Bill Owens: Confounding And Confusing Events 7/19/21

On the Covid front, summer camps in Texas, Illinois, Florida, Missouri and Kansas experienced significant Covid outbreaks, and in some cases, they have spread to the local community.  Obviously, the reason for this is the youngsters attending the camps have not been vaccinated.  Does this portend outbreaks in the fall when school resumes?  It seems only logical.  Hopefully, we can move the vaccination age even lower since this could have a devastating effect on the children, as well as the families.

Continuing on the Covid issue, locally vaccination rates are 59.7% in Clinton County; 60.6% in Essex County; 71.7% in Hamilton County and 65.4% in Warren County, reflecting at least one dose has been taken, these numbers are not stellar, and are not going to adequately protect us (maybe any of us) as variants evolve over the next year.  Late in the week Essex County reported an uptick.

On July 12^th, a formal Change of Command Ceremony took place ending our 20 years in Afghanistan.  It is clear that Afghanistan is under siege, and whether or not they will be able to withstand the onslaught of the Taliban is unknown, but also unlikely.  Whether we can come up with a peace package that would allow the antagonist to settle the dispute, within the bounds of Afghan history and culture is certainly unclear.

A report from the Washington Post indicates that significant numbers of people have dumped goldfish into lakes, obviously in warmer parts of the country, and they are growing into football size fish.  They are, in fact, an invasive species and are disrupting the ecology of these bodies of water.  These fish get to extraordinary sizes and contribute to poor water quality by mucking up the bottom sentiments and uprooting plants.  The message here is any fish or animal released into local waters or the local environment are, in fact, an invasive species and will disrupt the ecology of your region.  Clearly, the message is, don’t dump them.

The Wall Street Journal reported on the walk-out by the Texas Democrats in an attempt to stymie the voting rights bill which Republicans were attempting to pass in the Texas Legislature.  The Republican Governor of course called it a political stunt without taking credit for his own political stunt - the legislation itself.  This legislation is dressed up to look like an attempt to enhance voting, but rather, it is really an attempt to suppress voting by minorities and others who would vote democratic.  Are there some actions that could be taken that would enhance the sanctity of the elections and ensure fairness, there clearly are, but that is not the intention of the Republicans in Texas, nor in any other state in the United States that is passing this type of legislation.

The US Labor Department reported that the CPI rose the most in 13 years during the month of June.  This led to a rise in the US dollar to a 5-day high against a basket of currencies, which is a typical reaction when inflation appears to be gaining strength, as reported by Reuters and Treasury yields rose, as well.

The withdrawal from Afghanistan, although wholly appropriate in my view, leaves open the question how we handled Afghanis who have served along with us.  General Milley, Chairman of the Joint Chiefs said it best, “I consider it a moral imperative to take care of those that have served along our side”.  Mr. Biden pledged to offer the opportunity to the Afghans who have served with us to be relocated to the United States, and to the extent those brave people take another alternative, then we should take all steps necessary, including financial, to make that happen.  We don’t need to lose any more American lives, and the Afghans who served with us shouldn’t lose theirs. 

The Wall Street Journal this week led with a headline “Government Worldwide Gorge on Record Debt, Testing New Limits”.  The United States has certainly moved in that direction with deficits in the $3 trillion range for the last several years, under both President Trump and President Biden.  One new twist is a change in economic thinking, which has moved away from viewing debt as a threat to essentially saying the debt is not something that government needs to worry about, and it could usher in robust local growth.  Nonetheless, there will be large mounds of debt that can only be absorbed by inflation, high taxes or even default.  The markets have largely ignored this growth in debt, and seem unmoved as long as the Fed fails to raise, or raises only slightly interest rates.  The yield on Treasury bonds remains low, if that changes, and Treasury bonds and the yield begins to rise, then we are likely to see both increased pressure on the debt because it will cost more to carry it, as well as inflation.

The Wall Street Journal reported recently that there were four reasons why inflation was gathering steam.  The first are those goods whose prices dropped during the pandemic, but are now rising – think airline tickets.  The second are those rising because supply is not matching demand, but may readjust once supply catches up.  Third, those that rose during the pandemic and are standing pat.  Fourth, those products whose prices have slowed versus essentially increasing.  Classic supply and demand coming out of an unprecedented environment.  No surprise, we can’t predict it.

China is reporting slow growth in the last quarter after seeing growth in the first quarter that was at an 18.3% rate dropping to 7.9% in the second quarter.  Chinese economists are saying that this is the result of the fact that the Chinese economy picked up quicker than the rest of the world and is now fully recovered.  This is belied by the fact there is such a dramatic slowdown in the delivery of products from China for a wide variety of reasons which clearly is impacting their export activity.  If the growth is largely coming internally, then even 7.9% is very impressive.  This does bear watching.

Unemployment insurance claims dipped to the lowest level since the beginning of the pandemic at 360,000.  This is clearly good news and we now have to see how many of those unfilled jobs remain empty since if we are getting close to a full recovery on the employment side, where are the people going to come from to fill the vacant jobs.  This is yet another conundrum that has developed after the pandemic for which we do not necessarily have a clear answer.

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