kampanye Trump mirip kampanye Farage... sesaat setelah sadar ia menang, Farage berubah pikiran seketika, karna amat sadar konsekuensi ekonominya AMAT PARAH bwat INGGRIS (tanpa Skotlandia, n kemungkinan disusul tanpa Irlandia Utara)
... tampaknya TRUMP TIDAK PEDULI ... Trump triumph ... tapi seketika terpilih, seketika itu juga BERUBAH LAH CARA BICARA TRUMP ... gejala awal terjadinya PERUBAHAN MENDASAR bahwa TRUMP KEMUNGKINAN BESAR akan MENAKAR KEMBALI janji2 kampanyenya, termasuk yang EKSTREM KANAN (white only politics)
Republicans claim that when the FBI got a secret court order to spy on former Trump campaign adviser Carter Page during the election, it relied “extensively” on information from a politically motivated British ex-spy who was being funded by Democrats to find dirt on Donald Trump. And it didn't share those political motivations with a secret court that ultimately authorized the surveillance. That's the gist of the declassified memo written by House Republicans, which President Trump agreed Friday to release despite concerns from the FBI and Justice Department that the memo is inaccurate and risks undermining source-gathering methods and ongoing investigations. Here's a quick breakdown of the allegations in the memo and the outstanding questions surrounding it: 1. The dossier funded by Democrats formed “an essential part” of the FBI's application to spy on Trump campaign adviser Carter Page.
Getting a secret court to approve spying on an American citizen is no small thing. It requires an application that former FBI director James B. Comey has said is “thicker than my wrists.” Former FBI agent Asha Rangappa told The Fix that a Foreign Intelligence Surveillance Act application (referred to as “FISA application” in the memo) probably involved a dozen people's insights and intelligence. This memo alleges the dossier put together by Christopher Steele was “an essential part” of that application. Page had been on the FBI's radar at least since 2013, so it would be remarkable if the dossier, which was shared with the FBI in late 2016, was the essential piece of information used for the application. Outstanding questions: Given that this seems to be the key point of the memo — the FBI relying on a politically motivated document to spy on a U.S. citizen — its description of how important the Steele memo was to the FBI's surveillance of Page is vague. How much constitutes “an essential” part of the application? The FBI officials have told my Post colleagues that the memo was far from the only piece of intel it used to get court permission to spy on Page. 2. Senior Justice Department and FBI officials knew Democrats were funding this research but didn't tell the court of the party's role.
When BuzzFeed published this dossier in January 2017, we didn't know who funded Steele's work. We now know Democrats were, indirectly. A conservative publication hired the opposition research group Fusion GPS to get dirt on Trump during the GOP primaries. After Trump won the Republican presidential nomination, the Democratic National Committee and Hillary Clinton's presidential campaign started paying Fusion GPS to continue the research. That's when Fusion GPS hired Steele. This memo alleges that the FBI and top Justice Department officials knew Democrats were funding the dossier but did not share that with the court that approved the original surveillance order or any of the four renewals. (A surveillance order must be renewed every 90 days, with FBI officials having to convince federal judges the warrant is yielding legitimate information relevant to the FBI’s case.) Outstanding questions: Does who funded dossier really matter to the court? The company behind the dossier testified to Congress that Steele’s report isn’t fake, was not politically motivated and did not set out with the intention to smear Trump, least of all to find collusion. 3. The FBI should have terminated a contract with Steele after he spoke with the media.
The rest of the memo attempts to provide corollary evidence that Steele was not a reliable source for the FBI. Here, House Republicans argue that the FBI hired Steele during the campaign as one of its informants and then didn't let him go after he talked to the media — including for a September Yahoo News article. The FBI cut him off only after he disclosed his relationship with the FBI in an Oct. 30 Mother Jones article. The memo also alleges Steele lied to the FBI about talking to Yahoo News and other media outlets more than a month earlier, ostensibly to keep his job: “Steele improperly concealed from and lied to the FBI about those contacts,” the memo reads. More: Steele's numerous encounters with the media violated the cardinal rule of source handling — maintaining confidentiality — and demonstrated that Steele had become a less than reliable source for the FBI. Outstanding question: It's not immediately clear how this affects the information that made its way into the FISA warrant. 4. Steele had his own political bias that the FBI “ignored or concealed.”
Here's another reason Steele's information can't be trusted, House Republicans allege: He had it in for Trump. The memo alleges that Steele told a top Justice Department official he “was desperate that Donald Trump not get elected and was passionate about him not being president.” The memo says that the Justice Department official told the FBI of the “clear evidence of Steele's bias,” but it was “not reflected in any of the Page FISA applications.” Outstanding questions: It's an open question whether Steele's bias matters if the information he provided was sound. Talking about how the FBI got the information is a distraction from what agents found, Jens David Ohlin, a dean at Cornell Law University, told The Fix earlier this week: “Consider an analogy. Say there’s a murder in a small town, and the police aren’t making any progress. In frustration, the family of the victim hires a private investigator who turns up evidence and gives it to the police. What should the police do? Answer: They should act on it if there’s something there.” 5. At least two FBI officials had a clear bias against Trump.
At the very end of the memo, its authors also mention FBI officials Peter Strzok and Lisa Page, who were having an affair and texted frequently about the investigation, including exchanging pro-Clinton texts and expressing anti-Trump sentiments. This memo also alleges the FBI needlessly mentioned former Trump foreign policy adviser George Papadopoulos in its application to spy on Page. Papadopoulos later pleaded guilty to lying to the FBI about his conversations with Russians during the campaign. Outstanding question: Unless House Republicans are alleging the entire FBI was biased against Trump, it's not clear how this affects the FISA application that ultimately let the FBI spy on Page. Strzok was a key member of the team investigating Russian interference in the 2016 election, but he was reassigned after the FBI discovered these texts. Also, the memo arguably undercuts itself when it acknowledges that Papadopoulos was what triggered the FBI investigation, not the Steele dossier. 6. Republicans released this memo because “the public interest in disclosure outweighs any need to protect the information.”
Legal experts, Democrats, intelligence officials and some Republican members of Congress have heavily criticized this memo as needlessly declassifying information to prove a political point. The process this memo went through to get released is highly unusual, former congressional staffers say. The White House pushes back on that characterization by saying “the public interest in disclosure outweighs any need to protect the information.” White House lawyer Donald McGahan wrote that in a letter attached to the memo. Outstanding question: The memo has yet to answer why Trump's handpicked head of the FBI disagrees.
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THE NATION: Asked at the close of the Constitutional Convention of 1787 if the delegates had created a republic or a monarchy, Benjamin Franklin is reported to have replied: “A republic, if you can keep it.”
Paul Ryan has abandoned the effort to keep it.
At the heart of the US Constitution is a system of checks and balances that was established primarily to guard against the concentration of power in an executive branch that might tend toward royalism. The founders of the American experiment wanted to prevent a repeat of the monarchical abuses of King George III, against which their constituents had risen in revolution.
“The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, selfappointed, or elective, may justly be pronounced the very definition of tyranny,” warned James Madison, the essential author of the Constitution, who explained, “The great security against a gradual concentration of the several powers in the same department, consists in giving to those who administer each department the necessary constitutional means and personal motives to resist encroachments of the others.”
What Madison asserted in the late 1780s remains true to this day: For the system of checks and balances to function, the leaders charged with responsibility for the various branches of government must zealously defend the authority of the branches they lead. They cannot allow one branch to become the extension of another.
This is the basic duty that House Speaker Paul Ryan rejected when he chose to make the legislative chamber subservient to President Trump’s lawless executive branch. Ryan’s abandonment of the Constitution began long ago. But it culminated with the speaker’s decision to support Friday’s release of a partisan memo produced by disgraced House Permanent Select Committee on Intelligence chair Devin Nunes (R-CA) to discredit law-enforcement agencies that have organized and supported inquiries into Trump campaign and Trump administration wrongdoing.
“Discrediting law enforcement is the memo’s transparent purpose and why it has been embraced by President Trump,” argued a Washington Post editorial that condemned Ryan’s choice. “Written mainly by the staff of Devin Nunes (R-CA), the loose-cannon chairman of the House Permanent Select Committee on Intelligence, the memo reportedly makes the case that the FBI abused spying authorities as it sought permission to surveil a former Trump adviser,” noted the Post. “The Justice Department called its potential release, which Mr. Trump reportedly intends to approve, ‘extraordinarily reckless.’ The FBI released its own startling public statement citing ‘grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy.’ Adam Schiff (D-CA), the ranking Democrat on the Intelligence Committee, wrote in a Post op-ed that the Nunes memo ‘cherry-picks facts, ignores others and smears the FBI and the Justice Department.’”
The Post’s editorial appeared just before the release of the memo. But the concerns it expressed were confirmed by the document, which makes over-the-top and highly speculative allegations about how the inquiry into the Trump team’s Russia ties has been conducted, and especially about how FISA warrants were obtained, but fails to present an even minimally credible case that the inquiry is unnecessary or inappropriate.
That memo is so thin in content and character that it adds weight to the argument made by the Post with a headline that read: “Paul Ryan is tarnishing the House.”
The speaker’s embrace of Nunes and his memo has dishonored the chamber that he, above all others, is duty bound to defend.
But that is the least of the sins against the American experiment committed by Ryan in collaboration with Nunes. Illinois Congressman Mike Quigley, a key Democrat on the Intelligence Committee, aptly describes Ryan and Nunes as “co-conspirators” in doing the bidding of a president who has “freaked out” over special counsel Robert Mueller’s investigation into Russian meddling in the 2016 presidential election.
Nunes is a secondary figure, whom Quigley appropriately dismisses as nothing more than an agent for Trump.
Ryan’s dereliction of duty is the more serious matter, as it betrays the most fundamental tenets of the Constitution. When the speaker chose to facilitate this bungling effort by Nunes to smear the Federal Bureau of Investigation and the Department of Justice on Trump’s behalf, the Wisconsin Republican signaled a willingness to make the House of Representatives an appendage of the White House.
In so doing, Ryan abandoned the solemn oath he swore “to support and defend the Constitution of the United States against all enemies, foreign and domestic…”
Paul Ryan is not supporting the Constitution. He is shredding it. It is grotesque for the speaker to claim that he is aiding and abetting Nunes because “that brings us accountability, that brings us transparency, that helps us clean up any problem we have with [the Justice Department] and FBI”—as Ryan did Thursday in a crudely defensive and wildly dishonest attempt to deny his true intentions.
Make no mistake: Paul Ryan has zero interest in accountability, transparency or cleaning up problems with law-enforcement agencies and the investigative process. He has shown no interest in legitimate and necessary oversight of intelligence agencies. He has never been identified with the cause of civil liberties or with the defense of privacy rights.
What Paul Ryan has been identified with is extreme partisanship and with the determination of congressional Republicans to defend Donald Trump—even if that defense comes at the cost of a system of checks and balances that was established 231 years ago to guard against precisely the abuses that are now occurring.
John Nichols is The Nation’s national-affairs correspondent. He is the author of Horsemen of the Trumpocalypse: A Field Guide to the Most Dangerous People in America, from Nation Books, and co-author, with Robert W. McChesney, of People Get Ready: The Fight Against a Jobless Economy and a Citizenless Democracy.
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marketwatch: Alan Greenspan, who warned of “irrational exuberance” during the dot-com bubble of the 1990s, said Wednesday that Wall Street is in another bubble. Two, in fact.
“There are two bubbles: We have a stock market bubble, and we have a bond market bubble.”
“At the end of the day, the bond market bubble will eventually be the critical issue,” the former Fed chairman said in an interview with Bloomberg TV.
“For the short term it’s not too bad,” Greenspan said. “But we’re working, obviously, toward a major increase in long-term interest rates, and that has a very important impact, as you know, on the whole structure of the economy.”
Greenspan, who led the Fed from 1987 to 2006, cited the growing federal deficit as the reason behind the bond bubble, and said he worries that raising interest rates too quickly will fuel inflation.
“We are dealing with a fiscally unstable long-term outlook in which inflation will take hold,” he said. “In fact I was very much surprised that in the State of the Union message yesterday all those new initiatives were not funded and I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.”
Add meager productivity growth and a falling dollar, and “we are working our way towards stagflation,” he said.
Earlier Wednesday, the Fed said it expected inflation to rise to about 2% this year, hinting that it will likely raise interest rates at its next meeting in March.
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post-gazette: During my morning run last Thursday, I couldn’t get out of my mind the image of Donald Trump and the Republican Congress members standing outside Wednesday in their thousand-dollar suits and thousand-dollar ties, with their thousand-dollar smiles — glad-handing and applauding one another for their passage of a tax reform bill.
They all seemed to feel so good about themselves and the tremendous accomplishment they had just achieved for the American people, some even emboldened enough to speculate on what they would “fix” next — Social Security, the Affordable Care Act, welfare reform, any or all of the so-called entitlement programs that could use their magic touch that was so deftly applied to our tax laws.
However, it is an absolute disgrace that while the president and the Republican Congress are congratulating themselves in Washington, historic fires continue to burn in California, tens of thousands of our fellow citizens in Puerto Rico are still without power, people in Houston and Florida are still living in tents following epic hurricanes, and the average life expectancy of our citizens declined for the second year in a row, due primarily to the opioid crisis. All of Congress is apparently too preoccupied with tax reform to address life-and-death struggles of their constituents.
Time will tell if the tax reform legislation passed last week will be the catalyst for unprecedented prosperity for the middle class, but in the interim, can our dysfunctional government please come together to address the myriad of humanitarian crises that continue to plague the good citizens of this great country?
DAVID HOLLIFIELD
Findlay
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Kabar24.com, JAKARTA - Industri majalah dewasa melambungkan Hugh Hefner di dunia. Ia disebut-sebut membantu mengantarkan revolusi seksual tahun 1960-an dengan majalah pria yang inovatif dalam hal melangkahi tabu, terutama di dunia timur.
Hefner membangun kerajaan bisnis di seputar gaya hidupnya yang libert, dan akhirnya meninggal, Rabu pada usia 91 tahun.
Keterangan kematian Hefner itu disampaikan pihak Playboy Enterprises.
Hefner, yang pernah disebut "nabi hedonisme pop" oleh majalah Time, meninggal dengan damai di rumahnya, Playboy Enterprises mengatakan dalam sebuah pernyataan.
Hefner kadang-kadang disebut sebagai Pan Peter yang terlalu banyak waktu. Dia menyimpan 7 harem berambut pirang muda di Mansion Playboy legendarisnya.
Hal itu dicatat dalam "The Girls Next Door," sebuah reality show TV yang ditayangkan mulai tahun 2005 sampai 2010.
Dia mengatakan bahwa berkat obat penghambat impotensi Viagra dia terus menjalankan libido ke usia 80-an.
"Saya tidak akan pernah tua," kata Hefner dalam sebuah wawancara CNN saat berusia 82 tahun.
"Tetap muda adalah apa adanya bagi saya. Berpegang pada anak laki-laki itu dan lama sekali saya memutuskan bahwa usia benar-benar tidak masalah dan selama para wanita ... merasakan hal yang sama, tidak masalah dengan saya, " ujarnya.
Hefner agak telat saat menjadikan Crystal Harris, yang berusia 60 tahun lebih muda, sebagai istri ketiganya pada tahun 2012. Saat itu Hefner telah berusia 86 tahun.
Dia mengatakan bahwa gaya hidupnya mungkin merupakan reaksi atas kehidupannya di tengah keluarga yang tertekan dan jarang merasakan kasih sayang.
Masa kecilnya yang tak menyenangkan menyebabkan perusahaan multijuta dolar Hefner berpusat pada wanita telanjang sekaligus mendukung filosofi Playboy Hefner atas romantisme, gaya dan ikatan adat istiadat.
Filosofi itu mewujud di pesta-pesta legendaris di rumah-rumah mewahnya - pertama di kampung asalnya Chicago, kemudian di lingkungan eksklusif Holmby Hills di Los Angeles - tempat serombongan selebriti pria berkerumun untuk bergaul dengan para wanita muda cantik.
Sumber : Reuters
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marketwatch: As the Federal Reserve prepares to begin paring the size of its $4.5 trillion balance sheet next month, analysts at Deutsche Bank this week warned that what they have dubbed the “great central bank unwind” is one of several candidates for creating the next financial crisis.
“When looking for the next financial crisis, it’s hard to escape from the fact that we’re seemingly in the early stages of the ‘great unwind’ of global monetary stimulus at the same time as global debt remains at all-time highs following an increase over the past decade—at the government level at least—which has been unparalleled in peacetime history,” wrote strategists led by Jim Reid in an 88-page study entitled, “The Next Financial Crisis.”
The wide-ranging report examines other potential sparks for the next financial cataclysm, including political turmoil in Italy, a potential “China crisis,” the rise of populism and the impact of Britain’s formal exit from the European Union.
As for the unwind, the Fed, as expected, formally announced it would begin the slow wind-down of its balance sheet in October. The balance sheet grew to gigantic proportions as a result of an aggressive asset-buying program designed to push down long-term interest rates, push investors into riskier assets, spur investment and underpin a then-crisis-stricken economy.
The Fed ended its bond-buying in 2014, but maintained the size of its balance sheet by reinvesting proceeds as Treasurys and mortgage-backed securities matured. Now, the Fed is prepared to slowly let those assets work themselves off the balance sheet—a prospect that has done little to unsettle the markets.
But the Deutsche Bank strategists wondered if investors have simply become blasé about the size of central-bank balance sheets and the scope of the effective money printing the so-called quantitative-easing programs have entailed. The ECB continues to add assets to its balance sheet, a process that is expected to downshift next year. The Bank of Japan is also engaged in extraordinary stimulus efforts and the Bank of England maintains a hefty asset portfolio as a result of its own earlier QE initiative.
“You slowly become anchored to believe the current situation is normal as it’s persisted for so long now,” they wrote. “However it’s anything but normal. Since the financial crisis, $10 trillion plus has been added to the balance sheets of the four largest central banks with over $14 trillion of assets now owned.”
The analysts pointed to the charts below, showing the real adjusted balance-sheet size of the four largest developed market central banks through history.
The analysts argue that it’s more than a monetary phenomenon. Throwing in the cumulative government budget deficits of the U.S., U.K., Japan and the eurozone since the 2008, they come up with total combined QE and fiscal-stimulus sum of $34 trillion.
“In the end, $34 trillion of stimulus and QE has delivered only very low growth, subdued inflation and sky-high asset prices around the globe,” they wrote. “This is unprecedented territory and how can anyone estimate what the fallout will be when we normalize again?”
Indeed, Fed skeptics question how central banks can undo stimulus without creating headwinds for financial markets. If the goal of QE was to drive up bond prices and drive down long-term yields, why wouldn’t an unwind put upward pressure on yields. Bond prices and yields move in opposite directions. Observers who believe that low yields offered investors desperate for returns no choice but to pile into stocks and other assets perceived as risky wonder whether the market is due for a comeuppance.
They argue that the rise in global equities, which has seen the S&P 500 SPX, -0.14%advance around 270% over the course of the bull market that began in 2009, can be attributed in part to QE.
Others question whether QE had a lasting effect on yields and asset prices. They argue that the bulk of the gains in the stock market in recent years can be attributed to low interest rates, slow but steady growth and strong corporate profits. Also, the size of the balance sheet has shrunk relative to the economy and total debt.
The Deutsche Bank strategists, meanwhile, argue that aggressive money printing by major central banks has “obviously” been a response to the huge rise in the debt burden since the financial crisis. Government debt has continued to climb but yields have fallen due to QE.
As a result, the ratio of Group of Seven government debt to gross domestic product is now at a peacetime peak, while interest rates within the past year have hit multi-century, all-time lows. In fact, both base rates and long-term yields across a swath of the world have fallen into negative territory.
The strategists argue that when thinking about the possible causes of the next financial crisis, it would pay to consider “that we are at a unique point in time with regards to the relationship between debt, interest rates and central bank balance sheets,” they wrote.
That means the unwind of QE is a “journey into the unknown and history would suggest there will be substantial consequences of the move especially given the elevated level of many global asset prices,” the strategists said.
Even if the unwind stalls or the economy unexpectedly weakens “we will still be left with an unprecedented global situation and one which makes finance inherently unstable even if we are currently living in the lowest volatility markets on record.”
This article was originally published on Sept. 20.
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bloomberg: Beneath the tranquil surface of U.S. credit markets, bearish winds are blowing. Issuer and sector-specific risks are increasing while the pile of debt trading at distressed levels is rising -- evidence the post-crisis debt bull-run is peaking.
That’s the alarm sounded by Wall Street arch-bears Morgan Stanley after a deep dive into the shifting credit landscape in recent months, which they reckon vindicates a long-standing call that junk premiums aren’t compensating investors for the risks.
One warning sign: The face-value of high-yield debt trading at distressed levels has risen by about $30 billion from March to mid-September.
Morgan Stanley
Another: The dispersion between credit spreads -- the degree to which bonds are priced according to issuer and sector-specific risks -- is slowly rising. That underscores increasing credit concerns that are masked at the index level, as cheap liquidity and low volatility cap risk premiums for companies with stronger balance sheets, according to Morgan Stanley.
Morgan Stanley
Money managers are grappling with an uptick in operational and balance-sheet challenges late in the business cycle, with debt-laden Toys ’R Us Inc. the latest retailer to file for bankruptcy this week, catching bond markets off guard.
"Companies with the weakest fundamentals often show problems first late in a cycle, and the retail sector has many such examples," said Adam Richmond, Morgan Stanley’s chief credit strategist.
"Investors initially treat those issues as idiosyncratic, and then the problems spread, when credit conditions begin to tighten,” he said. “That is how the late cycle can transition to end of cycle."
These risks are hard to see at the index level, with the Bloomberg Barclays U.S. high-yield benchmark up almost 7 percent this year, led by CCC-rated names. Still, the latter has underperformed the broader market over the past two months, suggesting investors are increasingly compelled to price-in deteriorating fundamentals -- reminiscent of a market in its late winter, according to the U.S. lender.
Some 119 speculative-grade U.S. bonds currently trade below 80 cents on the dollar -- one rough rule of thumb to denote distressed junk names -- compared with 23 obligations in early March, according to Bloomberg data.
"Dispersion in 2015 and 2016 was higher in-line with markets that were more volatile as well there being a strong sectoral component to the selloff, i.e. commodity-sensitive sectors," wrote Vishwas Patkar, credit analyst at the U.S. bank. "This time around, it is notable that we are seeing dispersion rise even though spread levels are very tight -- and there isn’t really a one sector story."
Tighter financial conditions will eventually pave the way for higher defaults and wider spreads, suggesting investors should favor higher-quality companies, the bank concludes.
"The market is penalizing weak companies across different sectors,” Patkar added. "This is, we believe, yet another late-cycle indicator."
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By Kimberly Amadeo
Updated September 18, 2017
Definition: The debt ceiling is a limit that Congress imposes on how much debt the federal government can carry at any given time. When the ceiling is reached, the U.S. Treasury Department cannot issue any more Treasury bills, bonds or notes. It can only pay bills as it receives tax revenues. If the revenue isn't enough, the Treasury Secretary must choose between paying federal employee salaries, Social Security benefits or the interest on the national debt.
The nation's debt limit is similar to the limit your credit card company places on your spending. But there's one significant difference. Congress is in charge of both its spending and the debt limit. It already knows how much it will add to the debt when it approves that year's budget deficit. When it refuses increase the debt limit, it's saying it wants to spend but not pay its bills. That's like your credit card company allowing you to spend above its limit and then refusing to pay the stores for your purchases.
Congress imposes the debt ceiling on the statutory debt limit. That's the outstanding debt in U.S. Treasury notes after adjustments. The adjustments include unamortized discounts, old debt and guaranteed debt. It also includes debt held by the Federal Financing Bank. The statutory debt limit is just a little less than the total outstanding U.S. debt recorded by the national debt clock.
The U.S. debt consists of two types of debt. The first is what the government owes to itself. Most of that is the Social Security Trust Fund and federal employee retirement funds.The debt that's owed to everyone else is the public debt. It's 70 percent of the total debt.
Current Status
On September 8, 2017, President Trump signed a bill increasing the debt ceiling to December 8, 2017.
Later that day, the debt exceeded $20 billion for the first time in U.S. history.
The bill also approved $15.25 billion in relief funds for the victims of Hurricane Harvey and Hurricane Irma. It included an extension of government spending to December 8 as well. Without a debt ceiling increase, the U.S. Treasury does not have enough to disburse the funds to FEMA. (Source: "Trump Signs Debt Limit Suspension Tied to $15 Billion Storm Aid," Bloomberg, September 8, 2017.)
On September 6, 2017, Trump and Congressional Democratic leaders agreed to raise the debt ceiling until mid-December. Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Paul Ryan, R-Wis., wanted to raise the ceiling without any restrictions. (Source: "Trump Agrees to Raise Debt Ceiling Until December," Politico, September 6, 2017.)
That means Congress must approve a new debt ceiling and create a new budget by December 8. That will create a situation like the 2012 fiscal cliff crisis. (Source: "Congress Must Raise Debt Ceiling While Approving Harvey Aid," CNN Money, September 3, 2017.)
The House Freedom Caucus was furious. It wanted to impose a $1.5 trillion restriction. That would be enough to get the government through the 2018 midterm election.
It also wanted guarantees that the administration would cut the debt before allowing a ceiling increase. These include spending cuts and an assurance that debt repayment is the highest priority. (Source: "GOP Clash Looms Over Raising Debt Ceiling," Politico, August 3, 2017. "Freedom Caucus Eyeing $1.5 Trillion Debt Ceiling Increase," Politico, June 13, 2017.)
Congress needed to raise the ceiling before October 3, 2017. Otherwise, the federal government would have defaulted on 25 percent of its bills for that month. Congress suspended the debt ceiling on November 2, 2015, when it passed the Bipartisan Budget Act of 2015, Pub. L. 114-74. It remained suspended until March 15, 2017. That means the Treasury Department cannot allow the statutory debt limit to go one penny higher than the $19.808 trillion it was on that day.
(Source: "The Debt Ceiling Deadline Has Passed," Zero Hedge, March 17, 2017.)
Since March 2017, the Treasury has been raiding federal pension funds to keep from issuing new debt. It will run out of these extraordinary measures in early September. It can use incoming tax receipts to stay afloat until the October 3 cutoff date.
Debt Ceiling 2015
On February 11, 2014, House Speaker John Boehner passed a bill to suspend the debt ceiling until March 15, 2015. The debt ceiling would automatically become the level of the debt at that point in time. The bill approved without any attachments, riders or insistence that Obamacare be defunded. He didn't have 218 Republican votes to do so. Instead, he passed it with 193 Democrats and 28 Republicans.
Tea party Republicans in the House called it a "...complete capitulation on the Speaker's part and demonstrates that he has lost the ability to lead the House of Representatives." They and Senator Ted Cruz were the only ones who thought the threat of a debt default was a useful tool to force the government to cut spending. But there weren't enough of them to wield this ax. (Source: "Boehner Says House to Pass Clean Debt Limit Hike," Fox News, February 22, 2014.)
On March 15, 2015, the nation reached the debt ceiling of $18.113 trillion. In response, the Treasury Secretary stopped issuing new debt. He took extraordinary measures to keep the debt from exceeding the limit. For example, he stopped payments to federal employee retirement funds. He also sold investments held by those funds. He kept the debt under the limit until Congress passed the Budget Act on November 15. (Source: “Report on Fund Operations and Status,” Department of the Treasury, January 29, 2016. "Meet the New Debt Ceiling," CNN Money, March 17, 2015.)
Debt Ceiling History
Congress created the debt ceiling in the Second Liberty Bond Act of 1917. It allowed the Treasury Department to issue Liberty bonds so the U.S. could finance its World War I military expenses. These longer-term bonds had lower interest payments than the short-term bills Treasury used before the Act. Congress now had the ability to control overall government spending for the first time. Before that, it had only issued authorization for specific debt, such as the Panama Canal or other short-term notes. (Source: “The Debt Limit: History and Recent Increases,” CRS Report for Congress, 2008.)
This is no longer necessary. In 1974, Congress created the budget process that allows it to control spending. That's why Congress usually raises the debt ceiling. When the budget process works smoothly, both houses of Congress and the President have already agreed on how much the government will spend. There's no need for a debt ceiling. It merely allows the government to borrow money to pay the bills it has already approved. (Source: "1974 Budget Control Act," University of California Berkeley.)
Elected officials have a lot of pressure to increase the annual U.S. budget deficit. Increases in the budget pushes the national debt higher and higher. That's because there is not much incentive for politicians to curb government spending. They get re-elected for creating programs that benefit their constituency and their donors. They also stay in office if they cut taxes. Deficit spending does, in general, create economic growth.
When the Debt Ceiling Matters
Congress must raise the debt ceiling so the United States doesn't default on its debt. That usually isn't a problem. In fact, during the last 10 years, Congress increased the debt ceiling 10 times. It raised it four times in 2008 and 2009 alone. If you look at the debt ceiling history, you'll see that Congress usually thinks nothing of raising it.
The debt ceiling only matters when the president and Congress can't agree on fiscal policy. That occurred in 1985, 1995-1996, 2002, 2003, 2011 and 2013. It's a last resort to get attention by the non-majority in Congress. They might have felt slighted by the budget process.
For example, in January, 2013, Congress threatened not to raise the debt ceiling to force the federal government to cut spending in the Fiscal Year 2013 budget. Its position was that one dollar of spending should be cut for every dollar the debt ceiling was raised. President Obama replied he would not negotiate since the debt was incurred to pay bills that Congress already approved. Fortunately, better-than-expected revenues meant the debt ceiling debate was postponed until the fall. (Source: “Debt Ceiling Postponed,” Atlanta Blackstar, January 23, 2013.)
On September 25, 2013, Lew first warned that the nation would reach the debt ceiling on October 17. Many Republicans said they would only raise the ceiling if funding for Obamacare were taken out of the FY 2014 budget. At first, it looked like Boehner would pass a debt ceiling override without them. He didn’t want Republicans to be blamed for another fiasco like the 2011 debt crisis. Then he changed his mind.
On October 1, 2013, the government to shut down because Congress hadn't approved the funding bill. The Senate wouldn't approve a bill that defunded Obamacare. The House wouldn't approve a bill that funded it. Boehner announced he wouldn't raise the debt ceiling unless Democrats agreed to negotiate cuts in mandatory programs, such as Medicare, Medicaid and Obamacare. President Obama wouldn't negotiate a budget until the House approved a funding bill and raised the debt ceiling. At the last minute, the Senate and House agreed upon a deal to reopen the government and raise the debt ceiling. For more, see Government Shutdown.
On October 17, 2013, Congress agreed to a deal that would let Treasury issue debt until February 7, 2014. If it hadn't, the United States would have defaulted on its debt for the first time in its history.
The debt ceiling and government spending can also become a concern if the debt to gross domestic product ratio gets too high. According to the International Monetary Fund, that level is 77 percent for developed countries. When debt to GDP ratio rises too high, debt owners become concerned that a country can't generate enough revenue to pay the debt back.
What Happens If the Debt Ceiling Isn't Raised?
As the debt approaches the ceiling, Treasury can stop issuing notes, and borrow from its retirement funds. These funds exclude Social Security and Medicare. It can withdraw around $800 billion it keeps at the Federal Reserve bank.
Once the debt ceiling is reached, Treasury cannot auction new notes. It must rely on incoming revenue to pay ongoing federal government expenses. That happened in 1996 when Treasury announced it could not send out Social Security checks. Competing federal regulations make it unclear how Treasury could decide which bills to pay and which to delay. Foreign owners would get concerned that they may not get paid. See What Is the U.S. Debt to China?
If Treasury did default on its interest payments, three things would happen. First, the federal government could no longer make its monthly payments. Employees would be furloughed and pension payments wouldn't go out. All those receiving Social Security, Medicare and Medicaid payments would go without. Federal buildings and services would close.
Second, the yields of Treasury notes sold on the secondary market would rise. That would create higher interest rates. This would increase the cost of doing business and buying a home. It would slow down economic growth.
Third, owners of U.S. Treasurys would dump their holdings. That would cause the dollar to plummet. The dollar’s drastic decline could eliminate its status as the world's reserve currency. The standard of living in America would decline. In this situation, the United States would find itself unable to repay its debt.
For all these reasons, Congress shouldn't monkey around with raising the debt ceiling. If members are concerned about government spending, they should get serious about adopting a more conservative fiscal policy long before the debt ceiling needs to be raised.
What Happens When the Debt Ceiling Is Raised?
Continuing to raise the debt ceiling is how America wound up with a $19 trillion debt. The debt ceiling has become a joke. It has become more like a speed limit sign that is never enforced. In the short-term, there are positive consequences to raising the debt ceiling. America continues to pay its bills. Consequently, it has avoided a total debt crisis.
The long-term consequences are severe. That's because the paper-thin debt ceiling is apparently the only restraint on out-of-control government spending. A 2017 survey found that 57 percent of Americans said Congress should not raise the debt ceiling. Only 20 percent said it should be raised. But they don't want their taxes raised or their services cut. (Source: "Morning Consult National Tracking Poll #170604, " Morning Consult/POLITICO, June 19, 2017.)
"Many people seem to want to cut down the forest but to keep the trees," according to Humphrey Taylor, Chairman of Pollster Harris Interactive. The majority of those interviewed don't want to see cuts to health care, Social Security and education. Health care and Social Security are two of the largest budget items. They do want to see cuts in foreign aid which is one of the smallest budget items. They also want to see cuts to overseas defense spending which is one of the largest budget areas. They are saying "Cut programs that send my tax dollars overseas, and keep programs that help me personally."
The debt ceiling is good in that it creates a crisis that focuses national attention on the debt. Raising it is a necessary consequence of management by crisis.
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Paris, Nov 23, 2016 (AFP)
Donald Trump's election in the United States and a surge in far-right groups in Europe have led to a fierce debate among historians and commentators about the parallels between the current decade and the 1930s.
Some believe that drawing a comparison with a catastrophic decade that culminated in World War II is alarmist, underlining that populist movements emerging now are fundamentally different.
Others warn that the political reaction visible across Western democracies stems from the same sense of anger and bitterness documented in the 1930s, warning that the lessons of history should not be ignored.
Here are 10 quotes from leading commentators on the subject:
"It will be as exciting as the 1930s, greater than the (president Ronald) Reagan revolution -- conservatives, plus populists, in an economic nationalist movement."
- President-elect Donald Trump's chief strategist Steve Bannon in an interview with The Hollywood Reporter, November 19
"Modern populism lacks the level of violence and the anti-democratic character it had in the 1930s."
- British historian Richard Overy, author of "The Morbid Age", to AFP, November 17
"I never really understood how fascism could have come to Europe, but I think I understand better now."
- New York Times editorialist David Brooks in a column entitled "Are We On The Path To National Ruin?", July 12.
"A look at the polls in Austria and Germany -- Austria and Germany -- cannot fail to evoke unpleasant memories for those familiar with the 1930s, even more so for those who watched directly, as I did as a child."
- American political theorist and historian Noam Chomsky, talking to the truth-out.org website, November 14.
"We are not in the 1930s. We are not being crushed between the monolithic alternatives of fascism and communism."
- Antony Beevor in an article called "This is no rerun of the Thirties -- but the world is changing at terrifying pace", The Daily Telegraph, November 11.
"We are starting to understand since Trump that it is not just the wild dream of a few intellectuals saying 'watch out, fascism is coming back'."
- French historian Pascal Blanchard, author of "The 1930s are back: A little history lesson to understand the current crisis", to AFP, November 16
"The populism is different to the 1930s but of course it has echoes of it."
- Ian Kershaw, author of "To Hell and Back", a history of Europe from 1914-49, to AFP, October 15.
"Comparisons with the 1930s are fatuous... Nonetheless, it is clear that an exclusive, often ethnically-based, form of nationalism is on the march."
- The Economist article on nationalism, November 19
"Democracy often brings fascists to power, it did so to Germany in the 1930s."
- British historian Simon Schama, November 9, BBC radio
"In the work of preserving civilisation, nine-tenths of the job is to understand the past and stress its most obvious lessons. Now would be a good time to re-remember the 30s."
- Pulitzer-winning columnist Brett Stevens in a piece titled "The Return of the 1930s", The Wall Street Journal, March 7
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<org idsrc="isin" value="US6501111073">THE NEW YORK TIMES COMPANY</org>
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news.com.au: DONALD Trump has long cultivated an aura of unadulterated success, but those who scratch beneath the surface find a different story.
While the former reality television star is adept at captivating an audience, he has left a string of failures behind him, including six bankrupt businesses.
Economists are afraid he could do the same to the US economy — and there would be no coming back.
The President-elect campaigned on a platform of cutting taxes and increasing spending, and no one is quite sure where the savings would come from.
It could leave America buried under an even greater mountain of debt by the time his four-year term is over.
One of the first things Mr Trump plans to do after his inauguration in January is lower the corporate tax cap from 35 per cent to 15 per cent. In the short-term, this is likely to be a good thing, according to Tom Switzer from the US Studies Centre.
“Given the Republicans have control of the House of Representatives and the Senate, it’s more likely to pass and stimulate the economy,” Mr Switzer told news.com.au.
“That’s probably why Wall Street rallied [following the initial hit to the market after Mr Trump’s election]. He’s shown that, at least in the short-term, he’s pro-growth.
“But where’s he going to get the money for tax cuts and to increase spending, notably on infrastructure? He may face more deficit problems in four years.”
GAME OF RISK
In 1991, the Trump Taj Mahal in Atlantic City was nearly $US3 billion in debt when it filed for bankruptcy, and Mr Trump gave up half his stake in the casino and selling his yacht and airline.
A year later, the Trump Plaza Hotel in New York filed for bankruptcy while $US550 million in debt, with the real estate mogul giving up a 49 per cent share but remained a figurehead CEO. Another casino, Trump Castle, also went bankrupt along with the Trump Plaza Hotel and Casino in Atlantic City, which was $US250 million in debt.
In 2004, Trump Hotels and Casinos Resorts, which includes the Taj Mahal, Trump Marina and Trump Plaza casinos in Atlantic City, filed for bankruptcy with an estimated $US1.8 billion in debt. The President-elect reduced his share in the company from 47 to 27 per cent and it was renamed Trump Entertainment Resorts, before it again went bankrupt in 2009 after a missed $US53.1 million bond interest payment during the global financial crisis. Mr Trump resigned as chairman and reduced his stake to 10 per cent.
Early this month the Trump International Hotel & Tower Toronto went bust, just four years after Mr Trump and his children cut the ribbon at its opening. He is not the developer or even an investor, but was paid for his name and management team.
As he and his children said in a CBS 60 Minutes interview on Monday, none of that matters any more. Some believe his bid for the presidency is simply his latest hubristic plan to gild his name and image.
TRILLIONS IN DEBT
Global markets were thrown into disarray after the election result was announced, but recovered surprisingly quickly following Mr Trump’s conciliatory victory speech.
Traders around the world will be waiting to see whether the new president will carry out the campaign promises economists estimated would increase national debt by trillions of dollars.
Not only has he promised corporate tax cuts, he wants to reduce the top income tax bracket from 40 per cent to 33 per cent. The President-elect claimed the cuts will pay for themselves by eliminating some deductions and credits, but both left-of-centre Tax Policy Center and the right-of-centre Tax Foundation say this is nowhere near true, and the scheme would cost $US9 trillion in revenue over the first decade. The question, then, is where he will find the money to carry out his plan to both cut tax and raise government spending.
The Wall Street Journal’s economics blog reported that he would make savings with large tax cuts from repealing Barack Obama’s signature Affordable Care Act and slashing discretionary spending, but has promised far greater increases in spending on defence, veterans’ programs and childcare.
THE WHEELER AND DEALER PRESIDENT
The United States’ debt already stands at 75 per cent of gross domestic product. The only “advanced economies” with higher debt are Italy, Japan, and Portugal, according to the International Monetary Fund.
History has already shown us what happens when a president follows such a strategy, according to Daniel Altman, an adjunct associate professor of economics at New York University’s Stern School of Business, writing in Foreign Policy.
Ronald Reagan and George W. Bush both spent heavily on the military while drastically cutting income tax, each leaving the nation in such great debt their successors were forced to raise taxes back up again.
But Mr Trump’s greatest hurdle could come from within his own party. “There is fear in the global markets, the global economy is showing signs of contraction and there could be a recession,” said Switzer. “Republicans could disagree more with Trump on spending than the Democrats.
“He changed political parties five times. He’s an erratic character, he’s not bound by ideology. He’s a pragmatic wheeler and dealer, he could be very loose with the strings.”
If Mr Trump and Congress do approve big cuts and spending to drive growth, it could lead to the debt becoming unsustainable, causing a “deficit crisis”, says Switzer.
“The Federal Reserve will likely put the brake on Trump via interest rates,” he said.
But the Treasury has already refinanced the nation’s debt at low interest rates so there are limits to what it can do, Altman writes in Foreign Policy. “If he stays true to his record in business, another bankruptcy could be on the horizon.”
The question is whether the billionaire businessman would stick around to watch his greatest vanity project implode.
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Donald Trump’s movement has often been compared to that of a rightwing European party. Now, his union with Europe’s right is official. At a rally on Wednesday Trump presented himself as America’s Nigel Farage, holding the former Ukip leader up as his populist, nationalist twin.
Make it a long-lost twin for Trump, who when first asked for an opinion on whether Britain should leave the European Union appeared to be unfamiliar with the referendum in question. Fast-forward to the day after the referendum, though, and Trump would boast he had predicted the British exit from the EU all along. Earlier this month he rebranded himself “Mr Brexit” in a tweet; and now he’s getting even more explicit about what promise he sees in the tale of British secession.
“On 23 June, the people of Britain voted to declare their independence – which is what we’re looking to do also, folks! – from international government,” Trump told his audience in Jackson, Mississippi.
Jackson is a place where the memory of the Confederacy is still fresh, and as such a curious one in which to be touting a second independence day, of sorts. But such white nationalist fervour seemed to play well with the overwhelmingly white crowd assembled in the largely black city on Wednesday night.
The architects of Brexit like to frame the vote as a righteous backlash against powerful elites. As Farage put it on Wednesday: “You can beat the pollsters. You can beat the commentators … Anything is possible if enough decent people are prepared to stand up against the establishment.”
According to this oft trotted-out framing, Trump’s reviled Washington establishment is a parallel for Farage’s European Commission. But the hyper-focus on anti-elitism obscures the far less righteous xenophobia, racism and anti-immigrant sentiment that were also elements of the leave campaign.
Such uninspiring qualities are the core of Trump’s movement too, and that was apparent in no small number of crowd-pleasing lines. “Why do our leaders spend so much more time talking about how to help people [who are] here illegally than they spend trying to help American citizens?” Trump asked. “The media ignores the plight of Americans who have lost their children to illegal immigrants, but spends day after day pushing for amnesty for those here in violation of the law.”
The bigotry of Trump’s campaign is, if anything, more extreme. While leave campaign leaders such as Boris Johnson would at least distance themselves from the anti-immigrant rhetoric espoused by Farage and others, Trump has embraced it. And even Farage himself has suggested that some of Trump’s anti-Muslim rhetoric goes too far.
Trump has long harnessed America’s wave of white nationalism. But with the encouragement of his campaign’s new chief executive, Stephen Bannon(previously an outspoken Brexit cheerleader at the rightwing Breitbart news website), he has now harnessed something else. Namely, he’s enlisted Farage to help him airbrush bigotry from his message in much the same way Farage did with Brexit.
It’s telling that in the wake of Brexit’s victory Farage has, rather than assuming a position of leadership, found himself stoking populist flames elsewhere. And it underscores another unspoken parallel with Trump: trafficking in the politics of anger – not governance – is what he does best. If Trump wins in November, expect more of the same.
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Meski Bank Sentral Amerika Serikat (the Fed) belum menurunkan maupun menaikkan suku bunga acuannya, namun pemerintah Indonesia telah menyiapkan beberapa upaya antisipatif agar perekonomian Indonesia tetap berada pada jalur positif.
Hal tersebut diungkapkan oleh Menteri Keuangan (Menkeu) Sri Mulyani di Kantor Kementerian Koordinator Bidang Perekonomian, Jakarta, Selasa (8/11/2016).
Sri Mulyani mengatakan, pada prinsipnya pemerintah memandang ketidakpastian yang berasal dari luar negeri telah diantisipasi dengan pengelolaan perekonomian nasional.
"Tentu kita pasti dari sisi pengelolaan perekonomian akan melihat semua sektor dari sisi sumber-sumber ekonomi, apakah ini akan mempengaruhi sisi ekspor impor, dan itu juga akan mempengaruhi kepada nilai tukar," kata dia.
Tidak hanya itu, mantan Direktur Bank Dunia ini menyebutkan, pemerintah akan menetralisir dan memperkuat sumber-sumber perekonomian nasional. Sedangkan dari sektor keuangan atau perbankan, Sri Mulyani meyakini regulator dalam hal ini Bank Indonesia dan Otoritas Jasa Keuangan (OJK) telah berkoordinasi untuk melihat kemampuan ekonomi nasional dari neraca jikalau terjadi sentimen dari luar negeri.
"Dari sisi ekonomi riil, ekonomi Indonesia kemarin pertumbuhan ekonominya relatif cukup baik, yang dianggap titik-titik untuk diperbaiki belanja pemerintah, karena kuartal 3 dilakukan penyesuaian pada APBN, tapi itu secara seasonal, tapi pada kuartal IV akan ternetralisir," tambahnya.
Upaya yang dilakukan pemerintah untuk menjaga perekonomian dari sentimen negatif luar negeri juga akan disisir dari sektor ekspor dan impor. Menurut Sri Mulyani, dua sektor tersebut masih relatif baik sekaligus mampu menetralisir dampak yang ditimbulkan dari kebijakan Bank Sentral AS.
"Dari sisi lainnya perdagangan kita punya cadangan walaupun ekspornya negatif tapi kita masih bisa masih dikompensasi dari PMA, maupun yang mereka masuk melalui Surat berharga negara, itu bisa mengurangi sentimen negatif," tandasnya.
Supercharging the bluster, hyperbole and media mastery that made him one of the world's best-known businessmen, Donald Trump upended U.S. democratic traditions on a 17-month quest he hopes will lead to the White House.
From his grand Trump Tower escalator entrance into the Republican presidential race on June 16, 2015, Trump managed to be simultaneously charismatic and combative, elitist and populist, lewd and pious as he drilled into a lode of polarity and anti-Washington anger among American voters.
In Tuesday's election against Democrat Hillary Clinton, Trump is making his first run for public office. Trump called it a movement, not a campaign.
He drew enthusiastic crowds to rallies where people cheered him for "just saying what everybody's thinking." Critics labeled him misogynistic, ill-informed, uncouth, unpresidential, a racist, a hypocrite, a demagogue and a sexual predator, all accusations he denied.
It took Trump, 70, little more than 10 months to vanquish 16 other candidates and become the first major party nominee since General Dwight Eisenhower in the 1950s to have no government experience. He drew a record number of votes in primary contests but in so doing created a rift in the party.
Then he squared off against Clinton, 69, in a race marked by controversies that included upheaval in his staff, charges he had groped women, and his claim, never supported, that Clinton and the media had rigged the election against him.
He shocked many by saying he might not accept the election result if he lost, repudiating a U.S. tradition of peaceful government transition. He said that as president he would investigate Clinton for her use of email while secretary of state. He vowed to send her to jail.
His campaign took a scandalous turn in October with the release of a 2005 video in which Trump, unaware he was being recorded, told a television entertainment reporter that he liked to kiss women without invitation and that, because he was rich and famous, he could "grab them" by the genitals without recriminations.
Trump dismissed the remarks as "locker room talk" and denied the subsequent accusations from more than 10 women who said he had groped them or made unwanted sexual advances.
GLOOM OVER AMERICA
Throughout his campaign - and especially in his Republican convention speech in July - Trump described a dark America that had been knocked to its knees by China, Mexico, Russia and Islamic State. The American dream was dead, he said, smothered by malevolent business interests and corrupt politicians, and he said he alone could revive it.
Trump said he would make America great again through the force of his personality, negotiating skill and business acumen. He offered vague plans to win economic concessions from China, to build a wall on the southern U.S. border to keep out undocumented immigrants and to make Mexico pay for it. He vowed to repeal Obamacare while being the "greatest jobs president that God ever created" and has proposed refusing entry to the United States of people from war-torn Middle Eastern nations, a modified version of an earlier proposed ban on Muslims.
Trump promoted himself as the ultimate success story. He dated beautiful women, married three of them, had his own television reality show and erected skyscrapers that bore his name in big gold letters. Everything in his life was the greatest, the hugest, the classiest, the most successful, he said, even though critics assailed his experiences with bankruptcies, the failures of his Atlantic City, New Jersey, casinos and what they viewed as the misplaced pride he showed when presented with evidence he avoided paying taxes.
Trump had flirted with presidential runs in the past and some initially saw his campaign as a vanity project meant to indulge his ego and burnish his brand. It was expected to be short-lived but as the election season progressed, he became the front-runner, winning state nominating contests despite an unconventional campaign that relied on large-scale rallies and mostly ignored grass-roots work.
His hired advisers came to realize there was only so much they could do to rein him in. His inner circle was dominated by his three oldest children - Donald Jr., Eric and Ivanka, along with Ivanka's husband, Jared Kushner.
TWEET ATTACKS
The rise of Trump, once a registered Democrat, threatened to blow up the Republican Party. Its establishment challenged his commitment to their tenets and organized against him. Prominent Republicans - including former presidents George H.W. Bush and George W. Bush and congressional leaders - shunned him or offered lukewarm support.
Trump used Twitter as a weapon, firing off insults and mockery at those who offended him, including "Crooked Hillary" and Republican rivals "Little Marco" Rubio, Jeb "Low Energy" Bush and "Lyin' Ted" Cruz.
Another target was the family of a Muslim U.S. Army captain who died fighting in Iraq after the soldier's father had spoken against Trump at the Democratic National Convention. Trump sniped back for days despite advice to move on.
As of late October, the New York Times had counted 282 people and things he had insulted on Twitter since declaring his candidacy.
The Trump candidacy was brimming with contradictions. The candidate who vowed to bring back jobs to the United States had his clothing line and campaign hats manufactured in foreign countries. The man who decried the corrupting power of money in politics boasted of having bought influence himself.
Undocumented workers had been used on his building projects but as a candidate Trump vowed to ship illegal immigrants out of the country. He said no one respected women more than he did but even before the groping accusations emerged, he was branded a misogynist for making fun of the appearance of rival candidate Carly Fiorina and an apparent reference to the menstrual cycle of Fox News' Megyn Kelly.
"YOU'RE FIRED!"
Trump's campaign trail demeanor seemed to draw from his experiences as host of "The Apprentice," a reality TV show where he barked a crowd-pleasing "You're fired!" at contestants who fell short in competitions.
His speeches were often unscripted and featured boasts on everything from his money to his IQ. He peppered them with dubiously sourced declarations, misperceptions and false statements.
He suggested that gun rights activists could act to stop Clinton from nominating liberal U.S. Supreme Court justices, a remark the Clinton campaign called dangerous.
Trump boasted of a fortune he put at $10 billion, although in September Forbes magazine estimated it at $3.7 billion, making him the 156th richest American.
Trump regularly made comments that would have doomed a more conventional candidate, such as when he said his supporters were so loyal that he could shoot someone on 5th Avenue in New York and not lose a single vote.
In May he would draw accusations of racism for questioning the impartiality of a judge - born in the United States to Mexican immigrants - who was hearing a lawsuit against him.
No other candidate referred to the size of his genitals during a debate. He was flattered when Russian President Vladimir Putin called him a “brilliant and talented leader.”
Trump mocked Senator John McCain, the Republicans’ presidential candidate in 2008, for having been captured during the Vietnam War and said he wanted to punch a protester in the face at a Trump rally.
DIFFICULT CHILD
Trump was born to money on June 14, 1946, in the New York City borough of Queens, the fourth of five children of Fred Trump, who would become one of the city's biggest developers and landlords, and his wife. It was Fred Trump who taught Donald the value of self-promotion and a killer instinct.
By his own admission, Trump was not an easy child and in the eighth grade his parents sent him to the New York Military Academy in hopes of instilling needed discipline. Through student and medical deferments during the Vietnam War, Trump would never serve in the U.S. military but said the school gave him "more training militarily than a lot of the guys that go into the military."
After graduating from the University of Pennsylvania, Trump went to work for his father's company, which focused on the outer New York City boroughs of Queens, Brooklyn and Staten Island and owned an estimated 15,000 apartments. In 1973 the Trumps were charged with racial bias in their rental practices before reaching a settlement with the U.S. government.
With a $1 million loan from his father, Trump eventually went into business himself in Manhattan, where he became a regular at some of the city's most exclusive clubs and developed a reputation as a ladies' man.
TRUMP TOWER FLAGSHIP
He soon made his mark with a series of real estate and development deals, including redoing an old hotel at New York's Grand Central Terminal. In 1983 he opened his flagship, 58-story Trump Tower, which serves as both his primary residence and Trump Organization headquarters.
More projects around the world would follow, including golf courses, the Mar-a-Lago private resort in Florida, New York's venerable Plaza Hotel and casinos.
Trump's projects had mixed success. The flops included the real estate-oriented Trump University, Trump Mortgage, Trump Airlines and Trump Vodka but it was his experience with four casinos in Atlantic City, New Jersey, that took the golden luster off his empire.
Timothy O'Brien, author of "TrumpNation: The Art of Being the Donald," wrote that in the 1990s Trump was out of money and twice had to go to his siblings for loans. A former employee said the Trump Organization would have shut down if the family had not come through but Trump disputed that in his 1997 book "Trump: The Art of the Comeback."
While he never filed for personal bankruptcy, the downturn in the gaming industry sent parts of Trump's corporate empire to bankruptcy court in 1991, 1992, 2004 and 2009. In the 2009 bankruptcy, the unsecured creditors received less than a penny on the dollar for their claim. Trump resigned as chairman four days before the filing.
(Writing and reporting by Bill Trott in Washington; Additional reporting by Diane Craft; Editing by Howard Goller)
"Crazy" vs. "Dishonest"? Candidate images from both sides
YouGov asked Republican and Democratic voters to describe the presidential candidates in one word
Follow @YouGovUS on twitter and stay up to date with the latest news and results
The images of several leading presidential candidates this year seem set in stone, at least among those in the other political party. Those negative assessments – held by voters in the other party – are clear and perhaps unalterable. In the latest Economist/YouGov Poll (conducted just before Super Tuesday), voters were asked to give a one-word assessment of the remaining candidates running for president.
The negatives are obvious – many voters don’t trust former Secretary of State Hillary Clinton, Vermont Senator Bernie Sanders is seen as a socialist, and Republican frontrunner Donald Trump, praised by many for “telling it like it is,” is also rebuked by many for his behavior.
The vast majority of Republican primary voters see Clinton exactly the same way – calling her a “liar.”
As seen in the word cloud, if a Republican primary voters didn’t use the world “liar” to describe Clinton, nearly all used words that mean the same thing.
That reflects other findings in the poll and recent campaign discussion. Only 9% of Republican voters had a favorable opinion of Clinton, and only 5% said she was honest and trustworthy. Former GOP nominee Mitt Romney, in a speech denouncing Trump this week, said that “A person so untrustworthy and dishonest as Hillary Clinton must not become president.” In that same speech, Romney called Trump a “con man and a fake.”
Given that extreme dislike for Clinton as a person, it may not be a surprise that given the choice, three times as many Republican primary voters favored Sanders over Clinton for the nomination in that poll (though half didn’t favor either). But Sanders has the quality Republican voters think Clinton lacks: the perception of honesty. Nearly half of GOP voters regard Sanders as honest and trustworthy. And while 73% would be “upset” if Clinton won the nomination, less than half would be “upset” if Sanders did.
However, most Republican voters still don’t like Sanders. He has his own negative – and it is ideological. Just as nearly all the bad things Republican voters say about Clinton focus on honesty, the words that Republican primary voters use for Sanders are “socialist” and even “communist.” Even though he is the oldest candidate in the field (Sanders is 74 years old), just a small number say “old.”
Lindsay Graham, who left the GOP presidential race last year, said in a January radio interview that “dishonesty beats crazy,” and that may summarize how opponents view the two party’s frontrunners. Graham’s full quote is: “Dishonest — which is Hillary Clinton in the eyes of the American people — beats crazy,” he said. “I think Donald Trump’s domestic and foreign policy is gibberish.”
Democratic primary voters seem to agree with Graham’s characterization. They also have reacted to the variety of Trump statements attacking Mexicans, Muslims and the confusion over whether or not he would accept an endorsement from a leader of the Ku Klux Klan.
While a little of their opponents’ negative characterizations shows up in the words a candidate’s own partisans use to describe them, positive assessments dominate, as each of these three get highly favorable assessments from their own party’s voters. Clinton is seen as qualified and experienced, Sanders as honest, and Trump as strong and a winner.
the street: Editor's note: This story was originally published in October. As Republican presidential nominee Donald Trump will appear in a town hall in New York tonight, it's worth taking another look at what the U.S. economy may look like under a President Trump. Also, check out our Donald Trump Stock Portfolio, which we'll be tracking until November 8. The sections below on immigration, taxes and trade have been updated.
There's no denying Trump has done a good job of making himself rich -- he's worth somewhere between $4.5 billion and $10 billion, depending who you ask. Can he make the rest of America rich, too?
The economy isn't something Trump looks forward to tackling. In a January interview with "Good Morning America," Trump offered up a bleak assessment of the U.S. economy but added that, in terms of fixing it, it's a task he'd rather skip.
"We're in a bubble," he said. "And, frankly, if there's going to be a bubble popping, I hope they pop before I become president because I don't want to inherit all this stuff. I'd rather it be the day before rather than the day after, I will tell you that."
In an April interview with the Washington Post, Trump reiterated his doomsday view of the economy, suggesting we might be headed for recession. But this time around, he appeared more open to the idea of his being in charge of finding remedies. "I can fix it. I can fix it pretty quickly," he said. And most recently, he maligned the Federal Reserve for creating what he says is a "false economy."
Many Americans appear to believe that is the case and that, more broadly, a Trump presidency would be good for the economy. According to a March CNBC All-America Survey, Americans rate Trump and Democratic frontrunner Hillary Clinton evenly on key economic issues. And a recent CNN/ORC poll shows Trump rating higher than Clinton on the economy among voters.
Trump has certainly been this election cycle's most riveting figure. He initially focused his attention on immigration reform, calling for a wall to be built between Mexico and the United States and demanding the deportation of 11 million undocumented immigrants. He has wavered on that last point as of late.
Trump has made plenty of enemies along the way as well, including but limited to fellow GOP contenders Ted Cruz and Jeb Bush, New York Mayor Bill de Blasio, Fox News journalist Megyn Kelly, the media in general and even the Pope.
Those who fear Trump's plans should find common cause with those who love them: "I'm not sure how much of what he actually says today will be his positions a year from now," said Michael Busler, professor of finance at Stockton University.
Trump's own campaign has suggested he is playing "a part" to garner votes.
While Trump certainly has some grandiose ideas -- and equally lofty rhetoric to accompany them -- deciphering the exact nature of his economic policies is a complex task, according to John Hudak, a fellow in governance studies at Washington, D.C.-based think tank the Brookings Institution.
Not to mention the fact that if he does make it to the Oval Office, Trump won't have a free pass from Congress, even if it remains under the control of the Republican Party (as you'll see, many of his positions don't exactly hew closely to GOP policies).
Taking legislative hurdles out of the equation, what will the U.S. economy and markets look like if Trump becomes No. 45.
The American Action Forum, a right-leaning policy institute based in Washington D.C., estimates that immediately and fully enforcing current immigration law, as Trump has suggested, would cost the federal government from $400 billion to $600 billion. It would shrink the labor force by 11 million workers, reduce the real GDP by $1.6 trillion and take 20 years to complete (Trump has said he could do it in 18 months).
"It will harm the U.S. economy," said Doug Holtz-Eakin, president of the American Action Forum and chief economic policy adviser to Sen. John McCain's 2008 presidential campaign. "Immigration is an enormous source of economic vitality."
The impact would be felt on both supply and demand.
A number of industries that depend heavily on cheap immigrant labor would be devastated -- especially agriculture. "There would be an abrupt drop in farm income and a sharp rise in food prices," said John McLaren, professor of economics at the University of Virginia with expertise in international trade, economic development and the political economy.
Companies that sell to the immigrant population would be affected as well, leading to decreased revenues for local businesses and a loss of American jobs.
"Immigrants, whether they are legal or illegal, always spend a portion of their earnings in the location where they have their jobs," McLaren said. "And in a lot of our urban centers, this is actually an important part of the economy."
He pointed to the case of Postville, Iowa, where in 2008 U.S. Immigration and Customs Enforcement (ICE) raided a slaughterhouse and meat packing plant, detaining 389 undocumented workers (and jailing 300 of them). The raid caused most of the more than 1,000 immigrants not caught to leave the town of 2,300, devastating the local economy in the process.
He also noted his own research, which suggests each immigrant creates 1.2 local jobs for local workers, most of which go to U.S. natives. "Obviously, those jobs would disappear if the undocumented were just yanked away," he said.
It is worth noting that Trump appears to have backed away from his mass deportation stance slightly as of late, outlining priorities that would lead to the deportation of what The Washington Post estimates would be 5 million to 6.5 million immigrants. He has warned, however, that "anyone who has entered the United States illegally is subject to deportation."
Trump has also discussed reducing the number of jobs held by legal immigrants, namely by increasing the prevailing wage requirements for H-1B visas (visas that allow U.S. employers to recruit and employ foreign professionals) -- an element of his plan that is often overlooked. The Republican contender's thesis is that doing so would force companies to give jobs to domestic employees instead of overseas workers. The maneuver would benefit some, but not most.
"If I'm an American software programmer, I probably would benefit somewhat from making it harder for highly-skilled software programmers from elsewhere," McClaren said. "It's really hard to argue that the country, as a whole, benefits from that. It would be bad for most Americans, and it certainly would be bad for corporations."
An extreme anti-immigration policy could also cause collateral damage to the American image. "What's the American brand after we've rounded up 11 million people and sent them packing?" said Jim Pethokoukis, a columnist and blogger at the American Enterprise Institute, a center-right think tank based on Washington, D.C. "Do people still view America the same way?"
Trump's tax plan, unveiled in September, is perhaps the most detailed proposal he has put forth yet. It essentially entails implementing tax cuts across the board and literally sets forth a scenario in which the lowest earners get to send a form to the IRS reading, "I win."
"His tax plan is one of the most dynamic and pro-growth tax plans out there," said Merrill Matthews, resident scholar at the Institute for Policy Innovation, a Texas-based, right-leaning think tank. "You would find a huge amount of new business investment and companies willing to put their money out there to begin growing the economy."
Trump's tax plan stacks up fairly well against his fellow Republican presidential contenders. It isn't as drastic as proposals put forth by Ted Cruz and Ben Carson but does, like most GOP tax structures, favor the rich. Perhaps the biggest distinguishing feature of Trump's proposal is his hard cap on business taxes at 15%, which might be especially appealing to freelancers and the self-employed.
But there's a catch: Trump's tax plan would reduce revenue enormously, and the federal budget deficit would almost inevitably skyrocket.
Nonpartisan tax research group the Tax Foundation calculates that Trump's plan would cut taxes by $11.98 trillion over the course of a decade. It would lead to 11% growth in the GDP, 6.5% higher wages and 29% larger capital stock as well as 5.3 million jobs. However, it would also reduce tax revenues by $10.14 trillion, even when accounting for economic growth from increases in the supply of labor and capital.
"That tax cut would produce faster economic growth and a bigger economy -- as long as you pay zero attention to the fact that it would dramatically increase the deficit and budget debt," said Pethokoukis.
Trump in August adjusted his platform, calling for a top income tax rate of 33% rather than a past plan for 25% as well as the full expensing of capital investment and a deduction for childcare costs. The Tax Foundation notes that the change will reduce the revenue loss from his original plan, but it will depend significantly on how wide the new bracket thresholds are.
Trump has promised to reduce spending, though he hasn't explicitly said how. Moreover, he has said he will maintain entitlement programs like Social Security and Medicare, two of the costliest parts of the federal budget.
"It reduces federal revenue by maybe a quarter. You can construct the United States at 75% revenue, but you have to have a plan for how you'd get there," said Alan Cole, an economist with the Center for Federal Tax Policy at the Tax Foundation, a non-partisan research think tank, based in Washington, D.C. "If there weren't any spending cuts that materialized, you would see the deficit widen substantially the moment the plan was enacted."
In the face of such an enormous deficit, creditors might begin demanding higher interest rates on U.S. bonds, and the markets would be spooked.
"I can't imagine markets would react well to it. I can't imagine global investors looking to relocate will look on a United States that is driving deliberately over a fiscal cliff," said Holtz-Eakin. "Sending the U.S. into a debt spiral where you're borrowing interest on previous borrowing will generate a market reaction that will be far from benign and that will, I think, in the end overwhelm the beneficial effects."
Of course, just because Trump hasn't yet explained how he will cut spending doesn't mean he won't. "It's not unusual for a politician to say, 'I'm going to cut spending,' and not give specifics," Matthews said.
Changing Views on Health Care
In his 2000 book, The America We Deserve, Trump touted universal health care and laid out an ideology on the subject that, frankly, looks pretty un-Republican. On the campaign trail, he has promised to "take care of everyone." But his campaign health care plan, released in March, sings a different tune.
The Trump camp finally outlined some of the details of his vision for health care reform in America after months of leaving voters to put together the pieces on his ideas about the issue. The seven-point plan calls for the repeal of Obamacare, the allowance of purchases of health insurance across state lines and block-grant Medicaid to states, among other things.
"This strikes me as a mixture of what is mostly Republican orthodoxy...with a couple of oddball proposals," said Roger Feldman, professor of health policy and management at the University of Minnesota. One of the unique aspects of the plan: allowing consumers to re-import drugs from overseas.
At a February town hall event hosted by CNN, Trump was critical of Obamacare, noting that "rates are going up 25, 35, 45, 55 percent," and emphasized that he is not receiving campaign money from insurance or pharmaceutical companies "so I can do what's right."
"I don't think [Trump's health care proposal] is based on economic analysis, I think it's based on channeling a populist dislike of insurance executives," said Feldman in an October interview. "If he really tried to do the things he said he would do the insurance industry would be in the crosshairs."
The ability for consumers to buy their health insurance in other states is perhaps the health-related proposal Trump has discussed most on the campaign trail. The idea is not new -- such a bill was introduced in Congress a decade ago -- but it is impactful.
When pressed for detail on his plan at the February 25 Republican debate hosted by CNN, Trump focused on the state lines issue, repeating on a handful of occasions his proposal to get rid of "the lines" around each state "so we can have real competition."
"You get rid of the lines, it brings in competition," he said. "So, instead of having one insurance company taking care of New York, or Texas, you'll have many. They'll compete, and it'll be a beautiful thing."
"I think it could be a potentially significant improvement in insurance," Feldman, who in 2011 co-authored a paper on consumer response to a national marketplace for individual health insurance, said. "It would do that by allowing people to buy insurance in states with fewer regulations, and that would, in turn, cause a restructuring of the health insurance industry."
Based on a pre-Obamacare baseline, Feldman and other researchers concluded such a system would result in seven million more people being insured by opening up the insurance markets to more competition.
Of course, not everyone agrees.
"It doesn't actually achieve you much," said Matthews, pointing out that a policy in another state may not translate to access to the network of physicians and pre-negotiated prices locally-purchased policies often afford. "It's not a bad idea, but it is no panacea."
Too Tough on Trade?
Trump likes to talk trade. And while has said he is a "free trader," he has also clarified he doesn't like the deals the U.S. has done, such as NAFTA and the Trans-Pacific Partnership. The Art of the Deal author has promised to negotiate better agreements.
"One of the things that's often lost is that [Trump] has a strong business background, he understands how commerce works," Hudak said. "He has more business training than any American president we've ever had."
But the ramifications of some of Trump's proposals might be less than ideal.
Take China, one of his top talking points. He has proposed negotiating with the country to prevent it from manipulating its currency and keeping it too low for American manufacturers -- and workers -- from competing.
"The reality is that when China devalues its currency, the goods that they produce become cheaper, and as a result, while we may lose some manufacturing jobs, the rest of the population gets to buy things a lot cheaper than they would if the products were made [in the U.S.]," said Busler. "The jobs he would bring back are yesterday's jobs."
In November, Trump released his full plan for U.S.-China trade reform, in which he pledged to immediately declare it a "currency manipulator," force it to uphold intellectual property laws and end its "illegal export subsidies and lax labor and environmental standards," among other measures, in order to help American manufacturers -- and workers -- compete.
Trump has also pinpointed imposing tariffs on imported goods, for example, suggesting a 35% tax on automakers that manufacture cars in Mexico. Such a maneuver might bring jobs back stateside, but it might not. Instead, it could just mean people paying more for what they're buying.
"If he puts 35% taxes on products, the manufacturing will still not come back to the U.S., and all it will mean is U.S. consumers have to pay 35% more for the products that are made outside the country," said Busler.
"American consumers would end up paying more for things, and that hurts the economy if you're putting tariffs on those other things," said Matthews.
The Trump Effect
Trump's brand has contributed an enormous amount to his net worth -- he says more than $3 billion. But how will that Trumpiness translate to the White House? Perhaps not well.
"That off-the-cuff, gruff, tell-it-like-it-is approach that Donald Trump has may be great for headlines and a stadium full for supporters, but what unguarded comments like that from a president do is make dramatic fluctuations in the world economy, in stock markets in the United States and in the world," said Hudak. "Think about how much the market reaction is to the choice of two or three words from the Federal Reserve chairman."
The words chosen by American officials can have serious economic repercussions, and the country -- and the world -- have equally high expectations for their commercial and diplomatic capabilities. The blunt way of speaking that has made Trump so popular among Republican voters could be detrimental once he's in the Oval Office.
"His brand of rhetoric would actually make for profound economic instability," Hudak said. In an October interview with The Hill, Trump warned of a looming recession and stock market bubble and targeted Federal Reserve Chairwoman Janet Yellen in his comments. "She's keeping the economy going, barely," he said. Such comments coming from a presidential candidate are one thing -- coming from the president of the United States they would be another.
But Trump is a smart guy, and may be able to adjust. Matthews pointed to the Clinton administration, which took a few months to settle in.
"You wonder if the Trump administration would be the same until they got things under control, or got him under control," he said.
Not everyone agrees.
"I think Donald Trump is good for the Republican Party, and I think he's good for the country," Busler said. "Donald Trump is not afraid to face the public and raise his voice, even if it is politically unpopular."
bloomberg: Former U.S. Treasury Secretary Lawrence Summers called for a $2.5 trillion infrastructure investment program over 10 years to energize the American economy and help it exit from “secular stagnation.”
Speaking to a Sydney conference via live video on Tuesday, Summers cited one of his favorite examples in reiterating his call for new U.S. infrastructure. He got a large show of hands after asking how many in the Australian audience had been to New York’s Kennedy airport. He then asked how many thought the U.S. should be “really proud” of that airport as a gateway to America’s greatest city. The response: no hands, and a lot of laughter.
“It is a no-brainer,” Summers said. “Because of what it means for job creation and demand in the short run; because of what it means for economic capacity in the medium run; because of what the growth means for the financial health of the government.” He highlighted historically low funding costs, "very low" materials costs and the employment needs of non-college-educated males in his call
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The Bill
Asked what it would take to get out of secular stagnation, where trend economic growth rates have been reduced, Summers nominated 1 percent of gross domestic product a year for a decade as "a reasonable target to do something substantial with infrastructure investment” that would have a meaningful impact. He said he didn’t think it would be a problem for the country’s fiscal health, representing “about $2.5 trillion over 10 years.”
“Infrastructure investment as a share of GDP is lower than it’s been any time since 1947, and if you look at federal infrastructure investment, net of depreciation, net investment, it is rounded to the nearest integer: equal to zero,” he said.
In a question-and-answer session with a moderator at the Citigroup Inc. investment conference, Summers’s comments included:
While government debt is high, it’s serviceability is “extraordinarily low,” thanks to current interest-rate levels;
Substantial parts of Europe -- particularly Germany -- should join the U.S. in investing in buildings, roads, bridges and the like;
The Trans Pacific Partnership trade deal could still be passed;
The Federal Reserve should avoid raising interest rates.
On the U.S. presidential election, Summers said it now looked highly unlikely that Donald Trump would win, and criticized the Republican’s platform.
“I had never supposed that populism personified by Juan Peron in Argentina or many other Latin American leaders would be successfully exported from Latin America to the United States,” said Summers, who served with Trump’s opponent, Democratic candidate Hillary Clinton, in the Obama administration. “And I think it’s very dangerous.”
On the TPP, Summers said President Barack Obama “is very determined, and it is a mistake I think to count him out given he’s been successful at accomplishing things like universal health care that many people thought were impossible.”
cnbc.com: The notoriously bearish Marc Faber is doubling down on his dire market view.
The editor and publisher of the Gloom, Boom & Doom Report said Monday on CNBC's "Trading Nation" that stocks are likely to endure a gut-wrenching drop that would rival the greatest crashes in stock market history.
"I think we can easily give back five years of capital gains, which would take the market down to around 1,100," Faber said, referring to a level 50 percent below Monday's closing on the S&P 500.
In fact, stocks would need to fall by at least that much in order for some of Faber's calls to be proven correct. In October 2009, when the S&P was trading near 1,100, Faber said on Indian CNBC-TV18 that U.S. and Indian stocks were "very overbought" and "the gravy's out" on the rally.
Since then, Faber has generally only become more and more bearish as stocks have climbed. And on Monday, as Faber made his latest crash call, the S&P 500 touched an all-time high of 2,185.44.
When pressed on what could cause the decline he predicts, Faber responded that "you never know exactly why this will happen," adding that he believes the market's gains are unsustainable.
"The fact is, the market hasn't really been driven by genuine buying, but by stock buybacks, takeovers and acquisitions, and market leadership has been narrowing. It's not that many stocks that have been making new highs. It's quite a narrow growth of stocks that have been very strong," he said.
In fact, market breadth has broadened substantially, and as of Monday's close, 48 percent of the stocks within the S&P 500 have made 52-week highs within the past three months; 6 percent made 1-year highs on Monday alone.
Even though markets have been incredibly quiescent of late, Faber warns that "the excess liquidity that have been generated by central banks will lead to a great deal of volatility."
And turning an eye to personal history, Faber said that "I've seen, repeatedly in my life, markets drop 40 or 50 percent, and in some cases I've seen a market like the Dow Jones drop 21 percent in one day."
"So many things can happen."
A look at Faber's predictions, however, would suggest that a sustained market rally was never really within the realm of possible happenings that he considered.
marketwatch: Permabear Marc Faber has some good news for you: the S&P 500 index could soar to 2,300 over the next several months, rising about 5% from its current toppy level.
But here’s the bad news: The Swiss investor, who publishes the aptly named Gloom, Boom & Doom Report, sees the large-cap benchmark SPX, +0.04% shedding more than half its value, possibly over the next year.
“When it unravels, we are going to go to 1,100 on the S&P 500,” Faber told MarketWatch.
“Maybe we go first to 2,300, then we would have a perfect topping formation. A widening-top formation is about the most bearish technical formation you can have,” he said. Faber is referring to a so-called megaphone pattern, or broadening formation, which usually is associated with a sharp reversal in an upward trend for a security.
Faber has grown increasingly pessimistic as U.S. stocks have climbed over the past several weeks.
The S&P 500 has advanced about 4% from 2,096 on June 10 when MarketWatch last spoke to Faber. And on Tuesday, the Nasdaq Composite Index COMP, +0.24% marked its second record close of 2016, while the Dow Jones Industrial AverageDJIA, +0.02% and the S&P 500 were mostly quiescent.
His ursine-tainted call shouldn’t be a surprise to market participants who have followed him over the years. The 70-year-old investor has been critical of global central banks and negative on the U.S. economy, lately.
So, why should investors listen to Faber?
For one, the Swiss investor’s concerns about central bank’s propping up global markets and distorting markets echo legitimate worries expressed by smart-moneyinvestors like bond guru Bill Gross of Janus Capital.
Now, the Bank of England can be added to the list of central banks rolling out accommodative policies.
Last Thursday, the BOE revived a dormant bond-buying program and cut its interest rate to 0.25%—marking its lowest level in more than three centuries. Similar to the Federal Reserve, the BOE had been viewed as preparing to tighten monetary policy. That changed when the U.K. surprisingly voted on June 23 to exit the European Union, briefly roiling global markets.
The BOE finds itself, presently, on unsteady footing at the same time the European Central Bank and Bank of Japan are jousting with anemic growth of their own.
Faber said central banks“printing money” is a recipe for carnage that could result in “ five years of capital gains” being coughed up by the market. And if we give that back, “we’re around 1,100,” he said.
“We’re all on the Titanic.” Faber said. “When things unravel a colossal asset inflation” will burst.
Faber also gives voice to some of the persistent concerns shared by a host of investors and strategists that argue that the fundamentals of the stock market don't justify its current run-up in price.
“On a price-to-sales basis P/E ratios are not dramatically higher, but they are high, especially given that earnings are no longer growing. They are actually contracting,” Faber said.
Indeed, aggregate earnings-per-share for the S&P 500 were on course to decline 3.5% from a year ago, according to FactSet data.
Similar to Gross, Faber says that soaring government-bond prices, which have pushed yields to record lows and, in some cases negative levels, make this period distinct from other stock-market bubbles.
“In 2007, U.S. 10-year Treasurys were yielding 5% and in Europe no negative yields,” he said. On Tuesday, the benchmark 10-year Treasury note TMUBMUSD10Y, -0.61% was yielding 1.54%, compared with a yield of just over 5% in June of 2007, according to FactSet data.
Ultimately, the major criticism of any permabear like Faber is that, like a broken clock, they tend to be right twice a day, as the following tweet attests:
But Faber has this to say to critics who say that he has been consistently wrong-footed in his past market calls.
“There are lots of people who always criticize me. First of all, they have no money. And I always tell them to send me their performance audited over the last 10 to 20 years and we’ll compare,” he said.
Faber says naysayers should look at it his calls to invest in Treasurys and gold-related GCZ6, +0.82% assets for success stories.
“Everyone has good calls and negative calls,” he said.
NEW YORK. Permodalan perbankan Amerika Serikat (AS) terbukti tahan guncangan. Kabar baik ini tercermin lewat hasil uji tekanan (stress test)perbankan yang baru saja digelar Bank Sentral AS atawa Federal Reserve (The Fed).
Hasil stress test yang terbit Kamis (30/6) menunjukkan, secara kuantitatif, permodalan seluruh 33 bank yang bercokol di AS, mampu bertahan menghadapi guncangan. Tapi, ada dua cabang bank luar negeri yang dinyatakan gagal.
Dua bank yang gagal adalah Deutsche Bank Trust Corporation, anak usaha dari Deutsche Bank AG dan Santander Holdings USA, anak usaha Banco Santander SA.
"Mereka gagal karena rencana permodalan mereka lemah dan memburuk," tulis The Fed, seperti dilansir Reuters, kemarin.
Deutsche Bank telah gagal uji tekanan selama tiga tahun terakhir. Sementara, ini merupakan tahun kedua bagi The Fed menyatakan bahwa rencana permodalan Santander di bawah ketentuan The Fed.
Secara umum, sebagian besar bank kakap di AS terbukti memiliki kekuatan modal yang mumpuni. Bank-bank besar AS juga terbukti melakukan penambahan modal secara signifikan sejak dihantam krisis keuangan 2007-2009.
Catatan The Fed, bank-bank besar AS mengalami kenaikan permodalan lebih dari dua kali lipat atau setara US$ 700 miliar ketimbang posisi permodalan di 2009. "Manajemen bank juga memiliki rencana lebih matang dalam menghadapi krisis," tambah The Fed.
Yang menarik, rapor bagus uji ketahanan perbankan ini dianggap telah mampu menahan gejolak yang sungguh-sungguh terjadi. Misal, menghadapi turbulensi keluarnya Inggris dari Uni Eropa (UE) atau populer disebut Brexit.
"Gejolak pasar karena Brexit merupakan contoh baik untuk menguji kekuatan modal dan manajemen risiko bank secara nyata," ujar Mike Alix, analis PricewaterhouseCoopers.
Boleh bagi dividen
Lantaran lolos uji tekanan, The Fed merestui rencana sejumlah bank yang ingin membagikan dividen. The Fed meyakini, pembagian dividen tidak akan mengikis permodalan bank.
Contoh, The Fed menyetujui rencana Morgan Stanley memberikan dividen sekaligus membeli saham (buyback) senilai US$ 3,5 miliar. Sejumlah bank jumbo yang juga dinyatakan lulus stress test menyatakan rencana bakal memberikan dividen dan menggelar buyback saham.
Mereka diantaranya JPMorgan Chase & Co, Bank of America, Citigroup, Goldman Sachs Group Inc dan Wells Fargo & Co. Rencana ini langsung direspon dengan kenaikan harga saham bank.
marketwatch: Yellen says the Fed’s handling of the economy during the crisis was “nothing short of magnificent” as she credits her predecessor,Bernanke. The problem was how to get credit flowing, and though the Fed was a slow-moving institution, Bernanke encouraged what Yellen called “blue-sky” thinking.
“Ben was immensely courageous,” Yellen says, as Mankiw agrees. But what did the Fed do wrong, he presses. Yellen said the Fed didn’t see the financial crisis coming. “We saw trees, and the house price bubble was a tree,” as was growing leverage — but the Fed, and the private sector economists, didn’t see the crisis coming.
Is regulation better since the crisis, Mankiw asks. “Definitely yes,” Yellen replies. “I think we have a better understanding how to look for those conditions,” she says.
fortune.com: Buffett admits that he didn’t see the financial crisis coming until it was too late.
The National Archives on Friday released a bunch of new interviews and other documents that came out of the Financial Crisis Inquiry Commission. The FCIC interviewed lots of people about the financial crisis, everyone from CEOs like Goldman Sachs’ Lloyd Blankfein to The Big Short author Michael Lewis. Among the interviews released on Friday was one conducted with legendary investor and CEO of Berkshire Hathaway Warren Buffett.
In the interview, which took place in May 2010, Buffett admits that, like most everyone else, he didn’t see the financial crisis coming until it was too late. Buffett also says that, while he didn’t know what the government would do, his investments during the financial crisis in General Electric GE1.34% and Goldman Sachs GS1.93%were essentially based on the belief that the government wouldn’t let such big firms fail. Buffett also gave a long, thoughtful response to the question of what caused the bubble that caused the financial crisis. Here’s a transcript:
Brad Bondi [financial crisis inquiry commission]: What do you think it was, if you were to point to one of the single driving causes behind this bubble? What would you say?
Warren Buffett: Well, there’s a very interesting aspect of this, which will take a minute or two to explain; but what my former boss, Ben Graham, made an observation, 50 or so years ago to me that it really stuck in my mind and now I’ve seen evidence of it.
He said, “You can get in a whole lot more trouble in investing with a sound premise than with a false premise.”
If you have some premise that the moon is made of green cheese or something, it’s ridiculous on its face. If you come out with a premise that common stocks have done better than bonds—and I wrote about this in a Fortune article in 2001—because there was a famous little book in 2001 by Edgar Lawrence Smith—in 1924 by Edgar Lawrence Smith that made a study of common stocks versus bonds. And it showed—he started out with the idea that bonds would overperform during deflation and common stocks would overperform during inflation. He went back and studied a whole bunch of periods and, lo and behold, his original hypothesis was wrong. He found that common stock always overperformed. And he started thinking about that and why was that.
Well, it was because there was a retained earnings factor. They sold—the dividend yield on stocks was the same as the yield on bonds, and on top of it, you had retained earnings. So they overperformed.
That became the underlying bulwark for the ‘29 bubble. People thought stocks were starting to be wonderful and they forgot the limitations of the original premise, which was that if stocks were yielding the same as bonds, that they had this going [unintelligible].
So after a while, the original premise, which becomes sort of the impetus for what later turns out to be a bubble is forgotten and the price action takes over.
Now, we saw the same thing in housing. It’s a totally sound premise that houses will become worth more over time because the dollar becomes worth less. It isn’t because—you know, construction costs go up. So it isn’t because houses are so wonderful, it’s because the dollar becomes worth less, and that a house that was bought 40 years ago is worth more today than it was then.
And since 66 or 67 percent of the people want to own their own home and because you can borrow money on it and you’re dreaming of buying a home, if you really believe that houses are going to go up in value, you buy one as soon as you can. And that’s a very sound premise. It’s related, of course, though, to houses selling at something like replacement price and not far outstripping inflation.
So this sound premise that it’s a good idea to buy a house this year because it’s probably going to cost more next year and you’re going to want a home, and the fact that you can finance it gets distorted over time if housing prices are going up 10 percent a year and inflation is a couple percent a year. Soon the price action -– or at some point the price action takes over, and you want to buy three houses and five houses and you want to buy it with nothing down and you want to agree to payments that you can’t make and all of that sort of thing, because it doesn’t make any difference: It’s going to be worth more next year.
And lender feels the same way. It really doesn’t make a difference if it’s a liar’s loan or you know what I mean? [Unintelligible] something because even if they have to take it over, it’s going to be worth more next year. And once that gathers momentum and it gets reinforced by price action and the original premise is forgotten, which it was in 1929. The Internet was the same thing. The Internet was going to change our lives. But it didn’t mean that every company was worth $50 billion that could dream up a prospectus.
And the price action becomes so important to people that it takes over the—it takes over their minds, and because housing was the largest single asset, around $22 trillion or something like that, not above household wealth of $50 trillion or $60 trillion or something like that in the United States. Such a huge asset. So understandable to the public—they might not understand stocks, they might not understand tulip bulbs, but they understood houses and they wanted to buy one anyway and the financing, and you could leverage up to the sky, it created a bubble like we’ve never seen.
Buffett concludes by saying he wish he had figured that out in 2005. Don’t we all.
time.com: One of the areas hardest hit by the Great Recession
In the early days of his presidency, Barack Obama visited one of the areas hardest hit by the Great Recession, Elkhart, Indiana. There, he promised the people of the northern Indiana town that he’d do “everything I could” to help the area recover. “I intend to keep my promise,” he said during a visit in early 2009.
Elkhart at the time was a bleak representation of the troubled American economy. In January 2009, the unemployment rate in Elkhart County, which includes the cities of Elkhart and Goshen, was 19%; in March of that year it would hit 20%.
Between 2008 and 2009, Obama visited the area four times, delivering a message that he would usher in change to an area where jobs, particularly in the key industry of Recreational Vehicle manufacturing, seemed to have gone the way of the dodo. Between August 2008 and 2009, more than a dozen RV factories shuttered. In telling the community he had their back, President Obama set aside money from his nearly $800 billion stimulus package to address the area’s woes. He visited the Elkhart area in August 2009 to announce a local RV manufacturer was one of several Indiana businesses that would receive part of a $400 million federal grant to bolster the economy. The White House said Tuesday the Recovery Act, which President Obama signed in February 2009, provided $169 million in stimulus funding in Elkhart. Throughout both of the president’s terms, he returned to the Hoosier state —in 2010 and in 2014— both times noting the area’s economic progress.
In the seven years since the president’s first visit to Elkhart, times have certainly changed. The Bureau of Labor Statistics reports the unemployment rate was at 4.3% in March 2016. Charts promoted by the White House show foreclosure rates dropping and manufacturing jobs increasing during the president’s two terms in office. “The story of Elkhart’s recovery is the story of America’s recovery,” the President said in an open letter. “This progress is thanks to the determination of Americans like you. And it’s the result of choices we made as a nation.”
During a trip on Wednesday, the president plans to address the Elkhart community from the same place he spoke in 2009 touting the progress the community has made and the work that remains. The community of Elkhart, however, does not credit the White House or President Obama for the recovery they’ve experienced.
“He gets very, very little credit, and I think that’s too bad because we got quite a bit of help,” Dick Moore, who served as Mayor of Elkhart from 2007 until Nov. 2015, told the New York Timesin April. “I don’t know what we would have done without it.” A similar report by the Guardian found the president was less-than-well-liked in the town of 51,000. “ He said he was going to be there for us. He didn’t do anything,” said Tom Bumpas, who is back to work as servicing motorhome after bouts of unemployment and part-time work.
Even Gov. Mike Pence, who is running a campaign touting himself as the key to Indiana’s success, says the president didn’t do much. “I’m more than happy to have the president come and celebrate the economic success of the state of Indiana, but I’m not real sure what Washington D.C. has done to contribute to it,” Pence told radio station 95.3 MNC in April.
During Tuesday’s press briefing, White House Press Secretary Josh Earnest said the president is likely not getting the credit he feels he deserves for the recovery because of “Republican obstruction” to recovery efforts, though he said the American people and the private sector are largely responsible for it.“It’s the American people who deserve credit for our recovery, but that recovery would not have been possible without the federal government making smart decisions to invest in the middle class, to invest in those aspects of our economy that are critical to our long term success,” he said.
Earnest also said the president will use Wednesday’s visit to discuss the “very real choice” Americans are setting out to make this upcoming November, when they’ll hit the polls to choose his successor. He attempted to rebuff any notion that Republican policies would be more beneficial to citizens like those in Elkhart than the presidents were, while contending that the visit is not meant to be a campaign stop.
“The president is not content with the progress that we’ve made thus far,” Earnest said Tuesday. “He understands that his successor will have some important decisions to make about whether or not we are going to build on this progress or whether we’re going to tear it down. There is a pretty clear choice to be made if you take a look at the policies that are being advocated by the two parties.”
Yet, the favorite among Elkhart residents, reportsshow, is anti-establishment businessman Donald Trump who shuns globalization and whose views, residents believe, align more with their conservative values. In May, Trump picked up 57 delegates in the Indiana primary with 53% of the Republican primary vote. Though the president narrowly won the Hoosier state in 2008, he lost to Mitt Romney by nearly 11 percentage points in 2012.
That divide will likely make for an interesting conversation during a planned Town Hall meeting in the city, hosted by PBS Newshour, airing at 8pm on Wednesday.
marketwatch: The bull market, which reached a record high a year ago, seems to have petered out
CHAPEL HILL, N.C. (MarketWatch) — Some investors and pundits are commemorating the one-year anniversary of the May 2015 record high in U.S. stocks by noting that the market is only a couple percent below it.
Their implication is that the bull market is still alive, if not exactly well. But they are finding it increasingly difficult to adhere to this belief. Within one week, they will find it nearly impossible to do so.
That’s because there’s been only one bull market since 1900 that experienced a correction that lasted longer than a year. And, within one week, the length of even that bull market’s correction will be exceeded by the time elapsed since the May 2015 high.
Unless the stock market this week surges to new all-time highs, in other words, those in the bull-market-remains-alive camp will have to argue that the current bull market and correction is different than any other over the past 120 years.
I base these comments on an analysis of the 35 bull markets in a calendar maintained by Ned Davis Research. Focusing on the Dow Jones Industrial Average, I calculated the length of the longest correction within each of those bull markets (defined as the number of days it took for the market to surpass a previous high). The results are summarized in the accompanying chart.
On average, the longest corrections within those bull markets lasted 155 calendar days, or about five months. The longest of any one of those bull market corrections occurred during the bull market of the 1990s, and it lasted 379 days. By the first week of June, this length will be surpassed by the time elapsed since the May 2015 high.
You might wonder if it makes any difference whether the year-ago bull market remains alive or whether, instead, we are in a new bull market. Isn’t this just a matter of semantics? Isn’t the important thing whether the stock market is going up?
It makes a surprisingly big difference. If we can agree that the bull market that began in March 2009 has died, we no longer need to wonder if it is getting long in the tooth and, therefore, vulnerable to dying from old age.
At least among the several hundred newsletter editors/investors that I monitor on a regular basis, a surprising number continue to make that argument. If my analysis is correct, that is one worry we can eliminate.
The bull is dead; long live the bull!
For more information, including descriptions of the Hulbert Sentiment Indices, go to theHulbert Financial Digest or email mark@hulbertratings.com
USN: Ten years ago, a storm was brewing in the housing market.
Lenders were handing out mortgages seemingly to anyone who applied, and in many cases, borrowers weren't asked for documentation to prove income. Some institutions rolled out adjustable-rate mortgages that featured teaser rates and were marketed to consumers as loans that could be easily refinanced before the interest rate was scheduled to reset and send payments into the stratosphere.
As buyers clamored for homes, prices surged. But then the economy slowed and the bottom fell out of the housing market. Homeowners were unable to make payments, and sagging values made refinancing or selling impossible. The market crashed in what is widely considered one of the worst recessions to hit the country.
While the economy and home prices have both rebounded, some people have expressed concern we are headed for a repeat housing bubble. As of January 2016, home prices were rising at a rate twice that of inflation, according to the S&P/Case-Shiller U.S. National Home Price Index.
What's more, Fannie Mae and Freddie Mac have unveiled programs to allow first-time homebuyers to make a purchase with only 3 percent down. Plus, some lenders are using alternate credit scores, which may make loans available to those who can't get one under conventional credit scoring methods. Together, these factors may signal danger ahead. "I wouldn't discount it," says John Harrell, a vice president at USAA Bank, about the possibility of another housing crisis. "But I don't see it as an imminent threat."
Government regulations have changed the playing field. Harrell isn't concerned about a housing crisis, in part, because the mortgage industry looks different today than it did in 2006. Most notably, the Dodd-Frank Act was passed in the wake of the recession to eliminate much of the risky behavior that led to the proliferation of subprime loans. The bill prohibited the use of negative amortization and certain balloon payments. It all but wiped out the possibility of lenders using so-called low-doc or no-doc loans that didn't require borrowers to substantiate their income. "The regulatory scrutiny is very high," Harrell says.
Many lenders have also voluntarily tightened up their lending standards and are limiting access to mortgages to only those with very good credit. While subprime mortgages could be found 10 years ago for borrowers with credit scores well below 620, the bar has been raised substantially, says Brad Friedlander, co-founder of Angel Oak Capital Advisors in Atlanta, Georgia. "A bad borrower has a credit score in 2016 that is 100 points more than the bad borrower in 2006," Friedlander says. Nowadays, many creditors are looking for mortgage applicants to have credit scores north of 720.
New down payment options for mortgages cause concern. At the same time as they are tightening certain lending rules, both the government and banks are looking for ways to extend mortgages to those who can't afford or wouldn't qualify for a conventional loan.
Traditionally, Federal Housing Administration loans have provided the most accessible option for those who want to buy a house, but can't afford the down payment. These loans may have only required 2 percent down, but Harrell says many big banks have backed away from offering them.
Without FHA loans, another viable low down payment option for potential homeowners may be a VA loan, which may require zero down. "It's time-tested, and it's a great program," says Harrell. However, not everyone can qualify for a VA loan, so Fannie Mae and Freddie Mac have now begun offering loan programs with down payment requirements as low as 3 percent. At least one borrower on the application must be a first-time home buyer and income requirements and other criteria may apply.
A rush of low down payment mortgages may be reminiscent of 2005 and 2006, but there is no reason to believe they alone will cause a housing crisis. "The fact that people are highly leveraged doesn't mean prices are going down," says Mark Fleming, chief economist at First American.
Alternate credit scores may expand the pool of borrowers. Fleming is also quick to say the use of alternate credit scores shouldn't be worrisome either. Some lenders have begun to look for other ways to gauge a person's credit-worthiness, particularly those people who have limited or no credit under traditional scoring models. "What you need to establish credit-worthiness is changing," Fleming says. "New credit models are reflecting that."
For example, millennials may be renting longer or opting for mobile phones rather than landlines. Old scoring models might not take those factors into consideration, resulting in low or no credit. Alternate models may also be able to address non-traditional situations, such as multi-generational families or those earning income through the sharing economy. "The whole point of these new models is that they are able to score people who would [otherwise] not have a credit score or have a limited one," Fleming says. "But that doesn't mean they are of poor credit score quality."
Reasons to remain optimistic about the housing market. With 10 years between us and the start of the last great housing crisis, many people are feeling optimistic that both lenders and borrowers have reformed their bad behavior. Not only have banks eliminated many risky lending practices, but "most American borrowers tend to be stronger savers now," Friedlander says.
Some people may feel skittish about rising home prices and apparent attempts to open the mortgage market to unconventional borrowers, but many industry experts say there is no reason to believe a repeat of 2006 is about to happen. "House prices have rebounded, and the jobs market looks quite good," Fleming says. "There's not a lot of data indicating another housing crisis."
Don’t sound the “all clear” siren yet.
In February, when the Dow Jones Industrial Average had fallen nearly 15%, concerns grew that the U.S. economy was slipping into recession. Those fears have since subsided in financial markets, but most economists continue to see an elevated risk of the U.S. falling into a new recession within the next 12 months.
wsj: Forecasters in the latest Wall Street Journal survey of business, academic and financial economists estimated, on average, that the U.S. had a 20% chance of falling into recession in the next year. That was up slightly from the 19% in last month’s survey. While 1-in-5 odds are far from a slam dunk, they are double the odds from as recently as September.
“Decelerating employment growth, growing uncertainty and sputtering GDP growth does not portend well,” said Chad Moutray, chief economist at the National Association of Manufacturers.
The economy grew at a 0.5% annual pace in the first quarter of the year, according to the most recent Commerce Department reading. The most recent monthly jobs report showed the pace of job growth slowing as well.
This rough start to the year prompted economists to lower their estimates for economic and job growth this year. The average forecast now calls for 1.9% growth this year, down from 2.1% in last month’s survey. Over the next 12 months, the economy will add about 180,000 jobs, they estimate, down from 185,000 last month and 190,000 in March.
Even after making these downgrades, 63%% of economists think the risks to the economy are to the downside. In other words, if their forecasts are wrong, economists think it’s because they’re probably too optimistic.
Since recession risks first rose late last year, the biggest risk has consistently been the chance that China’s economy would falter or that the dollar would be too strong, and that a slowdown in international trade would weigh the U.S. down.
While a global slowdown is still identified as the biggest risk, the forecasters see elevated risks coming from the U.S. political process as well. About 42% of respondents say uncertainty from the election is already harming the U.S. economy, at least somewhat, because business investment can be challenging when the potential range of political outcomes is so wide.
The Wall Street Journal surveyed 70 economists from May 6 to May 10, though not every respondent answered every question.
Less than a decade ago, the world economy sank into the Great Recession: the deepest and most widespread downturn since the Great Depression of the 1920s and '30s. Since the stock market crashed in 2008, recovery has been long and slow, marked by persistent bumps in the road along the way. Nonetheless, an economic recovery has, indeed, taken place. The S&P 500 index rose more than 92% over the past five years until market volatility kicked in during the second half of 2015. So far in 2016, the S&P 500 is down almost 9% since the start of the year. U.S. unemployment has dropped from nearly 10% at the height of the Great Recession to 4.9% today.
A lot of this apparent growth, however, has been fueled by government bailouts, loose monetary policy and huge injections of capital in the form of quantitative easing. The problem is thatexpansion cannot continue forever, fueled only by cheap money and central bank support. Ultimately, the underlying fundamentals of an economy must catch up with the stimulus to create real growth. Because the real economy has lagged in many ways, it might be the case that we are on the verge of another global recession. Here are some signs that a recession may be on the horizon.
The European Situation
The sovereign debt crisis that followed the Great Recession in Europe has been a persistent issue, and Europe represents a significant part of the world economy. The European Central Bank (ECB)has also taken the extraordinary measure of implementing quantitative easing in the Eurozone to stimulate growth. The so-called PIIGS nations (Portugal, Ireland, Italy, Greece & Spain) have been bailed out repeatedly by the European Union and the IMF, with mandatory austerity measures imposed on their populations. Not only has austerity been unpopular, such measures may have also restricted growth by reducing aggregate demand and keeping the debt burdens in these nations high.
The worst of the PIIGS has been Greece, which defaulted on an IMF loan in 2015. The Greeks had elected an anti-austerity government which called a popular referendum, rejecting EU bailout terms and calling for an end to austerity. Even though Greece itself represents a relatively small portion of the Eurozone, the fear is that if Greece leaves the European common currency (the so-called Grexit), other PIIGS countries will follow and contagion will spread, putting an end to the euro experiment. A collapse of the euro would have widespread negative consequences for the world economy, perhaps bringing on recessions.
The Chinese Bubble Has Begun to Pop
The Chinese economy has grown by an extraordinary amount over the past few decades. ChineseGDP is second in the world only to the United States, and many economists believe that it is only a matter of time before China will overtake the United States.
China's government, however, imposes capital controls in order to keep its money within its borders. Therefore, as the Chinese middle class has grown, they have few options when it comes to investing their new wealth. As a result, Chinese stocks and real estate, two of the places where Chinese people can invest, became increasingly expensive, with the hallmarks of a bubble forming. At one point last year, the Chinese stock market had an average P/E ratio higher than the rest of the world's, with the Chinese technology sector showing bubble-like valuations of more than 220 times earnings on average. To put that in perspective, the tech-heavy NASDAQ market had an average P/E of 150 times before the dot-com bubble burst. The Chinese stock markets have been experiencing a correction, with the government taking such cautionary measures as curbing short selling. Most recently, in an attempt to curb volatility, China implemented circuit breakers that would halt all trading on the country's stock exchanges if losses fell to 7%.
Meanwhile, the real estate boom has led to overproduction of building resulting in so-called ghost cities, entire urban landscapes where nobody lives. When the market sees that the oversupply cannot meet demand, prices may collapse in the Chinese housing market.
If the Chinese economy slips into recession, it is likely to drag down the rest of the world as well.
A Debt Problem Growing in Student Loans
The debt crisis that accompanied the Great Recession had a lot to do with the burden of home mortgages that were issued to people who simply could not pay them back and bundled into securities called collateralized debt obligations (CDO) and sold to investors with an illusory 'A'-credit rating. Today, something similar seems to be going on in the student loan market.
The U.S. government backs nearly all student loans, so ratings agencies pin a high credit rating to these debts, even though a student may not have the ability to repay. Right now, the government is on the hook for over $1.2 trillion in outstanding student loans that need to be paid back. To put that in perspective, Australia's GDP in 2014 was only $852 billion.
Not only could a wave of defaults impede the U.S. treasury's ability to function properly, but student loan burdens prevent young people from engaging in other economic activity such as buying homes and cars.
The Unemployment Picture is not as Rosy as it Seems
The U.S. unemployment rate fell to 4.9% in January, the lowest level since the crisis began. But that so-called headline unemployment rate does not include discouraged workers who have taken on temporary or part-time work to make ends meet. When accounting for that part of population (called the U6 unemployment figure), the unemployment rate jumps to 10.5%. There has been a steady decline in the labor force participation rate, which measures how many people in the potential workforce are actually working, to levels not seen since the 1970s. Since even the U6 unemployment rate accounts for those in the workforce, the actual unemployment rate when accounting for the declines in the workforce participation rate is much higher.
Even for those working, the real wage has remained fairly stagnant. The real wage accounts for the effects of inflation, and a stagnant real wage can indicate a weak economy that isn't showing real economic growth.
Central Banks Have Little Room to Work With
Central banks typically employ loose, or expansionary monetary policy to stimulate an economy when it appears to be slowing down. They do this by lowering interest rates, engaging in open market operations, or through quantitative easing. Since interest rates are already near-zero, with some European countries even deploying a negative interest rate policy (NIRP), that policy tool is no longer effective for banks to use to stave off the next downturn. Meanwhile, quantitative easing and the buying of government assets has already ballooned central bank balance sheets to unprecedented levels. Again, central banks will see their hands tied in trying to avert a recession.
Economic Data Shows Patterns Similar to Right Before the Last Recession
Aside from the "stories" unfolding in the global economy above, some finer economic data is beginning to show some eerily similar patterns that have predicted recessions in the past:
Retail Sales have dropped the most since before the last recession. The same is true with wholesale sales.
U.S. factory orders fell in December of 2015 by the most in a year, according to the Commerce Department.
We may be on the verge of another global recession. Patterns in economic data are showing signs of weakness, and the troubles persisting in Europe or the bubble bursting in China may be the trigger that sends the economy over the edge. Unlike in 2008, when central banks were able to lower interest rates and expand their balance sheets, central banks now have much less elbow room to enact loose monetary policy to prevent a recession from happening. Recessions are a normal part of the macroeconomic cycles that the world experiences, and happen from time to time. The last recession was already seven years ago. Signs may show that the next is right around the corner.
If you are looking for more information about investing in turbulent markets, Investopedia's Advisor Insights tackles the topic by answering one of our user questions.
According to the renowned structural realist, John J Mearsheimer, the Chinese economic and military rise in the 21st century would not be peaceful; the US would employ all means, fair or foul, to contain and impede China from challenging the long-lasting American hegemony in the world. The competition between both the countries has awakened a dormant cold war atmosphere in certain regions. The imminent cold war would create both opportunities and challenges for developing countries.
From Capitol Hill to the Pentagon, all American decision-making quarters are heavily engaged in crafting strategies on how to encircle, counteract and impede China, thus slowing down the Chinese economic boom and military rise. Though the Chinese rise is relatively peaceful, the powerful communist state is still fully prepared to promptly respond to any aggressive American posturing against Chinese national interests, across the world.
In the restive South China Sea, China is having legitimate disputes with other South-East Asian countries over the Spratly Islands, the Paracel Islands, the Pratas Islands ,the Maccles field Bank and the Scarborough Shoal. There are precious minerals, natural gas and oil deposits on and under the seafloor of these islands. For its national security, China is also building military, naval and air bases on some of these highly disputed isles. A number of artificial islands have also been constructed for Chinese military objectives.
The US considers such strategic moves from China a grave threat to the security of its regional allies and also to its dwindling regional dominance. To counter China’s growing presence in the region, the US has adopted ‘strategic hedging’: It has recalibrated its ‘pivot’ towards the Asia-Pacific region, lethally armed its regional allies and deliberately violated the Chinese Exclusive Economic Zones time and again. Both the countries have also hurled threats against each other in the restless region.
To weaken the Chinese position, the US has been vociferously and blatantly supporting the nationalists in Hong Kong and Taiwan for their independence from mainland China. The US policy in response to the Chinese military and naval measures in the South China Sea is that of calculated confrontation rather than cooperation. If such widening distrust and ominous bellicosity were to continue unhindered, there could be a limited confrontation between China and the US, with the potential of escalating into a dangerous war in the disputed waters of the region.
In South Asia, it seems that China has outsmarted the US through its ongoing peaceful regional connectivity initiatives. The Chinese string of pearls strategy, stretching from the South China Sea to South Asia, has made China the main trade and defence partner of some of the littoral countries of the region. Moreover, the Chinese Silk Road, the China-Pakistan Economic Corridor (CPEC) and China’s growing presence in Afghanistan have become real bugbears for the American’s long-lasting military and economic dominance of South Asia.
Being an ardent realist, the US will not easily permit China to challenge its hegemony in South Asia. In this context, the US has calibrated some long term counter-China policies, to encircle and weaken the ever-rising influence of China in the region. The US has tried to counteract the Chinese influence in South Asia through its invasions of Afghanistan (in 2001) and Iraq (in 2003), its nuclear partnership with India and the recent nuclear deal with Iran. Since China has a heavy presence in the sea ports of Myanmar, Bangladesh, Sri Lanka and Pakistan, the response from the Chinese government to any future threat to its economic and military objectives would be prompt and harsh.
China is the only trustworthy power to have emerged as an alternative to the Middle Eastern countries, after the US’s dismal failure to fix some of their regional security issues. The US policy of regime change, its failure to root out Daesh and remove the beleaguered Bashar al-Assad and the Iran nuclear deal have compelled some of the oil-rich Arab monarchies to look towards China for their economic and military objectives. Through its astute diplomacy, China has grabbed the opportunity by both hands and created a win-win situation: it is not only importing substantial energy resources from the Middle East, but it is also exporting economic products and arms to some Arab countries.
To obstruct the growing Chinese engagement with the Middle East, the US is secretly supporting terrorist and militant groups, rebels and proxies in Iraq, Syria and Libya, in order to make the region insecure and unstable so that China cannot expand its economic and defence ties. Such marked divergences in the US counter-strategy against China do not bode well for the militancy-hit region. It would create an ever-increasing arms race and embolden the lethally-armed Arab states to brutally crush any pro-democracy movements.
The US’s all-out support to the mujahideen against the erstwhile Soviet Union, its invasion of Afghanistan, strategic nuclear partnership with India, the recent historic nuclear deal with Iran and Nato’s expansion into Eastern Europe are designed to attain a major geostrategic objective in the new great game being played in the energy-rich Central Asia. The US is apprehensive that if China continues capitalising on the potential energy resources of the Central Asian Regions (CARs), it would outmanoeuvre the US economically in the world. To challenge China in Central Asia, the US has been lending a hand to Indo-Iranian efforts to connect the Chabahar port to Afghanistan and Central Asia.
Unlike the previous cold war, this time it is also likely that the US, its Western allies and Indian would use Africa. It is the first time in the world’s history that a non-European power has outsmarted European countries in the African continent, through its burgeoning economic cooperation with African countries. Presently, thousands of Chinese companies are working in different sectors in Africa. It is unbearable for the West, particularly for the US, to allow China to dominate African enormous natural resources, potential markets and defence field. Arguably, terrorism and militancy in the continent would be further fuelled by the West to create escalating issues for Chinese companies in Africa.
It is a bit surprising that Chinese companies and products have gained a strong position in the European and American markets. Some of these highly-industrialised countries are concerned about the rapid expansion and penetration of Chinese enterprises, which have ominously threatened all local industries. Predictably, the West would very soon embark upon imposing obstructive tariffs on all sorts of Chinese products, so as to protect their national enterprises. Therefore, China will react in the same way, which would result in unfriendly relations and create mutual distrust and acrimony.
There is no doubt that China is engaged in a peaceful economic boom and military rise. But it is imperative for the Chinese government to grasp the underhand objectives of the US and its Western partners. After taking into consideration the disruptive designs of the West against China, the Chinese leadership should prepare itself both economically and militarily, so that it can be potent enough to respond to the US equally and on all fronts, thus ensuring its own socio-economic prosperity.
The writer is the editor of The Asia Watch.
time.com: Average income dipped to only $1.26 million.
Many Americans were hit hard by the Great Recession. And while the depleted middle class and low-income workers deserve most of the sympathy, there’s perhaps a little reason to feel sorry for another group: America’s top 1% of earners.
Research indicates that as of 2014, the income of the top 1% of Americans was still below where it was before the recession, CNN reported. Though the ultra-rich have captured the majority of the nation’s income gains since then, they’ve still yet to recover to their pre-recession earning levels, largely due to the plunging stock market.
The top 1% had an average income of $1.26 million in 2014, a 19.1% decrease compared to $1.56 million in 2007, according to an analysis of tax data from researchers at the University of California, Berkeley, and the Paris School of Economics. It’s even worse news for the top 0.01%, whose average income fell to 27.4% from 2007 to a mere $29 million in 2014.
“It’s not the case that the Great Recession had no impact on the top,” Scott Winship, senior fellow at the right-leaning Manhattan Institute, told CNN.
While presidential candidate Bernie Sanders has railed against the very rich taking home most of all new income, the analysis showed that the top 1% captured about 58% of income gains between 2009 and 2014. About 91% of those gains were focused in the years of recovery, between 2009 and 2012, and have since fallen off.
Still, it’s hard to feel too bad for the ultra-rich. While the bottom 90% of American earners saw their income drop by 10.7%, that amounts to an average of $33,068 in 2014—a far cry from the seven-figure salaries that the top 1% takes home.
Chart to accompany Moore article of March 21, 2016 more >By Stephen Moore - - Sunday, March 20, 2016
In a supremely weird election season the latest weird twist is the consensus emerging on Wall Street that Hillary Clinton would be better for financial markets than Donald Trump.
The usually sensible Barrons magazine concluded its cover story last week that Hillary-onomics is better for investors than Mr. Trump. Warren Buffett and other stock gurus have made the same case.
The argument for Hillary is that she’s predictable and that Wall Street knows what she will do. Mr. Trump, by contrast, is the high beta candidate, and let’s face it: no one knows exactly what you get with a President Trump. She’s the safer bet. Investors also are drooling for a return to the 1990s and the bull market returns under Bill Clinton — when stocks tripled in value. I know I am.
Hillary is seen as less likely to spark a trade war that could send stocks tumbling.
But there’s a problem with each of these arguments. It’s true that Hillarybrings far more certainty, but what this means is that we are absolutely certain to get bad ideas. I never have bought the argument that Wall Street wants the devil they know.
If you’re walking down a dark street at night and there’s a 100 percent chance that you will get mugged on the left side of the street and a 50 percent chance if you cross over to the right side of the street, what’s the logical move?
Hillary is 100 percent predictable. She is going to raise tax rates; she is going to spend trillions more over the next decade; she is going to stop drilling for oil and gas and shutdown our coal industry; she is going to double down on Obamacare; and she is going to wage war against the rich on Wall Street. Is that the certainty Wall Street is craving?
Let’s take taxes. Mr. Trump wants a 20 percent capital gains tax. Hillarywants a 46 percent capital gains tax. Now these are direct taxes on investors. What is the difference between these two policy courses? A share of stock is worth the discounted present value of the returns after tax. So let us assume a stock earns $10 a share. Under Hillary the stock’s after-tax return is $5.54 a share. Under Mr. Trump the after-tax return is $8.00. This is an oversimplification because Hillary would tax longer held stocks at a rate of 23.8 percent. But the stocks have a much higher return under Mr. Trump.
But the corporate tax also has an effect on stock values. Hillary wants to keep the 35 percent rate. Mr. Trump wants a 15 percent rate. So underHillary the government takes one-third of corporate profits, and underMr. Trump the government takes one-sixth of the profits. It’s true the effective tax rate is lower for many multinationals, but the broader point is obvious: Mr. Trump’s tax plan is much, much, much better for stocks than Hillary‘s. By the way I didn’t even mention that Mr. Trump wants a lower estate tax — another tax on stocks — and Hillary wants a more confiscatory system.
But stocks did phenomenally well under Hillary’s husband. True but this isn’t Bill Clinton’s party anymore. Hillary is running as Bernie-lite, not Bill-lite. The days of the centrist Democrats are long past. Bill balanced budgets, cut spending, cut the capital gains tax and signed welfare reform. Hillary stands on the other side on all these issues.
On trade, Mr. Trump’s black mark, Hillary might be better, but not by much. She’s against the Asia trade deal. She was against lifting the export ban on American oil and gas.
Will there be a Hillary Clinton bull market? I’d short that bet. And in some ways, Mr. Trump could be the most pro-investor president in decades.
• Stephen Moore is an economics consultant with Freedom Works and a Fox News contributor.
