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Author Archives: Cliff Jones

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Trump spending spree may speed up the Fed

Who is Jerome Powell? 1. Will the Fed pick up the pace: Everything seems to move faster in the Trump era. Perhaps even the deliberative Federal Reserve. The US central bank has long telegraphed a no-rush attitude about lifting interest rates from historic lows. But the Fed may be forced to pick up the pace over the next two years, in part because of a spending spree by President Trump and Congress — spending aimed at stimulating the already healthy American economy. If the Fed doesn’t raise rates more quickly, it risks falling behind. The $1.5 trillion Republican tax cut, as well as a bipartisan $300 billion spending plan, could overheat the robust labor market. That extra stimulation for the economy will push inflation higher and lead the Fed to raise interest rates four times this year instead of the expected three, Capital Economics chief economist Jonathan Loynes predicted in ... Read More »

10 years after the financial crisis, have we learned anything?

Remembering one of the darkest days in financial history When John Taylor starts remembering the years leading up to the financial crisis, his fury wells up all over again. As president of the nonprofit National Community Reinvestment Coalition, he warned Congress about the predatory and fraudulent lending that was fueling a housing bubble as early as 2000. Lawmakers told the Federal Reserve to write rules that would have put a stop to the worst practices. But the crash came first. “Thinking about it now, I can feel myself being angry about it,” says Taylor, in a soft accent left over from his upbringing in the housing projects of Boston. “Because we fought when we saw these things happening. We brought it to the attention of both Democrats and Republicans. In the end, it took the nation’s economy having to collapse before they felt the need to do something.” The crisis ... Read More »

Europe reveals long list of US exports it could hit

Global business leaders sound off on tariffs The European Union has published a list of hundreds of American products that it could target if President Donald Trump moves forward with new tariffs on imports of steel and aluminum. The list of potential targets for retaliation runs to 10 pages and includes US cigarettes, sweetcorn, ovens, sailboats, lipstick and stainless steel sinks. Europe had previously threatened tariffs on American denim, peanut butter, cranberries, orange juice, bourbon and motorcycles. Those products also appear on the new, expanded list. US exports worth €6.4 billion ($7.9 billion) are in the firing line. That’s equal to the value of steel and aluminum shipped each year from the European Union to the United States. The list is divided into two categories: US products that face immediate retaliation, and others that would be hit if the World Trade Organization rules the US tariffs illegal or three years ... Read More »

The stunning downfall of Bear Stearns and its bridge-playing CEO

Remembering one of the darkest days in financial history Bear Stearns was on fire. And its colorful chairman, Jimmy Cayne, was playing cards. The smallest investment bank on Wall Street had survived the Great Depression, Black Monday and the September 11 terror attacks. But by March 2008, clients and trading partners were bolting the firm because it had made huge bets on what turned out to be toxic mortgages. In the span of just weeks, Bear Stearns would run out of cash. On March 16, 2008, it agreed to a government-backed fire sale, and it was acquired by JPMorgan Chase for the unthinkable price of $2 a share. For Bear, it was the end of an 85-year run as an independent company. The bank would become the first domino to fall in the financial crisis, the worst panic to grip Wall Street since 1929. “We were the smallest firm,” Paul ... Read More »

Interest payments on US debt could top $1 trillion

Watch Trump’s budget director change his tune on deficits Interest payments on US debt could quadruple to an eye-popping $1.05 trillion by 2028 if current policies stay in effect. That would be 3.6% of the entire American economy, according to new estimates from the Committee for a Responsible Federal Budget, a fiscal watchdog group. By contrast, interest payments last year were $263 billion, or 1.4% of gross domestic product. Historically, interest spending has averaged 2% of GDP. CRFB’s estimates assume lawmakers will choose to make permanent the recent tax cuts — many of which are set to expire after 2025. It also assumes Congress extends the two-year increase in spending caps that just passed as well as other expiring legislation. Related: U.S. monthly deficit largest in 6 years Those assumptions are not far-fetched given how difficult it’s been for Republicans and Democrats to negotiate fiscal restraint while also trying to ... Read More »

Despite record profits, banks are playing the victim

Warren: Banking bill risks another bailout It’s taken nearly a decade, but the regulatory pendulum is swinging back in favor of banks. Safeguards designed to prevent another crisis could be removed if the just-passed Senate banking bill becomes law. The legislation, which received support from 17 Democrats, loosens regulations for community banks, regional lenders and mortgage companies. The deregulation push illustrates a role reversal for the banking industry. In the aftermath of the 2008 meltdown, they were villainized. Now they’re casting themselves as the victims of government regulation run amok. But banks aren’t exactly starving. In fact, the industry as a whole has been booming for some time — and that was before the gifts of lower taxes and lighter regulation. America’s banks hauled in $164.8 billion in profit last year, according to the FDIC. Take out the short-term accounting hit because of the tax law and profit looks even ... Read More »

No, Mr. President. The US doesn't have a trade deficit with Canada

Trump is wrong about a trade deficit with Canada President Trump falsely claimed the United States has a trade deficit with Canada, contradicting figures from his own administration. Trump said the inaccurate statement on Wednesday at a fundraiser. The United States has a trade surplus with Canada, according to statistics from the Commerce Department’s Bureau of Economic Analysis, which is a part of the executive branch. A deficit would mean the United States bought more goods and services from Canada than Canada bought from the US. Conversely, a surplus means that Canada bought more goods and services from the United States than the other way around. A deficit or surplus does not mean one country took money from another country, as Trump often portrays the number. Trump doubled down on the claim this morning, tweeting: “We do have a Trade Deficit with Canada, as we do with almost all countries ... Read More »

Trade war would wipe out gains from tax cuts, Penn analysis says

Is the US trade deficit a bad thing? A full-blown trade war would erase any economic benefits from the Republican tax cuts passed last year, according to an analysis by the University of Pennsylvania. The Trump administration is imposing steep tariffs on imported steel and aluminum next week. So far, only Canada and Mexico have officially been given exemptions, and Trump says even those are contingent on progress in NAFTA renegotiation talks. China and the European Union have already said they will retaliate. But Trump administration officials say fears of a trade war are overblown. Most independent economists also don’t see a full-scale trade war as the most likely outcome. The Penn Wharton Budget Model, a research center at the university, imagined the worst case — no US imports or exports crossing borders tariff-free. The United States has free trade agreements with 20 nations. Wharton’s model assumes those all disappear. ... Read More »

For gig economy workers in these states, rights are at risk

5 stunning stats about Uber Should gig economy workers, such as Uber drivers and Taskrabbits, be entitled to the same rights and benefits as regular employees? Currently they aren’t. And many of the online apps and platforms that offer the goods and services these workers provide would like to keep it that way. That frees these companies from having to offer benefits, pay a host of taxes and abide by certain labor laws. Leading the charge is New York-based Handy, an online platform that connects users with home service providers ranging from plumbers to house cleaners. The company has put bills in front of eight state legislaturesthis year that would permanently classify most gig workers as independent contractors. All eight bills have passed at least the house or senate in each state and appear likely to be signed into law soon. Defining gig workers as independent contractors will give platform ... Read More »

Don't applaud the drop in black unemployment just yet

US economy adds 313,000 jobs in February Margaret C. Simms is an economist and institute fellow in the Center on Labor, Human Services, and Population at the Urban Institute, where she directs the Low-Income Working Families initiative. The opinions expressed in this article are her own. At first glance, last week’s jobs report seemed very upbeat. The overall unemployment rate in February stayed at 4.1%, the lowest it’s been in 17 years, according to the Labor Department’s report. And there were other near-record lows: Black unemployment ticked down to 6.9%, just slightly higher than the record hit in December. Particularly noteworthy was the unemployment rate for adult black men, which at 5.9% is one-third of what it was at the height of Great Recession and more than one percentage point lower than it was a year ago. Do the latest figures mean we should stop worrying about the plight of ... Read More »

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