Finance Debt – Artists Studio Tue, 24 Aug 2021 15:56:18 +0000 en-US hourly 1 Finance Debt – Artists Studio 32 32 Americans paid off $ 108 billion in credit card debt last year – the most ever Thu, 11 Mar 2021 08:25:50 +0000

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In 2020, Americans have paid off a large chunk of their credit card debt. Indeed, according to data from New York Federal Reserve, the total outstanding credit card balance fell $ 108 billion from the end of 2019.

This is the largest annual decrease in the total credit card debt since the Federal Reserve started recording this data point in 1999.

Fed data shows Americans, on the whole, are reducing their balances rather than taking out new loans. Indeed, the number of people apply for new credit cards has declined since the second quarter of 2020, when the COVID-19 pandemic in earnest in the United States

There has been a lot of bad news this year. But the fact that Americans are making great strides in paying off credit cards is a bright spot.

Here’s what you need to know about the sharp decline in outstanding credit card debt

The Federal Reserve has a simple explanation for why Americans were so successful at paying off their credit cards in 2020: there just wasn’t much to spend the money on.

The sharp reduction in card balances began in the second quarter when the total fell by $ 76 billion. It continued into the third quarter when outstanding card balances declined by $ 10 billion. There was a small seasonal adjustment upward in the fourth quarter, but the Federal Reserve reports that people are still not spending much.

But the decline in consumer spending caused by the Covid-19 pandemic is only part of the picture. The Federal Reserve also suggests that many Americans have focused on paying down debt.

This also makes a lot of sense. After all, in the face of the economic uncertainty of a pandemic, it’s natural to prepare for a possible loss of income or unforeseen expenses. Paying off credit card debt is one of the best ways to do this because you can get rid of a monthly obligation and save on interest charges if you bring your card balance down to $ 0.

Americans can continue this positive trend

2020 has been an unprecedented year and it’s a year most of us wouldn’t want to repeat. The reason many people were able to repay their debts was that they couldn’t travel or eat out because of COVID-19. But most of us will want to get on with our normal lives and resume these activities once it is safe to do so. However, that doesn’t mean that you can’t keep improving your finances.

If you were successful in paying off all of your debts during the pandemic year, your financial situation should already be much better in the future. After all, you won’t have to pay interest on loans anymore and you won’t have to worry about monthly payments. The money you spent on debt before the pandemic can be reallocated to other purposes, like building a emergency fund or save for retirement.

If you haven’t fully paid off your high-interest debt yet, it may be worth continuing to forgo expensive trips or dining out until your balance hits $ 0. After all, the habit has been broken now. Sacrificing a little longer can be worth getting rid of debt.

Spend in moderation

If your spending habits changed during the pandemic, you might decide to reintroduce the splurge in moderation. You don’t have to spend at the pre-pandemic level. After all, if you haven’t been able to dine out at all, you will already be happy to eat out once or twice a month instead of every week.

If you can avoid resuming all the expenses you did before COVID-19, you can continue to use the money freed up by your new habits wisely. This may be one of the few silver liners from a rough and depressing year, so it’s worth some serious consideration.

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Bill Straub: Suddenly Republicans have found out about the national debt they have racked up and don’t like it Thu, 11 Mar 2021 08:25:50 +0000

We are approaching spring after an election that saw Republicans lose both the White House and the Senate, so as naturally as you would expect crocuses to bloom, the fancy of GOP lawmakers is turning to the national debt. that they helped create.

The target of the party’s concern this time is the $ 1.9 trillion COVIDE-19 relief plan that passed the House on Wednesday and now goes to President Biden for his signature. The massive measure contains, among other things, direct payments to families and new funding for the 50 states that have suffered the economic consequences of the continuing pandemic.

There are 50 Republican members in the Senate – two from Kentucky – and 211 in the House – five from the Commonwealth – and none have managed to lend their support. In other words, he passed only on Democratic votes.

NKyTribune Washington columnist Bill Straub was the Frankfurt bureau chief for the Kentucky Post for 11 years. He is also the former White House political correspondent for Scripps Howard News Service. A member of the Kentucky Journalism Hall of Fame, he currently resides in Silver Spring, Maryland, and writes frequently on federal government and politics. Email him at

For a party determined to get out of the political hole created by former President Donald J. Trump, alias Loser, while simultaneously trying to appease the bloated jester so that he no longer throws adjustable wrenches into political work, this solidarity could be seen as a little curious. National polls show the stimulus package is hugely popular with the voting public. A Politico / Morning Consult poll released on Wednesday showed that 75 percent of those polled support the legislation while a meager 18 percent oppose it. Even 59 percent who identify as Republicans agree it’s a good idea.

To add to that, the poll found that 55% of those who voted for Trump in the 2020 election offered their support.

And it looks like the American Rescue Plan Act of 2021 has drawn support from Republican office holders outside of DC boundaries. West Virginia Governor Jim Justice, whose state is one of the nation’s leaders in providing COVID vaccines to its residents, said lawmakers should “go big or go home” on the stimulus package, arguing that at this stage, it is also better to spend a lot more than not enough.

“We tried to under-spend and underestimate what was really needed to get over the top of the mountain,” Justice said. “You have a lot of people across this country who are really in pain.”

At first glance, then, it would appear that Congressional Republicans have fallen on the wrong side, especially if they are serious about winning back the House and Senate in 2022.

But any Republican vote in favor would be tantamount to giving Biden and the Democrats a huge, quick victory that they might call bipartisan. The GOP is hoping to use Biden’s campaign pledge to work cooperatively with Republicans against him, arguing that passing a substantial measure without any votes from the opposition party shows a propensity on his part to back down. his word.

And there is always the deficit card, a Republican is only brought to play when he is not in charge.

In a recent speech to the floor, Representative James Comer, R-Tompkinsville, a leading member of the House Oversight & Reform Committee, noted that the national debt was approaching $ 28 trillion.

“But instead of taking this burden, we are taking our children and grandchildren seriously, Democrats are sending a $ 2,000 billion partisan package through Congress,” Comer said. “Two trillion dollars in deficit spending. Congress has already spent $ 4 trillion to fight the corona virus. “

Now let’s say growing deficits will at some point create a huge fiscal problem and need to be addressed. Currently, with interest rates nearly historically low and the nation in the midst of a pandemic-induced economic collapse, now is not the time.

And Comer’s words would certainly have more weight if Republicans in 2017, maintaining majorities in both the House and Senate and with Trump as chief executive, had not passed a reduction bill. $ 1.5 trillion tax that is expected to increase the deficit by over $ 1000 billion over 10 years.

The so-called Trump tax cut, which was not as popular as the COVID relief measure, was passed by the Senate without any Democratic votes. impact on the deficit.

Weird, don’t you think? If Republican lawmakers want to be taken seriously, the first thing they can do is repeal the Trump tax cut. Don’t hold your breath.

Comer, for some reason, also forgot to note that the COVID relief bill will directly help the middle and lower classes while the Trump tax cut was primarily aimed at the wealthy, who were posing as gangbusters. Data from the Internal Revenue Service established that the taxpayers who received the largest refund increases earned at least $ 200,000. Tax returns further showed that those earning less than $ 100,000 received a more modest break, but those earning just over $ 100,000 – a significant portion of the middle class – ended up owing more than $ 100,000. taxes.

For what it’s worth, Comer also accused the bill of focusing on “the far-left political agenda” and that economists maintain it will cause “an economic crash” and lead to inflation.

Both claims were contested by Treasury Secretary Janet Yellen.

“This is a bill that will really give Americans the relief they need to get to the other side of the pandemic, and we expect the resources here to really fuel a very strong economic recovery,” he said. Yellen told MSNBC.

She further said the package would allow the United States to return to pre-pandemic employment levels by next year.

Comer, whose recall capabilities seem hazy, also forgets to point out that residents of Kentucky are expected to collectively receive $ 5 billion under the COVID bill – not bad for a product of the far-left political agenda. Stimulus checks of $ 1,400 will go to those who earn less than $ 75,000 a year. The child tax credit will be expanded, low-income households will receive help with groceries and utility bills, and the additional $ 300 per week in federal unemployment benefits will continue until September.

In addition, the state government could receive up to $ 2.4 billion for expenses related to COVID-19.

But that doesn’t seem to suit either Comer or Republican Senate Leader Mitch McConnell of Louisville, who maintains that the US bailout is “actually one of the worst pieces of legislation I’ve seen pass here since am in the Senate. “

Speaking to reporters on Wednesday, McConnell said the nation was recovering and “we are causing damage to the future of this country by spending a lot more money than we obviously need at this point.”

Not surprisingly, McConnell has expressed concern over the growing debt, insisting that it continues to “pile up, pile up and pile up.”

What he failed to note was that over the four years of the Republican Trump administration, when McConnell was the majority leader, the deficit rose to a record $ 7.8 trillion. dollars.

Like Thurber said, you can research it.

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American Airlines Raises $ 10 Billion By Betting On Vacation Thu, 11 Mar 2021 08:25:50 +0000

Come fly with me.

While the glamor of the The age of 1950s airplanes does not return, American Airlines Group Inc. has its money on passengers who dizzy again from pleasure travel, once the threat of the pandemic subsides.

This was the main idea behind American’s AAL,
+ 3.22%
$ 10 billion in new debt financing Wednesday, which went from an initial size of aapproximately $ 7.5 billion in a context of strong investor demand.

Unlike standard corporate debt financing, the new debt is backed up by the airline’s estimated $ 20 billion AAdvantage loyalty program, which is often tied to a credit card. That way, even if the airline struggles financially as vaccination efforts in the United States and around the world intensify, bond investors would be reimbursed by travelers using the loyalty program to book flights.

“Market acceptance is strong for airline mileage obligations as the five outstanding issuers are actively valued at significant premiums,” Roger King, senior analyst at CreditSights, wrote in a client note.

King was referring to the rush for yield that recently drove past customer loyalty program bonds issued by Delta Air Lines Inc. DAL,
+ 2.99%,
United Airlines Holdings Inc. UAL,
+ 3.18%
and Spirit Airlines Inc. SAVE,
+ 3.56%
up to 112 cents on the dollar. Bond prices move in the opposite direction of yields, but typically pay back in full at 100 cents on the dollar.

“This is the trade of the recovery,” said Matt Kennedy, head of corporate credit at Angel Oak Capital Advisors, of the travel debt rally in recent weeks.

“As vaccines are rolled out and we move closer and closer to herd immunity, pleasure travel has been stronger in air travel,” Kennedy said, adding that business travel is likely to put a strain on air travel. more time to recover as companies remain cautious about adding travel expenses. .

The new American Airlines financing is a mix of two classes of bonds totaling $ 6.5 billion and a loan of $ 3.5 billion, valued at a blended rate of 5.58%. This compares to the larger ICE BofA US High Yield Index nearly 4.5% yield.

But using its mileage collateral program, the bonds were rated Ba2 (substantial credit risk) by Moody’s. This still places them in the high yield or “junk bond” category, but a few notches above the US corporate rating Caa1 (very high credit risk).

+ 2.51%
added 0.2% Wednesday, as Iinvestors favored sectors of the economy this could be due to a rebound as the recovery accelerates, as the Dow Jones Industrial Average DJIA,
+ 0.13%
gained 1.5% to close above 32,000 for the first time in history.

American said the proceeds from the financing would be used to pay off a pandemic loan from the US Treasury in full, as well as for general corporate purposes, but declined to comment for this article.

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US budget deficit widens in February as spending to fight pandemic continues Thu, 11 Mar 2021 08:25:50 +0000

Numbers: The federal government’s budget deficit widened to $ 311 billion in February, from $ 235 billion in the same month last year, the Treasury Department reported on Wednesday.

Economists polled by the Wall Street Journal expected the deficit to widen to $ 255 billion in February.

The deficit is a record for the month.

What happened: Total spending stood at $ 559 billion in February, up 32% from the previous year. Spending increased for unemployment benefits from the Ministry of Labor and spending on health and social services. The government is ignoring all the money spent to fight the COVID-19 pandemic.

Total revenue also rose 32% in February to $ 248 billion.

For the fiscal year to date, the budget deficit has swelled to $ 1 trillion from $ 624 billion in the same period a year ago.

The big picture: Experts said the United States is expected to run a $ 3 trillion deficit for two consecutive years. The government is continuing a spending spree, with Congress due to pass a $ 1.9 trillion Covid relief package later Wednesday. After that, the Biden administration is expected to soon announce a “Build Back Better” green energy infrastructure and measure that could cost between $ 1,000 billion and $ 3 trillion.

Tom Simons, an economist at Jefferies, said the Treasury did not need to increase borrowing further because of the $ 1.9 trillion package. He said the coupon calendar is still collecting a huge amount of money due to the cumulative increase in auction size since last April.

“Before, it took us years to borrow $ 1,000 billion. Now we are borrowing that much in just five months, ”noted Maya MacGuineas, chair of the Committee for a Responsible Federal Budget.

The Congressional Budget Office warned last week that rising public debt has raised long-term concerns about a financial crisis.

During his confirmation hearing. Treasury Secretary Janet Yellen said it would be “essential” to put the federal budget on a sustainable path, but she said the government should first beat the pandemic and invest in long-term infrastructure. term to help the economy grow. Low interest rates have kept the interest charge on debt low. The government has spent $ 192 billion on interest on the federal debt so far in the fiscal year, which begins in October. That’s down from $ 229 billion in the same period last year as the government’s cost of borrowing has fallen, a senior treasury official said.

Market reaction: After having exceeded 1.6% at the start of the week, the yield on the 10-year Treasury bill TMUBMUSD10Y,
fell to 1.516% in Wednesday’s session. A previous government consumer price report from February on Wednesday allayed market concerns about inflation.

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10/03/2021 | Ocean City Council approves list of capital projects; Baltimore Avenue remains the main topic of discussion Thu, 11 Mar 2021 08:25:50 +0000
Baltimore Avenue is pictured in a file photo. Photo by Chris Parypa

OCEAN CITY – The mayor and council of Ocean City have narrowed down the list of projects deemed critical in the pending capital improvement plan, while agreeing to initiate a major renovation of the Baltimore Avenue corridor.

Two weeks ago, the mayor and council members submitted their own rankings on the extensive list of projects included in the proposed capital improvement plan (CAP), and asked staff, including several department heads , compile their own list by classifying projects as critical, very important, important, less important, or for future consideration. On Tuesday, City Engineer Terry McGean presented staff rankings and a comparison to rankings provided by the mayor and council.

McGean explained that eight department heads reviewed the list of proposed CAP projects and established their own rankings, which largely reflected the priorities expressed by the mayor and council with a few exceptions. While the redevelopment of the Baltimore Avenue corridor was the top-ranked project in the PIC for elected officials, staff rated it “very important.”

“The staff made it a priority to take care of something urgent that we have now before adding anything new,” said McGean. “For staff, for a project to be deemed critical, it would need to be funded for reasons of public safety, to repair failing critical public infrastructure, or because the project is already underway.”

After hours of debate, the board finally approved a list of projects deemed critical and to be funded in the coming year’s budget with a price tag of around $ 1.5 million. These projects include the continued paving of streets, the replacement of a section of the Chicago Avenue bulkhead near 4e Street, upgrading the communication system at the public security building, repairing the elevator at the fire department, continuing to clean the storm drains, replacing the patio at Sunset Park and replacing it off the gym floor in Northside Park.

live ocean city webcams

The ongoing dredging of the canal was also included in the shortlist with an asterisk. The council agreed to review a contribution of $ 400,000 to the dredging of canals next fall after the realization of the impacts of COVID on the balance of the general fund. It is expected that the impacts of COVID will result in budget deficits that could be offset by the transfer of the balance of funds. If the impacts are not as severe as expected, canal dredging could be added to the CIP’s shortlist next fall, bringing the total cost of “pay as you go” projects deemed critical to around 1.9 million. of dollars.

As for Baltimore Avenue, the council continued to lobby for the North Division reconstruction project at 15e streets, including burying utilities and widening sidewalks, to be considered critical. The State Highway Administration (SHA) has made efforts to repave Baltimore Avenue and bring its sidewalks into compliance with the Americans with Disabilities Act (ADA), but so far it has deferred to the wishes of the city for a major renovation of one of the main entrance doors. in the station marred by countless unsightly electric poles, panels and overhead cables.

However, the project comes at a high price. McGean estimates the project will cost around $ 20 million, of which the lion’s share will be landfill utilities. As such, Baltimore Avenue will likely be included in the city’s next major bond sale. However, on Tuesday, council voted unanimously to form a resolution authorizing an initial expenditure of $ 200,000 to pay for the design work of the various utility companies for the burial of utilities.

Under the plan, the city would be compensated for the $ 200,000 when the next bond sale is completed. Due to the high price tag, McGean cautioned against ranking the Baltimore Avenue renovation too high on the CIP’s Hotlist.

“Baltimore Avenue will be paved by the State Highway whether we do something or not,” he said. “It’s a $ 20 million project that would take up a lot of our bond issuance and limit what we can do with some of these other things.”

There are various sources of funding for CIP projects. For example, many are considered “pay as you go” and are paid from the fund balance. Other major projects, such as Baltimore Avenue, the Downtown Recreation Complex, the Downtown Fire Hall, and stormwater outlet repairs, for example, can be funded through a sale of water. ‘obligations and paid over time. There are also various grants and other revenue generated from user fees to help pay for certain IPC projects.

The city’s stated policy is to maintain a fund balance at 15% of the general fund budget, but that figure has increased in recent years and now hovers above 20%, or around $ 23 million. Assuming that a contribution would have to be made to cover the COVID-related deficits in the current fiscal year, that would still leave around $ 21 million in the fund balance. At the stated target of 15%, the fund balance is expected to be around $ 13 million.

City Councilor Tony DeLuca said he liked the plan to fund the projects listed in the PIC, but wanted Baltimore Avenue to be moved higher on the list. However, he understood that a massive project would be financed by a possible sale of bonds and not included in a “pay as you go” project.

“I love the strategic financial plan,” he said. “There are at least four projects on the list that we all agree are essential. If I draw a line through Baltimore Avenue on this list it makes at least 13 projects and I would like to add a 14e, but we’re only really affected by FY2022 at the moment. “

DeLuca said ranking which projects to include in the budget for the coming year comes down to a few simple questions.

“What can we afford? ” he said. “What can we predict? I would really like to see Baltimore Avenue move. We have to start now and there are things we can start on with the design work. “

McGean said staff understood the council’s desire to move forward with the Baltimore Avenue project.

“We have heard loud and clear how important this project is to you,” he said. “When this process is complete, we will get back to you with estimates for the design. Our list of one to six projects is the one that is critical and needs to be done now. “

Public Works Director Hal Adkins said the design work for the utility burial on Baltimore Avenue was a necessary first step in the process.

“If the council is dedicated to this project, we can move forward almost immediately with the design of the underground,” he said. “It will be the biggest challenge for us in terms of timing.”

McGean presented a graph showing the city’s projected debt service over the next several years. According to the chart, debt service would peak over the next several years, especially with the addition of bond sales for Baltimore Avenue and other major projects, but would start to decline over the years as that part of the current debt will be written off. However, he warned that Baltimore Avenue could limit the projects that city could undertake in the years to come.

“The debt service projection increases in 2024 with the Baltimore Avenue project,” he said. “That’s an addition of $ 2 million each year to the general fund. It goes beyond what we are currently paying for debt service and brings us to 2027 before we can do anything else. “

However, City Councilor John Gehrig said the city should consider taking advantage of historically low interest rates at this time.

“If we’re going to borrow money, let’s not drag our feet,” he said. “We are playing with fire with interest rates. They will only go up.

There are certain sacred cows in every PIC for Ocean City, including, for example, paving streets, dredging canals, and cleaning up storm sewers. Gehrig asked why these projects are not considered ongoing maintenance projects and included as items in the general fund budget each year. However, it was explained that these critical projects should be included in the CIP in order to identify a dedicated funding source.

In terms of dredging the canal, McGean explained that it has been a top priority for several years, which is why it is still included in the CIP as a critical project. However, he said the city has made significant progress in dredging the canals in recent years.

“If you asked me five years ago, I would say it was essential,” he said. “We’ve done a great job clearing most of the shipping channels and it’s not as critical now. At this point, I don’t have any channels that I consider critical. Could we take a one-year break? I think so.”

McGean said canal dredging could be added to the list next fall when the picture for fiscal 2021 becomes clearer.

“We can’t dredge during the season anyway,” he said. “We can see how the summer goes with the funds balance and everything is ready to be cleared next fall if you want to add canal dredging to the critical list. “

Replacement or relocation of the Midtown fire station to 74e The street has long been on the city’s radar, but the mayor and council rated the project as less important and staff rated it as very important. McGean explained that he should probably be added to the Critical List soon.

“With the downtown fire station, there was a big gap between the mayor and the council and the ranking of staff,” he said. “We honestly think this is getting critical and the chef will tell you. This existing building is obsolete.

After considerable debate, DeLuca proposed to include the list of projects deemed critical with a price tag of around $ 1.5 million in fiscal year 2022 CIP, with a provision to add dredging of the canal to the plan. next fall if funding allows, for a total potential expense of $ 1.9 million. Some council members questioned whether Baltimore Avenue should be included in the shortlist. However, City Councilor Peter Buas said Baltimore Avenue is a separate issue.

“We can prepare a resolution to fund the $ 200,000 for Baltimore Avenue design work from the fund balance and re-indemnify the city for the possible sale of bonds,” he said. “It should not be part of this motion.”

The board voted unanimously to approve the list of projects deemed critical for fiscal 2022 at a price of approximately $ 1.5 million, with the possibility of adding canal dredging if funding permits. after a review of the current exercise.

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Why isn’t Wall Street panicking over exploding debt and deficits? Thu, 11 Mar 2021 08:25:50 +0000

With the national debt of the United States at $ 26.6 trillion, and on the rise, and with the federal budget deficit approaching 4 trillion dollars in 2020, it seems reasonable to ask whether debt and deficits still matter. Is it only when the Republicans are no longer in power in Washington – as they should do from next January if there is justice in the world – that they care about fiscal responsibility?

Right now, the United States is one of the most indebted countries in the world, with a national debt equal to about 137% of gross domestic product, according to American National Debt Clock, in the same postal code as Mozambique and Bhutan. (Japan is the most indebted country in the world, with a national debt at around 238% of its GDP.) Federal budget deficits in the United States have never been greater than they are now in absolute terms. , although as a percentage of the GDP they were much more important, in particular during World War II.

Those economists who say debt and deficits don’t matter these days are the proponents of what has come to be known as modern monetary theory of economics. (That’s a shortcut of course. The real theory is more complicated for sure; don’t @ me.) But what do more mainstream economists think about the growing national debt and growing federal deficits? Do they matter at a time of extreme economic suffering caused by a pandemic that the United States is handling arguably much worse than virtually any other country on earth?

To find answers, I called Jan Hatzius, the chief economist of Goldman Sachs. He says he is not a supporter of MMT, rather, his take on what should be done from a monetary or fiscal standpoint depends on the facts on the ground. “When you’re in a deep recession, Keynesian macroeconomics is, I think, the right remedy,” he says. “Modern monetary theory is fundamentally a more extreme version of Keynesian solutions. For me it depends on the situation you find yourself in.

He is currently comfortable with heavy US debt and budget deficits, mainly because interest rates are at historically low levels, making interest payments on everything manageable – for now. borrowed money. He says interest payments as a percentage of GDP – around 1% – are lower than historical averages. It also notes that the Federal Reserve holds about $ 4 trillion, or so, in national debt and remits the interest it receives on that debt to the US Treasury once a year. “The point is you would have to see a very big increase in interest rates to levels way above what the markets are building or what forecasters are building at this point to create a problem,” he continues. . “It is possible, of course, that we will see a sharp rise in interest rates at some point. I don’t expect it. But you potentially have an increase down the road that could then put more pressure on other priorities in the federal budget. It just looks like it’s a long way away. He says the aggressive fiscal response – that is, the creation of huge budget deficits – was the right thing to do in the current crises.

He also has no problem with the growing national debt, despite Donald trumpthe ridiculous campaign promise of he would eliminate it— Again because of historically low interest rates. Higher taxes would be needed, he says, if interest rates rise and widen deficits further. Until then, he continues, “it’s actually important to have a large market for effectively a risk-free asset like US Treasuries. It’s good for the United States It’s good for the global financial markets to have that kind of deep market for safe asset risk. It all depends on the economic situation you find yourself in. If you are in a deep crisis where the private sector is falling back hard for whatever reason – in this case for health reasons – then the government must step in to keep the economy from spiraling down.

The US and European economies are recovering, albeit “from a very weak base,” he says, because “governments were prepared to intervene very aggressively.” He thinks more fiscal stimulus is both needed and coming – excess unemployment benefits in the order of $ 300 a week, instead of $ 600; more money for state governments; and perhaps another round of rebate checks – by action of Congress rather than by executive order. But there is also a limit to extravagant spending. “If you run big deficits even well beyond the point where the economic emergency is behind you, say two or three years from now and we’ll be back to unemployment rates in the order of 4% or 5%, a lot. closer to normal, and inflation is over 2% – I think at this point I would definitely be in favor of more fiscal restraint and probably also possibly some monetary normalization, ”says- he. “But I just think we’re still a long way from that.”

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BSP: Foreign reserves up to $ 109.08 billion in February Thu, 11 Mar 2021 08:25:50 +0000

Philippine dollar reserves hit $ 109.08 billion in February thanks to central bank foreign exchange operations and income from overseas investments, data showed Thursday.

The level of gross international reserves (GIR) – a measure of the ability to settle import payments and foreign debt service – compares to $ 108.673 billion in January and $ 88.187 billion in February 2020, on the preliminary database.

“The latest level of GIR represents an adequate liquidity cushion, which can help protect the national economy against external shocks,” Bangko Sentral ng Pilipinas (BSP) said in a statement.

The buffer is equivalent to 11.7 months of imports of goods and payments for services and primary income. It is also about 9.5 times the country’s short-term external debt on the basis of original maturity and 5.4 times on the basis of residual maturity.

The central bank said the inflows in February were partly offset by revaluation adjustments to its gold holdings, due to falling international gold prices.

National government withdrawals of its central bank deposits also thwarted inflows during the period. These were used to pay off foreign currency debt obligations.

Net international reserves (RNI) – the difference between GDI and total short-term liabilities – reached $ 109.08 billion from the previous month’s level of $ 108.67 billion. – RSJ, GMA News

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Money printing at the Fed fuels inflation in poor countries – Quartz Thu, 11 Mar 2021 08:25:50 +0000

The Federal Reserve and other powerful central banks have viewed an oddly long period of low inflation as evidence that stimulating the economy through unconventional money-printing measures can ease the pain of downturns. These tactics were traditionally seen as off-limits to less developed economies with unstable politics and weaker currencies.

But Covid-19 changed that. As the pandemic spread, a multitude of central banks from India to Turkey to South Africa have for the first time leaned headlong into their own unconventional monetary policy, known as “quantitative easing”, by buying up public debt and corporate bonds to stabilize their currencies and stimulate their recovery.

Prioritizing economic support for inflation risk seemed like the right decision: many central banks in emerging markets initially offset the impact of the fleeing from foreign investors and rising borrowing costs, while contributing to stock prices. But risks remain for countries that depend on foreign currency borrowing, as this debt can become unsustainable if their own currency declines in value. International investors who invest in emerging market currencies can quickly shrink from signs of market distress.

Falling currency values ​​can in turn be damaging to emerging markets dependent on foreign imports of basic commodities like food and fuel. Countries like Turkey, Brazil and Nigeria are now suffering from the pain of food inflation, a major contributor to headline inflation for many emerging markets.

Food prices are more than half of the inflation index in countries like Nigeria and Bangladesh, for example, compared to around 10% in richer economies like the United States and Germany. Central banks are wary of food price spikes, which have historically been a trigger for civil unrest. Rising food prices under the impulse the fall of Suharto in Indonesia and triggered the Arab Spring.

In Turkey, food inflation has increased more than 20% in one year, in part thanks to the massive bond buying program launched by the government last spring. Food and other commodity prices also rose sharply in Latin America, with Brazil recording its biggest rising inflation in January since 2003 and Threatening Argentina impose taxes or quotas on food exports to control domestic prices.

Some countries have started to ease their monetary policies in response. The Central Bank of Turkey heavily traveled interest rate from November. Brazil’s central bank warned of persistence inflation in January, and launched the possibility of raising interest rates. Russia gears changed on its interest rate cuts in December, opening the door to a rate hike. Colombia makes drastic cuts in economic aid measures to appease cautious foreign investors.

Controversial QE policies can work better in emerging markets that have deepened their domestic capital markets and improved their spending history, like Chile and Poland. For less reliable QE testers like Brazil and Russia, investors will be watching interest rates and inflation closely. Any sudden movement could force countries to prioritize fickle ones traders abroad on domestic needs.

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US economic recovery hinges on risky stimulus package Thu, 11 Mar 2021 08:25:50 +0000

The US Senate approved a $ 1.9 trillion coronavirus relief plan on Saturday. US public opinion and the market have regained confidence, with forecasts that the US economy will experience its fastest growing in decades this year. Some have even said that the United States will once again overtake China to contribute the most to global growth after the approval of the stimulus bill.

In the wake of a $ 900 billion relief plan at the end of 2020, he followed an even larger relief plan of $ 1.9 trillion. The new administration and the Federal Reserve both appear determined to adopt strong “flood-worthy” stimulus policies. The short-term effects are not difficult to achieve, but the long-term side effects are obvious and the risks are high, especially when the US national debt is 137% of its GDP.

Having learned of the side effects of strong stimulus policies adopted at home and abroad, China has since refused to adopt strong stimulus policies “like flooding.” When the economy was hit hard in 2020, China remained tight. The reason the United States has adopted large-scale quantitative easing policies is because its system encourages the pursuit of immediate interests and the current administration does not have to worry about the side effects to it. ‘to come up. However, this does not work in China.

In addition, the US dollar enjoys global currency status, and excess dollars distributed to the public are easier to disperse outside of the United States than other currencies. To some extent, the world is paying for U.S. quantitative easing, which also relieves pressure on the U.S. government when it increases debt.

But at this rate, the US economy is like a dangerous system under increasing pressure which, according to common sense, is doomed to explode sooner or later. It may bring short term prosperity, helping to realize the market rebound last year, but it also puts a huge thunderbolt on its head as well as the world.

Take the American stock market. It’s almost a quantitative easing bubble, and everyone knows it. Many people predict that the US stock market will collapse sooner or later, with some analysts suggesting that the US stock market needs to be cut in half before it returns to normal. However, rounds after rounds of quantitative easing encouraged investors to take the bet together and extend the bet.

The United States sees itself as the world leader, but it actually creates more risk for the world. The United States faces a growing number of governance gaps. Instead of fixing them, he covers them by printing more money and playing geopolitical maps. Rather than eliminating the risks, it pushes them outward and backward, and it’s not a good role model for the world to follow.

In doing so, US monetary policy is rendering small economies a dead end. Small economies cannot grow by issuing debt. They use the US dollar in much of their business and fear exploitation.

In addition, not only the investment industry but the public opinion of the United States are so excited about the rapid economic recovery in the first quarter and are delighted to talk about the fact that its economy in the fourth quarter of the year last achieved positive growth faster than Europe. They seem to have forgotten that the fourth quarter of last year and the first quarter of this year are the two periods when the highest number of Americans have died from the COVID-19 pandemic. Economic data which is better than that of Europe has come at the cost of people’s lives and health. It is not worth any pride.

The United States is a purely capitalist country where the interests of capital are at the center of the country’s value judgment. Many Americans can get $ 1,400 in rescue assistance from the $ 1,900 billion stimulus package, but that is not the ultimate goal of this measure. They are just used to facilitate the process of profiting from capital. That will not change, whether before, during or after the pandemic.
Source: Global Times

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China’s retail king’s woes dampen Xi Jinping’s fantasy Thu, 11 Mar 2021 08:25:50 +0000

When Zhang Jindong tied the knot with his billionaire colleague Hui Ka Yan and swallowed a glass of baijiu in 2017, the king of chinese retail had much to celebrate.

His Suning group had bought Inter Milan, the prestigious Italian football club, the previous year for € 270 million. Its streaming service, PPTV, had landed a $ 700 million contract to broadcast the English Premier League to homes in the world’s most populous country. And back in China, he recruited the local team of Jiangsu FC, thus strengthening his investments in the country’s young professional league.

The acquisitions put Zhang at the heart of Xi Jinping’s ambitions to use football – a sport the president loves – as a way not only to animate Chinese youth, but also to expand the country’s influence abroad. .

But four years later, the debt problems of Zhang’s vast conglomerate have reverberated far beyond its Suning stores and websites. The dismantling of its football empire signals a sharper turning point in Beijing’s approach to soft power at home and abroad: away from reliance on high-profile tycoons and corporations like Suning and return to the directing hand of state control.

Jonathan Sullivan, an expert on Chinese politics at the British University of Nottingham, pointed out that many of the central pillars that underpin “football dream” remains unchanged.

These cover dozens of Chinese-built stadiums in the developing world, with marketing agreements boosting the global exposure of Chinese brands, strengthening the country’s presence in sports governing bodies and training a generation of sufficiently skilled footballers. to compete on the world stage.

“All of these things are long-term projects that continue. What has changed is the place of private investment in football, ”said Sullivan.

In a first signal that Zhang’s strained coffers would have ramifications for his sporting interests, PPTV lost its rights to broadcast English football in September. This year, as a dispute over the broadcast deal lands in UK courts, Suning asked for $ 200 million in emergency cash and new partners to help consolidate finances of Inter Milan.

With imposing debt securities, Zhang’s potential departure from European football would be the latest in a chain of similar outputs ever since Beijing has tightened capital controls in recent years following a torrent of outward investment. The list includes Atlético Madrid in Spain, Aston Villa in the UK and Slavia Prague in the Czech Republic.

Suning’s debt problems have also hit much closer to home. Jiangsu FC went out of business on February 28, a blow to fans and players just months after winning China’s top soccer competition, further shaking the league defended by the president.

The Chinese Football Association shed little light on the developments in a public notice, but club supporters were less opaque: “Simply put, Suning is out of money,” a fan wrote on the networks. social.

Zhang Jindong during a Serie A match between Inter Milan and AS Roma in 2017 © FC Internazionale via Getty

Zhang, 57, founded Suning in Nanjing, east China, in 1990 as a home appliance retailer. It grew rapidly, filling the homes of the growing Chinese consumer class with air conditioners, washing machines and televisions.

But, like many once-dominant businesses on Main Street, Suning struggled to switch to e-commerce, losing to Alibaba, JD and Pinduoduo. On the very day of Jiangsu FC’s abrupt shutdown, Suning confirmed a state-backed investment in its online retail unit, The bailout led Zhang and other major shareholders to sell nearly a quarter of their stake in the company for $ 2.3 billion.

Suning declined to comment. Zhang is committed to refocusing on its core retail business, including expanding its e-commerce unit, Yunwang Wandian.

Zhang’s cash crunch, however, appears to have intensified due to his connection to Hui’s Evergrande, the the most indebted real estate developer.

In 2017 – the same year, Zhang was photographed drinking the traditional liquor with Hui, then The richest man in China – Suning has invested 20 billion Rmb (3.1 billion dollars) in the continental branch of Evergrande. Last year, a stock market listing of the unit did not go as planned, meaning Suning was denied both the benefits of the IPO proceeds and its cash investment. original.

Suning’s retirement also coincided with the Chinese Communist Party take better control on private enterprise.

Simon Chadwick, a global soccer trade expert at Emlyon Business School, said the exodus of Chinese club owners reflected a change in Beijing, which no longer wanted companies or entrepreneurs to run its football diplomacy.

“What is very clear about China is that there is still a very strong connection between the interests of the state, the direction of government and what these companies are doing,” Chadwick said. Suning “is not a company that has bought off Italian football in a capricious way, nor[did it do so]for purely commercial reasons ”.

Instead, analysts expect Beijing to prioritize exercising its influence over governments, especially in countries where it has critical infrastructure built, and at Fifa, sport governing body in difficulty. This pressure is seen as part of China’s strategy to host the World Cup in 2030, the tournament’s centenary year.

As the blow to private capital in football threatens to temper Xi’s ambitions in the sport, Sullivan was skeptical that the Chinese leader would suffer any fallout.

“Xi’s power is ingrained enough that it would take a lot more to damage it,” Sullivan said. “It hurts the football reform agenda that he encouraged, but it’s not hard to blame it on … private companies and / or Covid.

Given booming investments in China, foreign money may soon reach Chinese football clubs, Chadwick added.

“What China is doing right now is cultivating the conditions in football to attract investment from abroad,” he said. “We could see the resurrected Jiangsu with Volkswagen as the jersey sponsor or an American private equity firm as the owner.”

Additional reporting by Sherry Fei Ju in Beijing

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