies in the world, do we owe it to the rest of the world to resolve this mess? Also, how would we go about resolving this to where it is beneficial for both us and China. Lastly, do you believe that the United States and China will ever be able to go back to the way it was before this?

https://www.cnbc.com/2019/10/15/imf-says-trade-war-will-cut-global-growth-to-lowest-since-financial-crisis-a-decade-ago.html

Reduction in Unemployment

Donald Trump has claimed the USA economy is the greatest it's ever been l, saying it's "perhaps the greatest economy we've had in the history of our country".

Now while this is a bold claim, he is not too far from the truth. The economy is doing well. However, there have been multiple times throughout the history of the country where statistics show otherwise. 

The tensions between the second-largest economy in China have forced the Federal Reserve to lower interest rates which in turn leading to more investments 

One of Trump's biggest achievements is the reduction of the unemployment percentage. This rate is at its lowest for half a century; since 1969, which is 3.7%.

Wages on average has also gone up slightly. It reached 3.4% in February and has marginally come down to 3.23%.

However, it is important to note that when taking inflation into account, between the period of August 2018- August 2019, wages stand at 1.5%

https://www.google.com/amp/s/www.bbc.com/news/amp/world-45827430

Ohio Opioid Settlements Amount to Roughly $260 Million

NPR Article

Four drug companies settled with Summit and Cuyahoga counties to avoid a landmark case for liabilities in the opioid crisis, what would have been the first of federal court cases for thousands of similar opioid cases across the country. Distributors Amerisource Bergen, Cardinal Health, and McKesson pledged $215 million; manufacturer Teva pharmaceuticals will pay $20 million in cash and another $25 million in addiction and overdose treatment medication. This accountability for the medical and pharma sectors will have wide reaching implications over the entire US health field, and we shall see how similar cases will play out in the future.

More store closings coming: An estimated 12,000 shops could close by the end of 2019

This article keeps a list of the number of locations that retail stores have closed this year alone. The article attributes the numbers to the high tariffs that have been imposed by the US and Chinese governments. The author also talks about how there is also a need to consider that many stores are closing because of the e-commerce boom that has been happening and that will continue to happen for the foreseeable future. Where are all of these jobs going to go? Along with that what will happen to all of the empty stores that were previously occupied?

Link to article: https://www.usatoday.com/story/money/2019/07/03/2019-store-closings-list-these-retailers-shuttering-locations/1597997001/

Unexpected Decreases in Retail Sales

Retail sales decreasing is a sign on what to expect in the U.S economy. Consumption is a Huge piece of U.S GDP. If consumption begins to decrease, the chances of a recession is happening is high. Economist expected retail sales to increase by 0.2% in the month of September, but instead retail sales dropped 0.3%. In the article it mentioned auto sales and service stations dropping in September. They said "Auto sales fell 0.9% in September, the most in eight months, while receipts at service stations fell 0.7% in what likely reflects cheaper gasoline.." This shows if auto sales are effected, will also affect service stations. September is the first month in seven, where retail sales have dropped. Be attentive, because there looks like a recession is coming soon than later.  

US Housing starts fall from 12-year high

U.S. home building dropped from more than a 12-year high in September but single family home construction rose for a 4th straight month. This suggests that the housing market remains supported by lower mortgage rates as the economy is slowing. Housing starts declined to 9.4% to a annual rate of 1.256 million units last month. Now economist have forecast housing starts to decrease at a pace of 1.320 million units in September. Though housing did rise by 1.6% on a year-on-year basis in September. The housing market has perked up in recent months due to the Federal Reserve's monetary policy easing, which has pushed down mortgage rates from multi-year highs.

Homebuilder confidence surges to highest level in nearly two years, thanks to lower mortgage rates

Builder construction confidence in the single family market is up 3 points to 70 according to the National Association of The Home Builders/Wells Fargo Housing Market Index. The Index is composed of three parts current sales conditions, sales expectations, and buyer traffic. Current sales conditions is up 3 to 78, sales expectations is up 6 to 76, and buyer traffic is up 4 to 54 in the month of October. Anything around or above 50 is considered positive sentiment. The incline that began in the spring was supported by low mortgage rates and job growth but concerns about the economy slowing and the housing supply levels being low keep single family construction confidence from growing too rapidly.

https://www.cnbc.com/2019/10/16/homebuilder-confidence-surges-to-highest-in-nearly-two-years.html

2019 Nobel Prize in Economics

This past week, the Nobel prize in Economics was given to Abhijit Banerejee, Esther Duflo, and Michael Kremer. This honored was bestowed onto them due to their work attempting to explain poverty in other countries. They did this by stepping away from the big picture, and instead asked littles ones. They split the reasons for poverty into smaller sections and really tried to understand the root cause of this so they could make a bigger change. Their experiments reveal that the gap in productivity between the most and least efficient producers is much wider in developing economies than in advanced ones. While they have made significant progress, global poverty still remains. 

Now I ask, what do you think are some of the main causes of poverty and why are countries still struggling in 2019? And more importantly, can we ever erase poverty completely or are some always doomed to be "poor"?

https://www.economist.com/finance-and-economics/2019/10/17/a-nobel-economics-prize-goes-to-pioneers-in-understanding-poverty

EU Leaders Endorse Most Recent Brexit Deal

BBC Article

The latest Brexit deal headed to the UK House of Commons in a special session has received a unanimous endorsement from EU leaders, a rather surprising (to me) development. On the contrary, the session held on Saturday was much more divided, with DUP leaders promising to "vote (Boris) Johnson down", encouraging Conservatives to follow suit. Britain was set to leave on the 31st of this month, but another request for postponement came from Britain, which is in hopefully rejected, from my point of view.

Ceasefire in Northern Syria Due to Heavy Economic Sanctions on Turkey

Reuters Article

After five hours of negotiations with President Erdogan of Turkey on Friday, Turkish forces have stalled, allowing the Kurdish fighters time to retreat. This response by Turkey can be mostly credited to the very strong economic sanctions that President Trump warned Turkey of after pulling troops out of Syria earlier this month (a heavily scrutinized move). A classic example of using trade to force another country's hand.

Here’s where the jobs are — in one chart

In September of this year the winner for most jobs added is the education and health industry with 40,000 new jobs. The big loser was the retail industry with a loss of 11,400. Since reaching a peak in January 2017, retail trade has lost 197,000 jobs. This is unsurprising considering how market places such as Amazon have put a huge dent in the traditional retail industry. Wages increased on a slower pace than August. Unemployment fell to a new 50 year low of 3.5% showing that even with a possible recession upcoming the market is still going strong.

https://www.cnbc.com/2019/10/04/heres-where-the-jobs-are-for-september-2019-in-one-chart.html

"US in one bad recession away from zero rates"

A long term White House economic advisory has predicted little change in fed rates unless major policy changes are enacted.  He warns that if a recession comes in the near future the US will follow the European central banks and Japan into negative interest rates.   While the Fed has stated it wont consider negative rates in the near future president Trump has been outspoken in wanting negative interest rates in the US.  How do you think negative interest rates would effect the economy?  Should they even be considered?





https://www.cnbc.com/2019/10/14/larry-summers-economy-one-bad-recession-away-from-zero-rates.html

Fed Votes to Lighten Regulations for All but the Largest Banks

Federal Reserve Board members voted on Thursday to adjust key bank regulations put in place after the financial crisis, enacting a series of changed that one board governor, Lael Brainard, warned could weaken "core safeguards". 

Regulators are trying rules more closely to bank size, reducing the necessary level of cash and government bond stockpiles at all but the largest and most complex institutions. Affected banks will also be allowed to submit "living wills"- documents detailing how a bank would wind itself down in the event of failure, less frequently. 

Banks with $250 billion to $700 in total assets, including firms like Capital One and PNC Financial, will now have to submit a resolution plan every three years, alternating between full and partial filings. They are currently required to submit a full report annually, though in practice they have usually received extensions because the process is so complex. Foreign banks with operations in the United States, including Deutsche Bank, Barclays and HSBC, will be allowed to file less often. 

Requirements for the largest and most globally important banks went mostly unchanged in the rules the board approved on Thursday, though the package does formalize a longer cycle for living wills for such banks. They are now required to submit every two years, alternating between partial and full plans, bringing actual regulation in line with current practice. 

Will these changes together amount to a substantial weakening of post-crisis regulations, and lead to the system being vulnerable to future shocks?  


https://www.nytimes.com/2019/10/10/business/economy/federal-reserve-bank-regulations.html

Recession to occur if US and Europe begin Trade War

The World Trade Organization voted to allow the United States to begin heavily taxing European products shipped to the US in response to findings of illegal government subsidies which Europe has been granting their governments for years. The US plans to implement $7.5 billion worth of tariffs on European goods beginning October 18th, and Europe has threatened to tax $20 billion of US goods in response. Europe has attempted to settle this dispute without bringing additional tariffs upon goods, but that has been unsuccessful thus far. With the US engaging in large scale trade wars now with both China and the European Union, a recession which appears to be looming is only being encouraged to arrive sooner than expected. Not that the EU should be let off for breaking the trade guidelines, but a trade war would appear to  not be the best way to address this situation.

https://www.cnbc.com/2019/10/16/useu-trade-war-puts-world-straight-into-a-recession-itc-chief-says.html

The NBA-China Crisis Shows that the Business of American Business is Busines

Early this month a National Basketball Association (NBA) Franchise General Manager, Daryl Morey, sent out a tweet siding with and displaying his support for the Hon Kong protestors, those who are demanding several civil rights protections from their own communist government. The Chinese government obviously did not take kindly to this, and immediately Chinese companies were quick to suspend any partnerships and agreements with the NBA, even barring games from appearing on television in the country, putting the multi-billion dollar relationship in jeopardy. The NBA's progressive civil-right issue reputation was then tarnished as stars, such as LeBron James, and executives condemned Morey's tweet and clearly sided with China in hopes to salvage their financial relationship.

It clearly seems that the NBA and other American businesses progressive human rights stances mean nothing when millions of dollars and licensing agreements are on the line.

Do you think it is ethical for American business to put financial gain over their own values when it comes to doing business with China?

https://www.theatlantic.com/ideas/archive/2019/10/nba-china-disaster-stress-test-capitalism/599947/

GM strike reaches tentative agreement

         The strike that began nearly a month ago between GM and the United Auto Workers appears to be coming to a close. Although the agreement has not officially been passed, both sides have commented that there is a tentative agreement going to the National Council, which is comprised of members from both groups. Should they decide to approve of the agreement, then the 50,000 striking workers will return to work.
        Some of the things that the strikers are demanding are higher wages and more benefits. Although that sounds like a fair request, as we saw when we studied unemployment, the higher wages may actually lead to higher levels of unemployment, since GM will be willing to hire fewer workers at those wages. This will probably lead to more unrest amongst the workers that could get laid off because of these agreements.
       For the United States economy as a whole, ending the strike will be beneficial, since the output of the country has fallen slightly over the last month due in part to this strike. It will be interesting to see what the terms of the agreement are once they are publicly released.

https://www.npr.org/2019/10/16/770641235/gm-and-uaw-reach-tentative-agreement-to-end-national-strike

US housing starts fall from a 12-year high

U.S. homebuilding tumbled from a more than a 12-year high in September, but single-family home construction rose for a fourth straight month.  The housing market seems to remain supported by lower mortgage rates even as the economy is slowing. Economists expect a mild rebound in residential investment in the third quarter after it contracted for six straight quarters, the longest such stretch since the 2007-2009 recession. What do you think of the recent decline in the housing market? is it anything that the U.S. needs to worry about in the short term?
https://www.cnbc.com/2019/10/17/us-housing-starts-september-2019.html

In a Strong Economy, Why Are So Many Workers on Strike?

Despite one of the longest bull economies in US history workers across the US are striking. While most industries have been experiencing significant growth, workers' wages have not been keeping up. By 2010 corporate profits had already recovered from 2008 but on average it took 6 years for household wages to recover. Many workers feel as though they have missed out on the gains of the recovery and after. Their frustration stems from the rising gaps become corporate income and that of the worker and strikes are at a high since the 80s. Just last year over 500,000 workers participated in strikes.


https://www.nytimes.com/2019/10/19/business/economy/workers-strike-economy.html

Awfully high chance of global recession in the next 12-18 months, Moody’s chief economist says

Economist believe that their will be a global recession in the next 12-18 months and even if there is not  recession the economy will be much weaker. Eswar Prasad, a professor at Cornell University said that consumer spending has helped economic growth in many countries but is not enough to help reduce the chance of a recession. In the International Monetary Fund’s World Economic Outlook report, the International Monetary Fund forecasted that the global economy will grow 3% this year and 3.4% next year. That is lower than the 3.2% and 3.5% that the International Monetary Fund projected in July. They blamed the subdued growth on the growing geopolitical tensions. Governments should increase spending to support the economy but many major economies won’t go down that route. With the tensions growing between the left and the right over the possible impeachment of Trump, it doesn’t seem very likely that Congress will pass any plans to cut taxes. Should families and businesses start preparing for a recession now, or do they have time to wait?

Officials View Trade Uncertainty as Biggest Global Economic Risk

Finance ministers and central bankers who gathered in Washington for the IMF’s fall meetings in recent days said in interviews and public events that the biggest risks to the global economy are trade-related uncertainties and divisions among nations over how to reduce them. 
Global economic growth has receded this year to its slowest pace since the 2009 recession, the IMF said. The main reason for the uneasiness has been the trade war between the U.S. and China, which the fund estimates to have left a Switzerland-size hole in the global economy. Escalating tariffs between the U.S. and China have disrupted supply chains, reduced investment and rattled financial markets, trimming global output by 0.8%, or about $700 billion, this year and next.

https://www.wsj.com/articles/officials-view-trade-uncertainty-as-biggest-global-economic-risk-11571497200

https://www.cnbc.com/2019/10/16/weekly-mortgage-applications-flat-even-though-refinance-demand-rises.html

In the past week Interest rates for mortgages have been on the rise. That being said applications to refinance a home rose 4% from the last week  and was 199% higher than the same week one year ago while mortgage applications to a purchase a home fell 4% in the same week for the  second week in a row.  As mortgage rates continue to move higher, it is a sign to some investors that the recent lows in bond yields are now over.

GM strike pushed US factory output down 0.5% in September

As a result of he strike from General Motors there was a considerable decline in auto production, This along with other struggles led the US factory output to fall 0.5% in September. The Federal Reserve reported last Tuesday that manufacturing production fell 0.9% over the last 12 months. There was a 4.2% decline in auto production last month and total industrial production slipped 0.4% in September.