JPMorgan becomes first major bank to say first-quarter GDP will decline because of Covid surge

     The JPMorgan economists become the first to disagree with Wall Street's forecast of 2021 Q1 showing positive economic growth and instead say that due to the recent surges in covid cases the first quarter of 2021 will be negative. They see the economic growth shrinking down by one percent in the first quarter and then rising to 4.5 in the second quarter and rising even more to 6.5 in the third quarter of 2021.This all being said JPMorgan economists still think that the year 2021 will be met with good expansion in the second and third quarters due to the hopeful development of a vaccine . Not only are they predicting that the positives of a vaccine will help the economy but more stimulus checks will help the economy to see increased growth in the second and third quarters as well.  In the end, the JPMorgan economists believe that this growth we were experiencing in the months after the shutdown was the economy opening up but now the majority of the economy is opened and running and now we are facing restrictions that will slowly close the newly opened economy, Sadly the side effects will be decreased growth from q4 of 2020 to q1of 2021. Hopefully, the positives of a vaccine and more financial help from the government will help the economy grow and move past the restrictions after they are implemented in 2021.

Do you think these factors will help the economy to see growth?

https://www.cnbc.com/2020/11/20/jp-morgan-says-first-quarter-gdp-will-decline-because-of-rising-covid-cases-and-restrictions.html

US economy to shrink as surging coronavirus infections foreshadow 'grim winter'

JPMorgan Chase & Co. expects that the U.S. economy will shrink in the first quarter as states push back coronavirus reopening due to the new a wave of Coivd-19 infections, as the daily new number of cases amount to more than 141,600 on Sunday, and there have been 12.3 million cases reported in The U.S. and nearly 257,000 deaths. A JPMorgan a team led by chief U.S. economist Michael Feroli said that “The holiday season, from Thanksgiving through New Year’s threatens a further increase in cases.”

Feroli mentioned “The new measures will cause the U.S. economy to shrink by 1% in the three months through March after growing 2.8% during the final quarter of 2020,” stating that a vaccine will “limit the damage.” However, the firm forecasts that the U.S. economy will grow at a seasonally modified annualized quarter-over-quarter rate of 4.5%, 6.5%, and 3.8% in the final three quarters of next year.

Feroli further added that “One thing that is unlikely to change between 2020 and 2021 is that the virus will continue to dominate the economic outlook.”

What do you guys think?

https://www.foxbusiness.com/markets/us-economy-shrink-coronavirus-infections-surge-jpmorgan

Expiring Stimulus Programs threaten US Economy

Several critical COVID-19 economic relief programs will expire at the end of the year, which could force millions off of unemployment insurance, push many small businesses to close permanently, and raise the specter of mass evictions. This could threaten the stability of the US economy as the country enters an uncertain 2021.

In March, during the early days of the coronavirus pandemic, the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, quickly passed both houses of Congress with bipartisan support, providing a lifeline to recently laid-off employees and businesses that were forced to close due to COVID-related shutdowns.

However, this legislative comity quickly dissipated as the pandemic wore on. The $3 trillion Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, which followed the CARES Act, passed in the US House of Representatives in May but was stymied in the Senate. While Democratic House Speaker Nancy Pelosi championed the bill, GOP Senate Majority Mitch McConnell deemed it too expensive.

Stimulus gridlock has largely ensued ever since, with Treasury Secretary Steven Mnuchin working with Pelosi and McConnell for months with little progress. Pelosi wants a $2.2 trillion stimulus package, while McConnell has sought a $500 billion plan, but the leaders have not hashed out a compromise. Nor have their staffs worked together to forge any consensus on a potential bill. On November 19, Mnuchin expressed his desire to have $580 billion in unspent stimulus funds redirected to small businesses and extend unemployment benefits. It is unclear if this will occur, however, as it requires Congressional approval.

Do you think President-Elect Biden will be able to get stimulus package approved through the Congress?

https://www.businessinsider.com/stimulus-programs-cares-act-economy-covid-19-pelosi-mcconnell-trump-2020-11

October Home Sales see a 26.6% Increase

 Within the month of October, sales of existing homes soared well past expectations. In fact, sales rose 4.3% from the month of September and 26.6% annually. Also, in an interesting note, the median price for homes sold in October was $313,000 which is up 15.5% annually. This is actually the highest median price on record and reflects "the far stronger sales on the higher end of the market". 

I believe that this can be accredited to the extremely low interest rates that this country is seeing. More people are taking out loans and buying houses. The housing market is seeing a low supply and very high demand. From this, it is expected that prices increase as there is a shortage of the product.

My question for this would be, the housing market continues to increase when it is expected to "correct" and go into a decline, do you see this slowing down anytime soon? If you think it will, what are the indicators for your claim? 

https://www.cnbc.com/2020/11/19/october-existing-home-sales-see-spectacular-26point6percent-annual-increase.html

Vietnam Economy is Asia's Shining Star During Covid

 https://www.bbc.com/news/business-54997796

There have been many countries in the world that have gone through significant struggles over the past 8 months. Vietnam has actually come out of Covid doing quite well comparatively. They were able to get Covid under control pretty quickly and have been able to obtain a positive growth rate of over 2%, while many other countries will experience a negative growth rate this year. Another part of this growth has been in part due to a relationship with U.S., especially since the trade war has begun with China. Vietnam has become a spot for U.S. businesses to outsource to in search of cheap labor to make high end products. For example, Apple has started working on a production line that will produce Airpods in Vietnam. Vietnam has increased its exports to the U.S. by 23% in the first three quarters of this year. These are big steps forward for Vietnam in becoming one of the more developed countries in the world. 

Do you think that Vietnam has handled Covid so well because they didn't have the back stop of health infrastructure that say the United States has? With Vietnam's growth, what future problems is it possible that they have as they expand faster than the average developed nation?

U.S. companies with China operations look to the Asian giant for growth

https://www.cnbc.com/2020/11/17/china-important-for-us-businesses-hit-by-the-coronavirus-pandemic.html

The Covid-19 pandemic is not expected to prevent China from being the only economic power to experience positive growth in 2020. At least that is what caused the sharp rise in GDP in the third quarter. But the reliability of these data is questioned, suggesting a willingness of the Chinese authorities to take liberties with the economic reality as Beijing prepares its new five-year plan. These good results support the official rhetoric of the regime, which has repeatedly praised the resilience of the Chinese economy despite a very violent initial shock (a drop in GDP of 6.9% in the first quarter). These figures also seem to validate the policy pursued by Chinese leader Xi Jinping, who imposed draconian measures at the start of the year to contain the spread of the coronavirus in his territory. As related to US companies with Chinese operations, the article states “U.S. multinationals’ majority-owned affiliates in China brought in sales of $392.7 billion in 2018, up 4.8% from a year ago, according to the latest available data from the U.S. Bureau of Economic Analysis.” How do you think that disparity in economic recovery is going to affect multinational companies with China operations?

Is vaccine an elixir for all of economic woes?

 The world is facing dire consequences of the coronavirus pandemic. Lockdowns, social and travel restrictions, disruptions of production, cut off supply chains have created a new face of the world. Big economies are putting in a lot of cash to keep the economy afloat. The Winter surge of COVID-19 has raised new and complex questions.  is the vaccine a solution to all the problems?

Will it be an elixir to the economic woes? How quick? How far?

An effective vaccine, without any doubt, has kindled hope of getting back to normal. But the estimation and expectations of policymakers that the pandemic would be under control within a matter of months have already been failed. Clinical trials are taking place globally while Pfizer and BioNTech are on the way to get authorization by the end of this month.

While a successful vaccine will help the economy to recover in the upcoming months, but this recovery is dependent on many factors. First of all, the trail is demanding. It will take many to test and administer the vaccine to enough people before mass production. Lockdown measures have been reimposed across the West will further hinder difficulties to achieve the targets. Mass production of a vaccine that is needed globally is another challenge along with its availability. 

The price affordability also plays a key role in how easily accessible it will be and how quickly it is distributed. Wealthy and developed countries will undoubtedly be able to address the pandemic first as many countries have already placed orders for the vaccine in huge doses. This raises the question, “How long will it take for developing countries to get their hands on the vaccine?” At the end of the day, many experts think it will take up to two years to fully recover from the effects of the pandemic and for things to back to the normal speed of life. 

https://www.wsj.com/articles/a-covid-19-vaccine-would-boost-the-global-economy-but-not-all-at-once-11605087345

Small toy stores are worried they won't stay in business after this year.

 

The Winter holiday season is typically regarded as the busiest time of the year for small toy stores. Small toy stores experience a record number of sales during Thanksgiving and Christmas. Since the demand for toys and gifts increase during the festive season, shop owners expect more than usual traffic in the stores. However, this is not the case this year because the pandemic has forced people to stay inside and avoid public places. Since the pandemic, we have seen how businesses are adopting e-commerce activities and implementing strict health & safety guidelines. Similarly, consumers are also adjusting to online shopping creating a new normal. 

The small toy store retailers are concerned about the implementation of new operational protocols. They can’t keep up with their forecasted sales since there is a limit on the number of people allowed in a small retail outlet. Similarly, with low sales, it's difficult for them to maintain the expensive PPE inventories. Furthermore, small retailers in the toy industry don’t have the necessary resources to shift their businesses online overnight. This is where big businesses like Amazon and Big Box have an advantage over small toy stores. They can benefit from a situation like these by capitalizing on the customers lost by small toy stores. Experts suggest that this holiday season can further widen the gap between large chains and small toy stores. Do you think that the small toy store industry will be able to survive? 

https://www.cnn.com/2020/11/14/business/toy-stores-small-business-amazon/index.html 

Here are the things that scare Jerome Powell the most about the economy right now

In the article they talk about the many concerns that the chair of the Federal Reserve, Jerome Powell, has about the long term effects of the coronavirus. He says that he is worried about the long term affects on the children who are not getting the proper education due to the pandemic and the many business owners who have struggled as a result of the pandemic.

He also asserts that although we are recovering, our economy will not go back to what it was before the pandemic. Instead he believes that the new economy we are transitioning into will have an emphasis on technology. We have seen this through the adaptation of Zoom into the work environment. Powell believe that this new shift towards technology will make it even more difficult for some workers to get back on their feet.

I agree that this new focus and use of technology in the work environment will definitely affect lower skilled workers who are also often people who struggle financially. 

Fed leaders differ on how to boost virus-ravaged US economy

According to the article, the leaders of the US Federal Reserve banks differ in their views on what it will take to get the country’s economy back on track in a troubling surge in coronavirus infections. The St Louis Fed President James Bullard says that the economy can recover if households are just shoved in the right direction, where he means to push them to wear masks and take other steps that health officials have urged. For the New York Fed President John Williams, he believes a full economic recovery will have to wait for a vaccine, with the health crisis putting a question mark on the economy. Whereas, Minneapolis Fed President Neel Kashkari has called for a four to six-week national lockdown to try to stop the pandemic.

Likewise, Pfizer Inc announced that there experimental COVID-19 vaccine is more than 90 percent effective, according to initial trials. However, the very large rise in COVID-19 cases recently clearly puts a question on the ability of the economy to getting back on track.

https://www.aljazeera.com/economy/2020/11/13/us-federal-reserve-leaders-debate-economic-risk-as-covid-surges

COVID-19 Vaccine Eclipses US Elections as Economy Game-Changer

The COVID-19 Vaccine, announced by Pfizer, who developed the vaccine with Germany's BioNTech, has been proven to be 90% effective. The enthusiasm of having a vaccine brought hopes on Wall Street as a gamechanger. Even though there is a slow economic recovery on the main street, Wall Street has already started positioning portfolios for investors by looking at how the economy will be performing a few months from now. Many investors believe that with the announcement of the Pfizer vaccine, everything has become more normalized. People have started going out to restaurants, booking flights, hotels, and planning holidays. 

Joe Biden, the newly elected president, made sure to make it known that even though there is a vaccine, even if it does work well, it won't be made available until a couple of months, so we should stay safe. With the rise of Covid cases this week, everyone needs to take care of themselves and quarantine. Joe Biden has spoken about how there will be another wave of Coronavirus in a few months by looking at the number of cases. There have been records set this week of the number of people who have gotten Coronavirus. Because of the vaccine's announcement and the reckless booking of flights and holidays, advertisements are being sent out by different companies to stay home and enjoy. To watch movies at home instead of going to the theatre. 

With the vaccine being 90% effective, do you think that its effectiveness is good as a vaccine?

https://www.aljazeera.com/economy/2020/11/15/covid-19-vaccine-eclipses-us-elections-as-economy-gamechanger

Walmart resumes counting customers in stores and grocers reinstate limits on toilet paper as coronavirus cases surge

 Since yesterday Walmart has restarted counting the number of people/customers in their stores to track occupancy limits as COVID’19 cases have now started surging once again. Back in April, rules were strict as Walmart did not allow 20% occupancy exceeded in their stores across the U.S. Soon after COVID’19 cases had dropped in numbers, they stopped counting the number of people entering. Now, they are going back to taking precautions because U.S coronavirus cases, as mentioned, are rising rapidly by the day. Some of the major grocery brands had started putting purchasing limits on toilet paper and sanitizer, which goes back to when COVID’19 had started peaking months ago. Back then, panic buying had started, so stores are now taking precautions beforehand. Major names like Kroger, Wegmans, and Giant Foods have put purchase limits on certain items, just like those mentioned above. Walmart is also set to divide its Black Friday in-store sales into three separate events to prevent the spread of COVID-19. 

Do you think people will again go into “panic-buying,” or was that just a one-time thing. Have the various brand names mentioned taken the right decision to put purchase limits on certain products? Lastly, what effects will this latest surge of COVID-19 cases have on the economy?

Link: https://www.cnbc.com/2020/11/14/coronavirus-walmart-resumes-metering-customers-in-its-stores.html

Coronavirus in Spain

Spain is a very important country in the world, however it needs to undergo serious systematic market reforms. The coronavirus crisis has destroyed Spain’s economy leading to its worst recession since the civil war, and the low tourism and shutdowns make a recovery seem very far away. Spain had one of Europe’s largest outbreaks and strictest lockdowns so their economy came to a stop in March and stayed that way up until the end of June. It shrank 18.5 percent in the second quarter, a drop so harsh that it wiped out all of the recovery achieved since the 2008 global financial crisis. The government relied on tourists from northern Europe and further to contribute to a third quarter recovery, but quarantines and travel advisories have ruined this as Spain has new localised outbreaks of Covid-19. Their tourism numbers decreased even more when Britain required all travelers to Spain to quarantine when they arrived home and Germany put three Spanish regions, including Catalonia and Barcelona, on its list of high-risk areas. Spain normally received about 80 million tourists annually and has depended on tourism for about 12 percent of economic output. Spain needs to start reforming to make a recovery from its sufferings this year.

https://www.reuters.com/article/us-spain-economy-gdp/spain-dives-into-deep-recession-tourism-woes-bode-ill-for-rebound-idUSKCN24W0WF

Covid cases rising across the U.S.

Over the past two weeks, the U.S. has experienced a third surge of positive COVID tests. Since September cases have risen from under 50k a day to a little over 150k currently. On Friday, California became the second state to hit one million Covid cases, after Texas. And while deaths have lowered, around 1,000 people succumb to complications associated with the virus each day.

In response, many governors are starting to implement more restrictions on bars, gyms, and restaurants. They have even considered the idea of going into a second lockdown. The Oregon governor started a two week mini-shutdown to help slow the spread, saying "I'm not asking you, I am telling you, to stop your social gatherings ... and your house parties and to limit your social interactions to six and under, not more than one household."

Do any of you believe a second lockdown is imminent? And, if so, what will the long-term implications on our economy look like?

https://www.bbc.com/news/world-us-canada-54935700

Housing Prices Continue To Rise

Before Covid, the housing market was experiencing high prices and growth. In fact, most homes increased in value at all time records. Once Covid hit, one would expect this market to take a hit like many others did. However, we were wrong.

Covid has actually increased housing prices as the pandemic boosted housing market activity in a way not seen in recent history. Moreover, during the third quarter of the year 181 metro areas tracked by the National Association for Realtors was "higher in the third quarter from a year earlier." 

Houses have appreciated at record highs for a long period of time now surpassing the predicted decline in the market. Do you foresee any signs of slowing down in the future, or will this market just continue to increase because if a pandemic cannot stop it, what can?

https://www.wsj.com/articles/home-prices-are-rising-everywhere-in-the-u-s-11605220823

Jobless Claims Lower

 The weekly jobless claims which were reported for the week of November 7th were lower than expected by the Dow Jones' economists. The week prior, claims were at 757,000 and economists were expecting around 740,000 claims to occur the week of the 7th. In reality claims came in at 709,000 which marks the fourth consecutive week that claims have decreased.

Although numbers are lower in the last four weeks, there are still serious concerns about the lasting effects of coronavirus on the economy. With a large number of people still unemployed and a lack of a stimulus since the original one in April. The Fed is calling for another stimulus to be passed soon to assist in the safety of the economy.

https://www.cnbc.com/2020/11/12/us-jobless-claims-709000-vs-740000-estimate.html

Jerome Powell's thoughts on the economy

 On Thursday Federal Reserve Chairman Jerome Powell indicated that his main concern regarding the pandemic surrounds women, children, and business owner who are susceptible to the long term consequences from the pandemic. He goes on to explain by elaborating on each piece of his statement. He first begins by saying that it is not by choice that women are out of the labor market as the pandemic has caused this. What was interesting is when he explained his concern about children he said he was concerned about kids not receiving the education that they should be getting. Within the grand scheme of things Powell talks about the business owners who have just simply been out of work and are losing the connection to the labor force as well as the life they had. With the expected surge in COVID cases Powell indicates that displaced workers will need to receive extended support. An interesting point that Powell makes is that the economy we will be returning to will be heavily leveraged in technology, this poses a challenge for many workers who are not versed in technology like the younger generations. Overall Powell's main take away was that even after the pandemic becomes subdued with the vaccine there will still exist a group of people who will still require support due to the fact that the economy is vastly different than the one they once worked in. 

https://www.cnbc.com/2020/11/12/here-are-the-things-that-scare-jerome-powell-the-most-about-the-economy-right-now.html

The Case Of The Soaring Car Prices

 The Case Of The Soaring Car Prices - Podcast

Usually, cars depreciate over time. However, since the pandemic hit, car prices have been skyrocketing. A guy named Aaron Springer was able to sell his 2014 Volkswagen Jetta SportWagen during the pandemic that he bought used in 2018 for $1500 more than what he paid for. Why are cars getting so expensive?

There are four main reasons why supply of cars is decreasing. First, production of vehicles stopped as a safety measure when the pandemic hit. Second, some states put a moratorium on car repossessions since it is a really devastating time to lose a vehicle, meaning less used cars are entering the market. Third, rental car companies weren't buying new cars to replace their older used cars which usually injects around 2 million used cars into the market every year. They've held onto their vehicles because no one was driving what they already had. Fourth, lease extensions were granted because no one wanted to deal with lease renewals during a shutdown, so those cars didn't enter the market when they were supposed to.

There are also four main reasons why demand increased. First, the stimulus check stimulated demand because people wanted to put the money towards a car. Second, people are afraid of using public transportation due to fear of getting sick, so cars are the safest transportation option. Third, people who had a car are now looking for a different car due to lifestyle changes from COVID. For example, someone may now have a longer commute, and they want a more eco-friendly, small car. Fourth, people who are working during the pandemic have extra money to spend because they aren't going out and spending their money. Plus, interest rates are low.

These eight culprits are the reasons why car prices have been soaring during this pandemic when people predicted the opposite. There's more competition struggling to get cars from a smaller pool of options.

Fed’s Bullard Says Economy Has Recovered Faster Than Expected

The Federal Reserve Bank of St. Louis leader James Bullard gave an update today. He said that the US central bank policy is in a good place right now following Covid challenges. Regarding the monetary policy, Bullard said “we don’t know what’s around the corner as far as the crisis goes, so all those things make me think that we’re in a good position for now.” 

The interest rates are at very low levels which aren’t expected to change much and there is seemingly a significant pace of purchases. He didn’t show much concern towards more stimulus because of the larger first round of fiscal stimulus which is still helping the economy. He also thinks that there is more improvement still coming with the unemployment rate. He said unemployment, which is currently at 6.9%, “could fall to between 4.9% and 5.5% by year-end, depending on when workers are called back.” Unfortunately, Bullard didn’t give any insight into possible policies going forward, but he noted that central bank and government aid have been effective during this Covid economic shock.  

I agree with him that policies and aid thus far have been effective. I am not sure that I agree with stimulus being unnecessary at this point because many people and many businesses are still facing serious hurt. Do you agree or disagree with Bullard’s statements? What possible economic events do you think are coming our way that could change our current economic position?

Derby, M. S. (2020, November 13). Fed's Bullard Says Economy Has Recovered Faster Than Expected. Retrieved November 13, 2020, from https://www.wsj.com/articles/feds-bullard-says-economy-has-recovered-faster-than-expected-11605274229

 

What a vaccine means for America’s economy

The news of a vaccine may curb the threat of the US economy sliding into a recession. Before the news of a vaccine was publicized the US economy was already recovering better than what was predicted. With many countries in Europe begging shutdown and lockdowns the US will likely follow suit in the next coming months but not as severe as European countries, these more relaxed restrictions will help the economy not lose much momentum on its journey of recovery. As the news of the vaccine breaks the chance of having a vaccine will only help our economy in it a trend to pre covid levels, all this being said the economy is still not predicted to be in the state it was in before covid until 2022 or even later but the signs of a vaccine will help the US decrease it record-breaking infection rate. Everything in the US economy seems to be trending in the right direction but we must keep in mind that these future lockdowns will hamper economic growth and employment growth. The delay of stimulus packages being passed is also a problem we will have to face. Even though the signs of a vaccine have appeared, the economy can still be set back by the constant increase in covid cases through the US, we still have a long road to travel to fully recover but it seems the road is paved for us to travel.

What do you think the act of having a vaccine will have on the economy and do you think it will come in time before the US sees lockdowns and restrictions?

https://www.economist.com/finance-and-economics/2020/11/14/what-a-vaccine-means-for-americas-economy

Big tech and corporate tax cuts: the targets of Joe Biden's urgent economic plans

When Joe Biden enters the White House on 20 January, he will face arguably the biggest set of challenges a president has had to tackle since the end of the second world war. The coronavirus is raging through the US, millions of Americans are still losing their jobs each month, and the climate crisis – ignored by the Trump administration – is deepening. Biden has set out his economic and policy plans, but without control of the Senate he may struggle to realise them. Official GDP figures for the third quarter showed the size of the economy was still almost 4% below its previous peak, despite a 7.4% recovery from the spring lockdown according to the article.

Biden intends to use wartime legislation known as the Defense Production Act (DPA) to compel US businesses to make personal protective equipment (PPE), medical supplies, ventilators and whatever else the US needs to tackle the pandemic. The DPA gives the president broad powers to force a business to come to the aid of the country.Biden has also set out plans to increase unemployment insurance, send more direct payments to struggling Americans, forgive some student loans and provide more aid to small businesses.

Climate change is the “number one issue facing humanity”, Biden said last month and his administration has ambitious plans to tackle a crisis that the Trump administration downplayed and ridiculed. His plans include ensuring the US achieves a 100% clean energy economy by 2035 and reaches net-zero emissions no later than 2050, raise the corporate tax rate to 28%, from 21%, impose a minimum tax on all foreign earnings of US companies located overseas in an attempt to stop the use of foreign tax havens and a few others.

Do you think Biden's policies will prove effective to recover the economy?

https://www.theguardian.com/us-news/2020/nov/07/joe-biden-most-urgent-economic-plans-key-elements

How to fix America's Treasury Bond Market

     It is no secret that this year has been an extraordinary one for American government debt. Typically, the American treasury bond market is the worlds most liquid bond market even in times of economic downturn. However, in March, the market seized up and as panic about Covid-19 flooded the U.S. To fix this, the Fed bought back as many treasury bonds in a span of two months than it did during the five year period of quantitive easing following the 2008 financial crisis. The market has become flooded with new issuances, but over the past week bond yields have begun to fluctuate as investors weigh the odds of more stimulus now that the election has come to an end. 

    Regardless of whether or not a stimulus is passed in 2021, the budget deficit will most likely stay 8% above GDP, an ageing population will continue to lift health care spending, and the Fed will be unable to cut rates any lower. These three factors combined with a supersized bond market will amplify the probability of increased market stress and its consequences. According to Randal Quarlers, vice-chairman of the Fed, the "sheer volume" of new issuance could lead to disruption of the U.S gov's ability to borrow and cause tremors around would financial systems. 

    There are currently two fault lines for these markets. The first one being that when Uncle Sam issues new debt, a group of dealers (mostly banks), are obliged to buy it up at a reasonable price and leave it to pile up on their balance sheets and pushing banks closer to breaching capital requirements set by regulators. This will lead to banks being unable to act as intermediaries for investors, and would ultimately cause investors to pull their money out of markets. The second fault line is the possibility "repo" interest rates spike up drastically in a short period of time. The repo interest rate is extremely important in terms of economic stability and anchors borrowing rates for businesses and households. 

    There are a few quick fixes to this problem. A temporary exemption of cash and treasuries from banks leverage rations should be made permanent and the number of primary dealers could also be expanded to minimize any issues if some of them get in financial trouble. Nevertheless, it would be wise to implement a more long term solution. The primary-dealer system should be phased out for a clearing house for treasury trades which would let smaller firms dealer with each other rather than having an intermediary middle man clogging up the market. The Fed must also get a grip on rates in the repo market by lending at its target rate to any entity that can provide short term treasuries as a collateral. 

https://www.economist.com/leaders/2020/11/07/how-to-fix-the-market-for-treasury-bonds

EU's lawsuit against Amazon

 

Antitrust charges have been brought against Amazon by the European Union regulators. They say Amazon has been using its size to unfairly bully and harm smaller merchants that rely on them to reach their customers. 

The regulators say Amazon takes data from sellers of products to customers and in turn makes similar products and sells them for lesser prices, thereby undercutting and pushing out the original seller of that product. Margrethe Vestager, the commission’s vice president for digital issues, said "We must ensure that dual role platforms with market power, such as Amazon, do not distort competition". 

This charge has also been slapped on tech giants Apple, Google, and Facebook. In October, the Justice Department of the USA leveled antitrust charges against Google. These charges on all these tech giants are only so they don't become monopolies and distort markets for their sole benefits. 

In time we would find out if the charges on all these companies change the course of our way of life. 

https://www.nytimes.com/2020/11/10/business/amazon-eu-antitrust.html

Vaccine news gives a much-needed boost to economic outlook

 https://www.cnbc.com/2020/11/09/vaccine-news-gives-a-much-needed-boost-to-the-economic-outlook.html

Pfizer came out early this week to announce that their vaccine had a 90% success rate in trials. This news gave a gigantic boost to the economy in hopes that we may be moving to getting a working vaccine out the public. This vaccine would mean big things for many businesses, such as they would be able to go back to running at full capacity. In addition to this, there are also consumers who have not been leaving their homes. This news follows just a week after we saw record breaking GDP growth in Q3. Also this news comes at a time where we continue to have record breaking cases day after day and it is beginning to become more of a concern. 

The speculation is that a vaccine would add a lot of hope to the economy in terms of growth and jobs. However, I think at the same time a vaccine could help out the economy a good amount, there are also corporations that have thrived amidst the pandemic. These companies such as Zoom, Amazon and other tech stocks have seen some unprecedented growth. But this growth may end up being wiped out by a vaccine because they have established themselves as a way to get around the virus. 

Do you think that this boost to the economy may actually be taken away from because of the losses to companies like Amazon and Zoom? How quickly could a vaccine help the economy?

“Systemic racism is a drag on the US economy”

It is undeniable that systemic racism is still an issue in the United States. Oftentimes, however, we do not always assume the consequences it can have on the economy and its vitality. In this article from msn.com, the authors argue that systemic racism is a challenge to the U.S. economy. They attribute two reasons to this: knowledge and talent. According to them, “Knowledge is developed by talent, and it takes talent to effectively make use of knowledge.” Systemic racism stalls economic vitality in the sense that it restricts supply of talent which, in turn, threatens both our prospects for growth and social cohesion. Moreover, it deprives and/or limits minority groups and lower class individuals from access to key structures and goods and services which would play in their knowledge and talent development, which the authors categorize as intangible capital.

The authors also state that “by opening the gates of knowledge and talent, we can advance social justice, combat prolonged recession and build much-needed social cohesion.” In fact, for example: “research journals suggests that between 20 percent and 40 percent of the growth that took place in the United States between 1960 and 2010 can be explained by the removal of racial and gender discrimination in talent development.” All evidence from research and others mentioned in the article show and indicate that addressing systemic racism is critical for U.S.economic recovery and long-term vitality. What are your suggestions on how systemic racism can be addressed, and how that would specifically transform the U.S. economy?

https://www.msn.com/en-us/news/politics/systemic-racism-is-a-drag-on-the-us-economy/ar-BB1aJw0u?ocid=uxbndlbing

Where Does Friedman Fall Short?

 https://www.gsb.stanford.edu/insights/anat-admati-milton-friedman-justice?sf131463165=1

In this article, Anat Admati criticizes one of the most popular tenets of Milton Friedman: that corporations should be solely concerned with maximizing shareholder’s wealth. While this approach is not inherently immoral, Admati argues that Friedman’s argument rests on the assumption that “businesses operate in an environment of ‘open and free competition without deception and fraud’” (Admati, 2020, para. 2). This position presupposes that governments are able to fairly monitor and control corporate corruption and that businesses intend to act in the best interest of society. Admati highlights the ease in which corporations can be formed, often for immoral purposes such as to instigate money laundering schemes. Once these corporations are formed, there is often limited government regulation. For instance, Admati notes a lawsuit where PG&E only paid $4 million in legal penalties for committing 84 cases of manslaughter, due to their role in a California fire. Similarly, despite several fraud charges against Purdue Pharma, for aiding in the illegal sale of opioids, no individual from the company was sent to jail. While it is easy to point to these and other examples as merely a few instances of corporate wrongdoing, Admati notes the difficulty that the U.S. Department of Justice faces in combating corporate crimes.  

These problems raise a question central to this class: how much should the government be involved in an economy’s operations? Given that corporations have been able to get away with an array of crimes, Admati argues that Friedman’s view of limited government is not able to handle a society that can truly maximize shareholder wealth. It is possible that the American public’s hostility toward government intervention is ultimately backfiring, as corporate misconduct that hurts those we assume it will protect. With a less binary view of government as something that should either be completely absent (advocated by Friedman) or completely controlling (as found in socialism), it will be easier to regulate corporations and ensure they are truly working on behalf of their shareholders.

PRESIDENTIAL DEBATE (Healthcare) (BLOG 5)

The final presidential debate was held between Donald Trump, representing the Republican party, and Joe Biden, representing the Democratic party. The discussion was much calmer and more relaxed this time. Both the President and the Vice President did not argue as they did in the previous debate. This debate was made by Kristen Welker, a journalist who works for NBC News.   

Affordable Health Care is very important because of COVID – 19 and with the economy not doing, people losing their jobs they need to have some sort of way to afford Healthcare. The first question was asked to President Trump about how he would do better health care acts and his first response. Not to talk about the plan but talk about how the elimination process is going for the Obama Care. He pointed out how there were problems in health care since it was run, so people would have to pay a lot of money. He pointed out that the Removal of Obama Healthcare is in process at the Supreme court. He then followed on to talk about how he would come up with a ‘brand new beautiful health care’. 

On the other hand, Biden care was a fully ready plan to launch and be provided to the public which is going to be run by the government. He said that this would have a public option, so people who have their private insurance would not have to change to this health care. There was an analysis done by a nonpartisan who said that this plan that Biden is proposing would reduce the prices on the ACA exchanges and lower the Employer-Based Premiums. Trump had promised that he would make a better plan than the ACA which was going to protect people who had preexisting conditions, but when this plan was studied by the experts, they said that is going to be pretty expensive compared to the previous Healthcare. Trump also started talking about Bernie Sanders and the idea that he had failed and Biden’s response to him was that Trump didn’t know who he was standing against him because he was mentioning people he beat. Biden said that ‘I beat all those other people because I disagreed with them.’ 

What do you guys think about the answers from both parties? Do you think they justified their answer?

www.nbcnews.com/politics/2020-election/trump-says-obamacare-must-die-biden-says-he-ll-make-n1244454. 

White-collar job cuts are increasing.

The pandemic severely affected low-income jobs in mainstream industries such as hotels, restaurants, and retail however now we are noticing a similar trend spreading in high-income jobs. When corporate level layoffs increase it’s a pure indicator of the economic impact of a recession and tells us that there is a traditional recession happening beneath the surface of this public health crisis. The white-collar job cuts are increasing as we move further in this pandemic. Big insurance company Allstate announced that it would layoff about 3800 workers. ExxonMobil plans to layoff 1900 workers, mainly at the headquarters in Houston. Raytheon a major defense contractor plans to layoff 5000 workers, mostly corporate employees, and contract engineers. Similarly, people working with state and local governments are also at risk because of the reduced budgets. 

Economists argue that this is a secondary impact of the pandemic which will slow down the recovery process as layoffs ripple across different industries. Generally, in recessions, higher-wage workers are better off since they have stable jobs and savings. However, increasing layoffs in the white-collar sector during a recession can be very impactful because they spend the most. Are we moving towards a white-collar recession?

Money-Printing Slowdown Leaves Governments to Take Up Stimulus Slack

 As many of the world's largest central banks have reduced the frequency at which they are printing monies, government entities are taking the decision to increase their spending. Governments are working to prevent and minimize the havoc that would stem from the possibility of another shutdown. As European countries begin entering their second wave of shutdowns, and the United States prepares for its heavily anticipated presidential election, even small changes to economic policy is leaving economists, politicians and the alike in states of angst considering current social and political climates; hence the current trend of wanting to balance the money-printing slowdown with other fiscal stimuli. The Bank of China is said to have determined that they have sufficiently provided fiscal assistance and shows little signs of a willingness to do more. The European Central Bank, People's Bank of China and the Bank of England are said to be following a similar trend. This also includes the US Federal Reserve.

Europe's biggest asset manager is cited as saying that this slowdown will be a cause for concern for months to come and that it "may cause a sort of taper tantrum in markets and a possible re-pricing of inflation expectations." As a precaution, IMF experts are urging governments to “ensure fiscal support is not withdrawn too rapidly.”

For Retailers, a Halloween Shock: It’s Actually Happening

Sales of Halloween costumes and decorations have been stronger than what was expected with the pandemic. People are seeing this day as the last day for the kids to have fun outdoors before winter hits. “While Mr. Berman, like many other business owners, has welcomed the volume of Halloween sales given the uncertainty of the moment, he noted that before the pandemic, 2020 was poised to be a bonanza for the holiday and party industry.” Some business owners are saying people are dressing up and decorating the house much more leading to more sales than ever before in the history of their stores. “The National Retail Federation, an industry group, expected Halloween consumer spending to hit about $8 billion this year, a decline from $8.8 billion last year, as a result of fewer Halloween parties and haunted house visits and less trick-or-treating. But enthusiasm around costumes and decorations has persisted.” Halloween sales are higher than anyone could have ever expected, but It is nice to see strong sales considering this crazy year. 

Do you think that Halloween fun will get too chaotic and we will see a rapid increase in cases to come? Do you think a significant increase in cases will lead to a shutdown like in France? Increased sales will help our economy now, but do you see it coming back on us with a shutdown?

Maheshwari, Sapna, and Gillian Friedman. “Get Your Hand Sanitizer Costume. Halloween Is Still Happening.” The New York Times, The New York Times, 29 Oct. 2020, www.nytimes.com/2020/10/29/business/halloween-costumes-decorations-sales.html.

Jobless claim lower than expected

 The number of first-unemployment-benefit filers fell to the lowest level in the pandemic as it declined for a second straight week. The jobless claims came in at 751,000 which was down 40,000 from the last week. The initial speculated jobless claims for the week was presumed to be 778,000. This comes on the brink of  a ride in COVID infections as the assumed blowback would an increased in the jobless claims. To further on this trend the continuing jobless claims dropped 709,000 to 7.75 million. All of this data comes as law makers continue to delay the next round of stimulus for the economy. Maybe the election will have an impact on what is going to happen? 

 https://www.cnbc.com/2020/10/29/weekly-jobless-claims.html

Covid-19 Explodes the Myth That Women ‘Opt’ Out

 In August and September, more than a million people dropped out of the workforce. Eighty percent of them were women. Women have been losing jobs at a rate far higher than that of men throughout this recession, figures that can’t be entirely explained by industry effects. And it might get worse. One in 4 employed women (1 in 3 mothers) are considering quitting or dialing back at work, according to McKinsey — the first time in six years of research that they’ve found any difference in men’s and women’s interest in quitting.

The “Opt out myth” is the assumption that one reason, maybe even the main reason, you don’t see more women leading organizations or governments is that so many women “choose” to stay home. In reality, the number of women who give up their careers is small, and the choice is almost never truly a free one.

However, women do not “opt out” of the workforce, but now they are being forced to because of Covid-19. They are struggling to find caregivers while daycares, schools and home caregivers are not available during this time. So, are women still considered the person who should not work and stay home to take care of the house and kids? And will this get worse from now on with Covid-19?

https://www.bloomberg.com/amp/opinion/articles/2020-10-20/covid-19-explodes-the-myth-that-women-opt-out-of-the-workforce

The Future of Pennsylvania's Energy Sector

    During the campaign's of both President Donald Trump and Vice President Joe Biden, the energy industry, specifically fracking in states such as Pennsylvania have been a major area of contention. Donald Trump has claimed that Joe Biden will destroy the energy industry, banning fracking in Pennsylvania and pushing towards only renewable energy. The issue here is that in Western Pennsylvania, fracking makes up a large portion of the job market. Many in the industry compared it to the steel industry in the 19th and 20th centuries, everyone knew someone who worked in it. 

    Biden's plan is one in which new fracking will be limited, and a push for increased jobs in wind and solar energy. Those who agree with his principles argue that thousands of similar paying jobs to that of the fracking industry will open up. These will range from jobs requiring a high school diploma, to some upper level jobs requiring masters or bachelors degrees. Jim Spencer, a businessman who manages wind and solar farms in the area, predicts that they future will hold fracking alongside an increase in renewables. He recognizes the large scale employment that comes with building and managing the renewable farms. On the other hand though he thinks that for when the sun is not shining or the wind not blowing, natural gas can keep things running. Spencer is more so of the mindset that coal will be phased out, as both other options are cheaper.

    Trump and many of his Republican supporters are fearful of Biden's plan with the fracking industry. They are unsure whether to trust him and the Democrats, as they believe their policies will greatly reduce the scale of fracking. That means less jobs for them, lower wages, and a reason for mass exodus from the region. To them, the fracking industry has provided opportunity in a rural and otherwise unprosperous place. In the end it seems many Pennsylvanians are hedging their bets that there will be some sort of combination of renewables and fracking, regardless of the candidate.

https://www.wsj.com/articles/in-battleground-pennsylvania-fracking-and-renewables-compete-to-be-the-future-of-energy-11603979272

GDP Increases during Q3

 The US saw a increase in Gross Domestic Product of 33.1% during the third quarter. This comes after GDP decreased by 31.4% during quarter two. The gains are attributed to increased consumer spending, which increased by 1.4%, strong gains with business, residential investment increased, and increased exports. The gains in these areas come as states were able to ease up on the lockdown guidelines, allowing citizens return back to some normality. 

As strong as the GDP report was, there are still concerning figures that will likely inhibit economic performance in the next quarter. Since March there have been $22 million jobs lost, of which only half have been recovered. This leaves unemployment at 7.9%, a rate more than double its pre-pandemic level. Without the passage of another stimulus package, and a forecasted insurgence of COVID cases during the winter, it is unlikely to have the continued success that was seen in quarter 3. 

https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

U.S. consumer spending beats expectations in September

 According to a report from CNBC consumer spending increased by 1.4% in the month of September. Previously, in the month of August we saw an increase of consumer spending of 1%. These numbers were promising since consumer spending accounts for two thirds of economic activity. However, as COVID cases are beginning to surge again there is a high possibility of consumer spending decreasing in the fourth quarter. Personal income increase by 0.9% which exceeded the 0.4% expected increase. Due to everything going on I think consumer confidence will fall and as a result consumer spending will also fall in the following quarter.

U.S. Economy days before an election

On Tuesday, November 3rd either Donald Trump or Joe Biden will be elected for president of the United States. And the current state of the economy has been a contentious point for both candidates. Trump has been quoted as saying "we are rounding the corner" with this virus while Biden argues that the economy is struggling greatly. 

The truth; however, may be somewhere in the middle. Trump is correct when he boasts our 3rd quarter economic growth of over 33% which is a phenomenal figure in a vacuum. Though this can be heavily offset by the 31% decline we saw in the 2nd quarter.

Additionally, our economy has contracted 3.5% as a whole when compared to 2019. I believe it is unfair to blame Donald Trump entirely for the current state of the economy. There was so much uncertainty and panic during the first lockdown which could have affected these percentages. Still the entire U.S. government--not solely Trump--should share the blame. Our COVID response has been relatively weak when compared to other countries, and lawmakers from each side have used this as a political tool to siphon votes. It would be interesting to see how seriously politicians may have taken this virus if we were not in an election year.

 Many argue that we should not be "reopening" business at the moment and should take any means to control the transmission of coronavirus. It has become apparent that a shutdown is largely unpopular with voters, effectively ruling that out as an option. If our current economy is doing as poorly as it was in the 2nd quarter; this would almost guarantee a defeat for Trump.

Ultimately, the outcome of the election will be great news to some and horrible news to others. Our biggest concern should be working together to help the citizens. But I am afraid that the politicians from the losing party will do anything to ensure the failure of the president elect. Regardless if it is Trump or Biden.

https://www.marketwatch.com/story/heres-where-the-economy-stands-as-the-us-chooses-between-trump-and-biden-2020-10-31

Fed lowers minimum loan level for small business lending program

 In efforts to continue to help small and medium businesses get through the pandemic,  the Federal Reserve is reducing the minimum loan size down to $100,000 from $250,000. Along with this they have also decided to ease restrictions on companies that are participating in the Paycheck Protection Program. These decisions were in response to the growing concerns of an economic slow down in the winter due to both COVID and the current stalemate on future stimulus checks. 

As cases continue to grow around the world there has also been many talks of future possible shutdown in a number of countries. I think that by making these loans more accessible to these small business it could possibly help them survive another shutdown. 

Airlines will struggle long after passengers feel safe to fly again

 The current financial issues the airports are facing are due to the unfortunate global pandemic which ceased or halted travel for a while. It is predicted that this issue will continue on after the pandemic is over. With so many people having lost their jobs, the lack of business travel has especially hurt airlines financially. As well, there will most likely not be much business travel for years due to the fact that many companies have downsized, getting rid of employees. It is expected that business travel will go down by as much as 20% in the next couple of years because of this. This has caused US airlines to lose over $12 billion just in the second quarter. The airline industry has been placed in a crisis that it will take a very long time to recover from.

Historically it always takes a long time for business travel to recover after a recession so when do you think the airlines will recover the airlines ?

https://www.cnn.com/2020/10/27/economy/airlines-pandemic-recession-impact/index.html

Trump, Biden clash over climate, oil industry in final debate

The last presidential debate, which took place on September 22th, 2020, between former Vice President Joe Biden, who represents the democratic party, and the President of United States Donald Trump, representing the Republican party, raised many interesting points. The moderator Kristen Welker addressed many interesting questions towards both individuals, which got some very interesting responses. 

A major topic of discussion was climate change, where President Trump had a standard approach while Joe Biden presented some futuristic solutions. President Trump said he loves the environment, but he is unwilling to sacrifice businesses for the environment. One can agree here that business needs a priority in such a huge and influential economy, but perhaps there is more than what meets the eye. Joe Biden talked about he would slowly move to a climate-friendly economy, which would inevitably create many more jobs and improve the economy. Also, Joe Biden said, “Global warming is an existential threat to humanity, we have a moral obligation to deal with it, and we’re told by all the leading scientists in the world we don’t have much time.” (Bernstein) Joe Biden wanted to show that he as a candidate, understands the problem at hand and considers it his responsibility to improve. Joe Biden plans on making/promoting businesses that lessen the damage caused due to climate change. The President accused Joe Biden that he would get rid of hydraulic fracturing, which is used to extract natural gas from shale. Fracturing has shown many benefits but also has its downsides. Many environmentalists are against fracturing. Overall, President Trump's accusation here did have some basis to it. Joe Biden said he would ban it only on federal land in his defense. 

Yes, some of President Trump’s criticism of the democratic party had a premise, but Joe Biden perhaps gave concrete examples as to what the issue at hand is and how to deal with it. Do you guys think climate change is an important topic of discussion especially in the presidential debate? If yes, then which candidate presented a more apt front/view regarding climate change. 

 

References:

Bernstein, Sharon. “Trump, Biden Clash over Climate, Oil Industry in Final Debate.” Reuters, Thomson Reuters, 23 Oct. 2020, www.reuters.com/article/usa-election-debate- climate-change/trump-biden-clash-over-climate-oil-industry-in-final-debate- idUSKBN2780HW.

France is latest nation to return to lockdown amid COVID surge

Starting this week France will go back into a nationwide lockdown to try to contain the COVID-19. The new measures stated which will come into force on Friday and will last until December 1, that people have to stay in their homes except to buy essential goods, seek medical attention, or use their daily one-hour allocation of exercise. In the beginning, the lockdown was effective at containing the virus, but it started spreading again after relaxing the rules.

France has reported 523 new deaths from coronavirus during the last 24 hours, the highest daily toll when the virus was at its most severe. “France’s death toll is more than 35,000 and is the seventh highest in the world” according to Reuters News Agency data.

Earlier this month, Macron announced a nighttime curfew in Paris and other big cities, but now officials have recognized that this measure had proved not enough to bring down infection rates, and therefore calling for more severe response.

https://www.aljazeera.com/economy/2020/10/28/france-becomes-latest-nation-to-return-to-covid-19-lockdown