United States Deficit

     As of 9/11/2020, it has been announced that the United States deficit surpassed $3 trillion through August. According to official Treasury data, the deficit is projected to continue to grow to 3.3 trillion by the end of the fiscal year this month. The projection, which confirm estimates from the Congressional Budget Office, show that the Unites States in on pace to see the largest deficit in history. The deficit for the fiscal year is over double the $1.4 trillion record deficit during the financial crisis. Data shows that government spending has surpassed $6 trillion this year, largely due to emergency relief efforts to help the economy during the pandemic. The Congressional Budget Office estimates that the total debt will exceed the size of the entire economy. Economists warn that huge debt can hurt the economy by slowing growth, raising interest rates, and making it harder for the government to spend on priorities.

Should the government be concerned with the increasing deficit, or should it be a secondary problem during the pandemic?

https://thehill.com/policy/finance/516057-us-deficit-officially-hits-3-trillion-amid-pandemic

China Lags in Farm Purchases as Part of Trade Deal

As part of the phase one trade deal with China, China had promised to import $36.6 billion in U.S. agriculture products. In the first half of 2020, China has purchased less than one-fourth of this amount, having purchased $8.7 billion in U.S. agricultural goods. Some people say that there is still time for China to meet its target, especially with soybean and corn harvest right around the corner. The U.S. government is predicting that the coming harvest will be one of our largest soybean and corn harvests to date. Corn itself is estimated to be a record 15.3 billion bushels harvested this fall. With the harvest coming, China has started to shift to U.S. imports on soybeans from Brazilian, who they primarily bought from in the first half of 2020. In fact, China’s soybean imports were up 18% compared to the same period last year, however, more than two-thirds of these soybeans came from Brazil. In Brazil, soybeans hit a record low in March at $16.78 per bag of 60 kilos, prompting China to buy from Brazil rather than the U.S. The quality of the U.S. soybeans will determine how long it takes for China to switch back to Brazil’s soybeans. At the moment, China has booked about 10 million tons of soybeans and 5.7 million tons of corn for shipment in the 2020-2021 marketing year. The start of the marketing year was September 1st, and if the full volume of corn is shipped, this will become the largest U.S. corn volume that China will have imported in a marketing year. Likewise, for soybeans, it will be more than the first six months import amount on soybeans for the U.S. combined.

Do you think China will make up the gap in the trade deal for agricultural products? How is China doing on other parts of the trade deal?

https://www.marketwatch.com/story/china-is-far-behind-farm-purchases-needed-to-fulfill-terms-of-trade-deal-with-us-2020-08-14

Do Jobless Benefits Deter Workers?

 A lot of companies are not receiving applicants. Jeff Aznavorian, the company owner of a metal company in Detroit, is surprised because there should be a lot of people looking for jobs in Detroit. Or so he thought because Michigan's unemployment rate is up to 8.7%. Some believe companies are experiencing these hiring troubles because of the $600 per week benefits for being unemployed. Households are using this money to pay rent, buy groceries, and other things that would be harder to pay for if they had a job.

Do you think the unemployment benefits are discouraging people from searching for a job?

https://www.nytimes.com/2020/09/10/business/economy/unemployment-benefits-hiring.html

"U.S. economy could boom in 2021 like it did in the aftermath of World War II, says Morgan Housel"

 https://www.cnbc.com/2020/09/08/morgan-housel-economy-may-boom-in-2021-like-following-world-war-ii.html

We've seen it before that after a massive crisis the economy booms. Following the influenza pandemic in 1918 and World War II when spending was nearly impossible due to lack of funds and also restrictions by the government, it is likely 2021 may behold an economic boom.  

Vaccine testing is underway and researchers are hopefully nearing a final result. Case numbers are plateauing in many regions that saw the biggest spikes. After unemployment reaching 15% in April, it has finally dropped to 8.4% in August. With people returning to, somewhat, normal work and spending habits there is a light at the end of the 2020 economy tunnel. 

An economic boom is possible, but not guaranteed. 

https://www.ft.com/content/0850c689-2615-4128-85ed-9a89f5c0a82a

Skepticism especially arises regarding the turmoil in Congress.   Millions of Americans are still benefitting from unemployment and the $600 weekly stimulus package has expired. Additionally, many jobs are completely gone. Small businesses have been especially impacted.  Although it builds a healthier economy to weed out the weak businesses, many small businesses did not stand a chance during the pandemic shut down. Financial Times discusses the potential for extreme job loss as many small businesses are on their last legs. 

COVID-19 case numbers are rising in many areas that did not see initial spikes and are expected to rise further throughout the fall with colleges, universities, and other schools opening for the fall semester. This may be a driving factor to the second wave of shutdowns in the United States.

As of now, there is no clear outcome for 2020, but there are many possibilities for what 2021 will hold.

Unemployment Falling Below 10%

This article reflect and gives some insight into the new unemployment numbers that were released on Friday. Based on the article the new unemployment numbers being under 10% is very surprising especially since it fell to 8.4%. Some economist believe the worst is still yet to come with August showing the lowest job growth since the pandemic started. I think we’re still in the stage of people who were let go for the time being now being rehired to go back to work. I also found the use of the term under employment interesting because some people might be counted as employed but they are not up to their prior pandemic hours. I also found this article interesting based on another student's post about "shecession". This article does not break down how unemployment fell based on gender but I know her article mentioned how unemployment effects women more than men. I am still curious if women or men are finding better success early on to getting back to work.

https://www.google.com/amp/s/www.bbc.com/news/amp/business-54029361

Sports Betting and its Potential

 Contrary to popular belief, (legal) sports betting is actually relatively new. Sports betting has been banned in the United States until just recently in 2018. However, the government didn't make it legal in all 50 states, they decided to allow each state to decide on their own whether or not that would allow it. At the time of writing this, 18 states currently allow sports betting. It is estimated that by 2030 almost all states will allow it. Sports in the United states are vital for the success of the economy. Sporting events bring out millions of people every year and help local restaurants, clothing stores and bars do really well. I believe that sports betting will only increase this activity in the future.

Sports betting allows the fan to become super involved in the sport because they have something at stake when the teams are playing. It brings in more fans because for a lot of people out there, just watching sports isn't enough to keep them entertained. Since sports betting in the United States is relatively new, I believe people aren't taking its potential serious enough. 

What do you guys think about sports betting? Do you see it having an impact on the economy like I do?

https://sportshandle.com/future-sports-betting-part-two/

Will financial support from the government lead to inflation?

    Due to the coronavirus outbreak, many people have been negatively affected by the rising unemployment rate since many businesses were forced to shut down because of the stay at home orders. This left many people wondering: how am I going to afford my bills? The U.S. Senate and House of Representatives decided to help its population by releasing a $2 trillion stimulus package known as the CARES Act in late March (Blau, 2020). Despite the financial assistance, there are still citizens who are struggling to make ends meet, posing the question: will there be additional stimulus? As Libby Cantrill, Head of Public Policy at PIMCO, says, "additional stimulus is a question of when not if". She later explains that the 'when' is taking a longer than initially thought and suspects Congress will be discussing the matter when they reconvene in November (Keen, 2020). 

    With the thought of additional stimulus being issued into the economy, some companies and investors are worried about the inflation rate rising since massive amounts of money are being circulated into the economy (Amaro, 2020). On the other hand, other people believe that inflation isn't going to rise because, despite the excessive supply of money going into individual incomes, the demand to use that money is very low and therefore not entering the economy (Jones, 2020). 

Do you think either of these arguments is correct? Is it possible for both of them to be correct? Maybe the rise in the inflation rate will be a delayed effect until the economy stabilizes and the demand to spend money increases.

Links:

Amaro, Silvia. "Investors are dismissing the risk of an inflation spike. Morgan Stanley says that could be a mistake." CNBC, 4 Aug. 2020, www.cnbc.com/2020/08/04/new-stimulus-checks-could-push-up-inflation-morgan-stanley-says.html. Accessed 6 Sept. 2020.

Blau, Steven, et al. "Congress Passes Largest Ever Economic Stimulus Package: Key Provisions Of Cares Act - Update April 2020." JDSUPRA, 27 Mar. 2020, www.jdsupra.com/legalnews/congress-passes-largest-ever-economic-55140/. Accessed 6 Sept. 2020.

Jones, Kathy. "Stimulus = Inflation? Why It May Be Different This Time." Charles Schwab, 13 May 2020, www.schwab.com/resource-center/insights/content/stimulus-inflation-why-it-may-be-different-this-time. Accessed 6 Sept. 2020. 

Keen, Tom, host. "Surveillance: Inflation Outlook with George." The Bloomberg Surveillance, 26 Aug. 2020. Bloomberg, www.bloomberg.com/news/audio/2020-08-26/surveillance-inflation-outlook-with-george-podcast. Accessed 6 Sept. 2020.

Wage Growth: Numbers are not always as they seem.

 America has seen the highest amount of wage growth it has seen in many years, "median weekly earnings increased by more than 10% in the second quarter over the same period last year"(Bloomberg, 2020). How can that be? The reason why it is so high is because the pandemic and the ensuing statewide lock-downs disproportionately affected low income jobs more than higher paying jobs. When you knock out these low paying jobs from the calculations, the results tend to skew high. This is why it is important to examine these news releases about the economy with an extra close eye; the numbers do not really mean anything without proper context. So when these jobs are added back into circulation, the wage growth number is going to go down, and when that happens we have to look at the context as to why it went down.

https://www.bloomberg.com/news/articles/2020-08-31/fed-study-shows-low-income-pandemic-job-losses-skew-wage-growth

US debt will soon exceed size of entire economy

    The US Government is predicted to run the largest budget deficit since 1945. This was the year that World War II ended. The large deficit is due to the different policies that the government has had to implement to help recover the economy from the coronavirus. The federal debt next year is predicted to exceed the size of the entire American economy. The last time this occurred was 1946. Additionally, the debt will reach a new high if it continues on this course.

    To put this into perspective, the annual deficit is projected to hit $3.3 trillion in the budget year, which ends on September 30th. That is about 16% of the US GDP. The federal debt is projected to be 100% of GDP next year. In 2023, it is expected to climb $24.7 trillion, or 107% of GDP. 

    After World War II, the US focused on paying down the federal debt. The debt dropped to 44% of GDP by 1961. This was in part due to the booming economy. We are not in the same circumstances now because the economy is not in a postwar booming phase.

Do you believe the debt will stay on the course to hit $24.7 trillion in 2023, or things will begin to resolve with a reelection this November?

link to article: https://apnews.com/2e22a5f94e414f65429d9f91b7525c49

Covid-19 Vaccine and its Effect on the Global Economy

In a recent CNN Business article, Charles Riley speaks on some of the economic issues that will still be around post vaccine. He mentions four main problems, the first being the vaccine itself and the possible low effective rates. Then the supply issues that could arise from making the vaccine available to everyone else. Another topic he brings up is many people will not take the vaccine. The last is the market, and the boom or bust that biotech and Pharma stocks currently are.

While I agree with most of what Riley says, I think he takes a very pessimistic view of covid-19. While unemployment rates will likely stay high even post vaccine, I think a vaccine will open up a lot of opportunities and boost overall consumer confidence and morale. The current pandemic has been hard on many people and has had very negative effects on the mental health of the world. I think a vaccine will kickstart a reboot in market activity. While I agree there will be issues that arise, I think the economic benefits that arise from the vaccine creation outweigh anything else and is our first step in getting back to normal life. With reports of a possible vaccine approval coming before the election, it will be very interesting to see how the market and overall global economy will react to it. Another thing to watch, with inflation likely rising soon, how drug and pharmaceutical prices react to the vaccine.

https://www.cnn.com/2020/09/06/investing/stocks-week-ahead/index.html

The Impact of Covid'19 on the Global Economy

 A lot of people have been talking about the effects of  Covid'19 on the economy of the United States. I wanted to take a look at how the pandemic has changed the economic activity of the entire world. Looking from a global perspective, it is seen the that this pandemic has led to the deepest global recession in decades, despite government attempts to counter the effects with the help of monetary and fiscal policies. Most countries are expected to fall into recession in 2020, with per capita income decreasing in the largest fraction of countries since 1870. Countries closing down their borders caused a halt in global trade, making products that were once easily found in the market at relatively cheap prices either unavailable, or extremely expensive. Many emerging economies that were already struggling took a huge hit due to the pandemic, and we can see substantial growth downgrades in every region. Keeping this in mind the question that still remains is will countries be able to bounce back after taking such a hit to their economy, and how long will it take for the global economy to start thriving again. Now is the time for global coordination and cooperation, where stronger countries can help weaker ones get back on their feet, enabling a fast and smooth global recovery. 

“The Global Economic Outlook During the COVID-19 Pandemic: A Changed World.” World Bank, www.worldbank.org/en/news/feature/2020/06/08/the-global-economic-outlook-during-the-covid-19-pandemic-a-changed-world. 

What to know about the report on America’s COVID-hit GDP

As we all know, this pandemic has taken a serious hit on our economy; the biggest hit since the Great Depression. "GDP fell at a 32.9% annualized rate, the deepest decline since records began back in 1947. The drop in GDP was more than triple the previous all-time decline of 10% in the second quarter of 1958. The economy contracted at a 5.0% pace in the first quarter. It fell into recession in February." The affect it had and still has on consumer and business spending is devastating. Jason Reed, a finance professor at the University of Notre Dame's Mendoza College of Business says, “right now, the American economy is speeding toward a fiscal cliff. Not only do we need Americans to take serious action preventing the spread of the disease, but we also need Congress to agree on another stimulus package and quickly.” Years of business growth has been wiped out in a matter of months. The economy would be in a much worse situation if it wasn't for the fiscal package of nearly $3 trillion that "offered companies help paying wages and gave millions of unemployed Americans a weekly $600 supplement." Since businesses have opened back up in May, COVID is hitting areas hard and business is slowing again. In the week ending July 11th, 30.2 million Americans were receiving unemployment checks. When will it end?

Mutikani, Lucia. “What to Know about the Report on America's COVID-Hit GDP.” World Economic Forum, 31 July 2020, www.weforum.org/agenda/2020/07/covid-19-coronavirus-usa-united-states-econamy-gdp-decline/.