Category Archives: Economy

As the wealthy flee New York, poorest will be most affected, by Kristin Tate

New York City and State are becoming anti-magnets for younger people seeking opportunity. From Kristin Tate at thehillcom:

Are you a young person thinking of moving to a happening city? Chances are New York is not even on your list of potential hotspots, and if you are already living there, then you are looking for a way out. The last dividends of 20 years of leadership under Rudy Giuliani and Michael Bloomberg are being squandered by well intentioned but increasingly radical policies.

Dragging business practices, skyrocketing taxes, telecommuting, and loss of special status is a toxic mix for New York. Among young people, New York is becoming passe. During recent years, both the city and the state of New York have lost residents, as waves of educated and high earning millennials have fled. In fact, more than 46 percent of New Yorkers of all ages moving out of the state are in the bracket earning above $150,000.

The Empire State budget is in near freefall, in no small part due to lower revenue from middle class and upper class workers, while growing stateslike Texas and Florida are in surplus. Governor Andrew Cuomo noted a $2.3 billion hole in the state budget earlier this year, caused largely by oppressive policies that have gutted the local population and economy. More than 450,000 people moved out of New York in the last year alone.

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The Financial War Escalates, by Alasdair Macleod

Both China and the US will need to borrow a lot of money, and the competition for those funds could turn into a war. from Alasdair Macleod at goldmoney.com:

Behind the scenes, the financial war between America and China is escalating dangerously into a war to secure global financial resources.

At a time of growing liquidation of dollar assets by foreigners, the US Treasury’s internal analysis will highlight future government funding problems in the light of a developing US recession. This will result in an overdependency on inflationary financing, threatening to destabilise the dollar’s purchasing power. For these reasons, America needs foreign portfolios to invest in US Treasuries, at a time when China also needs them to help finance her infrastructure plans and future development. We face a battle for these funds, and the outcome will determine all our futures.

Introduction

When you see a rash, you should look beyond the skin for a cause. It has been like this with Hong Kong over the last few weeks. On the surface we see impressively organised demonstrations to stop the executive from introducing extradition laws to China. We observe that university students and others not much older are running the demonstrations with military precision. The Mainland Chinese should be impressed.

They are unlikely to see it that way. The build-up of riots against Hong Kong’s proposed extradition treaty with the Mainland started months ago, supported and driven by commentary in the Land of the Free. America is now coming out in the open as China’s adversary, no longer just a trading partner worried by the trade imbalances. And Hong Kong is the pressure point.

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Square Minus Zero, by Raúl Ilargi Meijer

Central banking is killing the global economy. From Raúl Ilargi Meijer at theautomaticearth.com:

I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.

And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.

But it doesn’t, because the people who pretend they’re in those markets hang on central banks’ every word for their meal tickets. These are the same people we once knew as traders and investors, but who today function only as rich socialists sucking the Fed’s teats for ever more mother’s milk.

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Brick-and-Mortar Meltdown Gets Costly for Big Retailers, and Results May Vary, by Wolf Richter

Online sales are both making and breaking the retail trade. From Wolf Richter at wolfstreet.com:

Ecommerce and the globalization of retail crush distribution channels, wholesalers, local retailers, large retailers, prices, and margins. 

Walmart, Macy’s, Best Buy, Home Depot, Nordstrom, etc. — they all spend vast sums of money building out their ecommerce sites and their fulfillment infrastructure. And the big lump-sum figures are starting to show up in their regulatory filings.

Other major retailers didn’t take the threat of ecommerce seriously, and didn’t have the funds to take it seriously, as they were squeezed by the private-equity firms that owned them, and just put up a website, hoping for the best: Many of them have gone bankrupt. This includes notably, Toys R Us, Sears and Kmart, Bon-Ton Stores, Borders Books, Claire Stores, Sports Authority, Limited Stores, and Payless Shoe Source.

Now the brick-and-mortar survivors are scrambling furiously to get on top of this existential threat that many had blown off for years as irrelevant to their business, thinking that this whole ecommerce thing was overblown, and that ecommerce is only a small part of retail, that it was too small to worry about, etc. etc.

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CA Voters Not happy With Free Medical for Illegals, by Sarah Cowgill

California now requires citizens to pay for their medical and subsidize free medical care for illegal aliens. Needless to say, many are not too happy about this. From Sarah Cowgill at libertynation.com:

As the California state legislature and Gov. Gavin Newsom dislocate their shoulders in the hearty backslapping of their self-congratulatory moment in American history, the rest of the nation is snarling and spitting over the lunacy of the left coast Democrats.  That is, according to the new Rasmussen Reports poll, which asked if illegal immigrants should receive free health care.

The answer was a resounding no.  No way, no how, nuh-uh, nada.

It was a brief two-question survey that spoke volumes: “Do you favor or oppose making health care benefits available to young low-income illegal immigrants in your state?  Is it offensive to refer to someone who has entered this country illegally as ‘an illegal immigrant?’”

Out of 1,000 online and telephone respondents, “31% of Likely U.S. Voters favor making health care benefits available to low-income illegal immigrants under the age of 26 in their state. Fifty-five percent (55%) are opposed, while 13% are not sure.”  One can only imagine the responses to question number two.

The only surprising statistic is that 13% had not yet picked a side in what might be the watershed issue for 2020 presidential candidates.

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Draghi Punts, Trump Grunts, Gold Bunts, by Tom Luongo

The world’s central banks are running out fingers to stick in the dyke of the increasingly leaky global financial system. From Tom Luongo at tomluongo.me:

For months now the markets have been in denial that ECB President Mario Draghi has any answers to the Euro-zone’s problems. Today’s statement confirms what anyone with eyes to see has been saying.

There is no Plan B.

Draghi started the year saying he would end his various QE programs and by June he’s not only put them back on the table (New TLTRO in September) but has now opened up the possibility of taking rates lower.

Draghi told an ECB conference in Sintra, Portugal, that “further cuts in policy rates… remain part of our tools.” He added that there was “considerable headroom” to re-start bond purchases, which inject newly created money into the financial system in the hope of boosting lending and economic activity.

Draghi has been exposed as swimming naked, as Warren Buffet would put it.

The fun part is that Draghi used the cover of Trump’s trade war with everyone to justify a policy that was inevitable anyway.

In response, President Trump piled on accusing Draghi of being a currency manipulator. And then announced his upcoming meeting with Chinese Premier Xi Jinping to hammer out a trade deal.

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Meanwhile In China, Echoes Of Lehman As Interbank Market Freezes, by Tyler Durden

Short-term funding pressures bespeak fundamental problems in massively leveraged China. From Tyler Durden at zerohedge.com:

One month ago we wrote that in the aftermath of the shocking government May 24 seizure of Baoshang Bank – not shocking because the bank failed as most Chinese banks are insolvent if left to their own devices due to the real, and far higher levels of non-performing loans, but because the government allowed it to happen in the open, sparking fears of who comes next (and when) – the PBOC “finally panicked and injected a whopping net 250 billion yuan ($36 billion) into the financial system via open-market operations, as it fills what traders have dubbed a growing funding gap following the Baoshang failure.”

In retrospect, the PBOC failed to restore confidence in the stability of the Chinese banking system, and since then things have taken a turn for the far worse.

Yet with the world fixated on the U.S.-China (Mexico, Europe, etc) trade conflict, it is easy to understand why many have brushed aside the Baoshang harbinger and its consequences which have exposed giant fissures under China’s calm financial facade and are gradually freezing up the Chinese banking system.

As the WSJ writes, on Sunday, China’s securities regulator convened a meeting asking big brokerages and funds to support their smaller peers, according to a meeting summary circulated among industry participants Monday. The briefing cited rising risk aversion in money markets after defaults in the bond repurchase market.

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