Bill Owens: Confounding And Confusing Events 8/10/20
Barron’s recently reported that consumer spending grew 21% in what they described as massive recovery, but then, in the body of the story, as opposed to the headline, they say that spending still is 9% below February, that $2.7 million mortgage forbearance payments are set to expire in September, setting the stage for a second housing crisis. The latter dovetails with the expiration of the moratorium on evictions this past month, the cumulative effect will be extraordinary pressure brought to bear on millions of people relative to their housing situation. This coupled with the failure to continue the extra UI payments of $600 a week will have to be carefully watched to determine what impact the combined events have on the overall economy. Clearly, the Barron’s article had good and bad news, and depending how much you read, versus just reading the headline (which I note is true in much of the media), you could miss the complete facts of the story.
Vice President Pence in a news conference this past week announced that mail-in ballots were ripe for fraud, but mail-in absentee ballots are not. I and many others are scratching our heads, what is the difference? It must be that the post office will be alerted when the ballot is an absentee ballot by some marking and process that while mail-in ballots won’t have that marking. Presumably, in both cases, they check the ballot against the voter rolls, including past signatures, street addresses, etc. Our friends in the administration continue to confound us.
Reports continue that the dollar is sliding, and as I commented last week, that creates a number of problems for our economy and for the world generally.
POTUS announced that Microsoft should pay “key money”, in other words a finder’s fee or brokerage fee, to the US Treasury, as a result of its deal with Tic Tok. At least he is creative.
Surveys amongst American, Mexican and Canadian businesses show that their receivables are reflecting increases in overdue payments. In business this would be called aging of your receivables, and if you are looking to get paid in 30 days, and you are now getting paid in 90 days, that presents a number of problems in terms of replenishing inventory, needing to increase borrowing, and raises the specter of the value of those receivables as collateral when you are looking for a loan and as banks analyze existing loans. As in every other economic crisis, this varies from region to region, but nonetheless, bears paying significant attention to these numbers. Securing verifiable information is another challenge, whether that is on the part of banks, or vendors selling to one another. Obviously, that can have a ripple effect if you sell to company A, and company A doesn’t pay in its normal 30 days but strings you out for 90 days, then that puts the squeeze on the seller including payments to its creditors and vendors. Again, let’s hope that the next package of COVID aid has some creative programs which can help businesses deal with these issues.
Another 1.2 million Americans filed new claims for first time unemployment benefits, but overall benefit claims have fallen during the last two weeks. A bit of an inconsistency and where those folks have gone is unclear. Employment increased by 1.4 million so jobs are being created.
Agricultural bankruptcies are up about 8% this year even though there have been higher levels of payments from the Federal Government than ever before. A combination of factors, including the pandemic, the disruption in trade due to the Trump Administration’s trade policies have all contributed to hard times in AG. There have been a number of conversations in the media about food supply being depleted which in normal times would mean as supply goes down even if demand stays the same, the prices should go up. That does not appear to be happening. The world of COVID and Trump trade policies has literally turned this process upside down. The likelihood that this trend continues for some period of time, is quite strong, and of course, the loss of farms and farmers creates any number of risks to the food supply and the economy which we’d rather not have to deal with at this juncture. It will be interesting to watch this process as we know that Mr. Trump is dumping money into agriculture because that has been a strong base for him and yet it does not seem to be accomplishing at least 1 goal—staving off bankruptcies. One can only wonder why that is or is it like all of his other policies, basically, window dressing with no thought about the substance that needs to be included in such policies.
A report concerning Homeland Security officials was very disturbing this week, as the head of the department’s security branch, a former FBI agent by the name of Brian Murphy was collecting dossier’s on protesters and journalists. This brings the ghost of J. Edgar Hoover back to us in a troubling fashion. Much to my surprise, this activity was shut down, Mr. Murphy transferred, and an investigation was initiated. This type of activity in conjunction with the deployment of Homeland Security forces in Portland, Oregon, not to protect federal buildings, but rather to chase down protesters who may not have been involved in any attack on a federal building, raises the specter of an out-of-control Justice Department, and of course, POTUS.
The GOP announced that no reporters will be allowed into the nominating convention. If the news media had the intellectual and emotional self-control necessary, they would simply not cover the convention, at all. This would be the best payback to the Republicans and POTUS that could be imagined. Just remember, it was the media that followed POTUS’ every word prior to the 2016 election, and likely propelled him to the nomination and to being elected. Let’s hope they learned something from that.
In terms of foreign policy successes, it was announced that the North Korean economy grew in 2019, despite international sanctions and pressure from the United States. It appears that another strategery by Mr. Trump flopped. The news coming from China and that relationship also continues to sour, so it is hard to see how any successes have been or will be had in international trade or other diplomatic settings in Southeast Asia.
Canada imposes 2.7 billion in tariffs in retaliation for tariffs on aluminum. POTUS issues executive orders in an end run of Congress. More on these issues next week.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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