Former Fed Chair Alan Greenspan says inflation is 'major concern' as deficits get 'out of hand'

The former Federal Reserve Bank Chair Alan Greenspan told CNBC on Thursday that inflation, the unknown factors surrounding coronavirus, and budget deficits are the critical issues the US is facing right now. The former chairman said that the US is underestimating the size of the budget deficits that are down the road, as the number of Americans retiring and receiving entitlements increases. Greenspan said he is certain there will be an "extraordinary increase in retirement" ahead. 
Budget deficit of United States has increased as the government has spent to help the economy through the pandemic. According to the article, the federal budget deficit reached $3 trillion in August. 
Greenspan said, "My overall view is that the inflation outlook is unfortunately negative and essentially the result of a huge increase in entitlements that are crowding out private investment and productivity growth."
We can see that Greenspan's arguments coincide with the policy of the current Chair of Federal Reserve Bank Jerome Powell. Powell announced last month a major shift in Fed policy saying that the Fed is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy. The central bank formally agreed to a policy of “average inflation targeting" which means it will allow inflation to run “moderately” above the Fed’s 2% goal.

https://markets.businessinsider.com/news/stocks/economic-outlook-inflation-major-concern-alan-greenspan-deficits-fed-entitlements-2020-9-1029579654#

Owensboro, KY Economy is Booming While Rest of Country Reels During Pandemic

     Owensboro, KY, just like the rest of the US, experienced a hard drop in employment once COVID hit. In fact, its unemployment rate was higher than the national average in April: 14.9%. With luck, hard work, and community spirit, Owensboro was able to turn that around within two months and brought the percentage down to 4.2% (then 5.4% in July), well below the national average and lower than its unemployment earlier in the year.

    What is the secret to their success? There happens to be big employers in Owensboro such as Kimberly Clark Toilet Paper, Ragu spaghetti sauce, and Fireball Cinnamon Whisky. Since the spirits business was designated as essential during the pandemic, the Fireball distillery was able to remain open and keep their employees. Even though bar consumption went down, home consumption went up, and they also turned some alcohol into sanitizer. They are actually hiring as well.

    Unfortunately and ironically, the Owensboro hospital network took a big hit financially once the pandemic hit due to halting elective surgeries, losing two-thirds of their income. The Owensboro health president decided to not let any employees go since they were in a rural area, and it would be hard to re-recruit because they may not come back. That worked out well for them once they re-opened because they nearly made up much of the revenue lost soon after.

    Previously mentioned in another student's article, the mortgage business has been booming during this pandemic as well due to low interest rates. This has bode well for Owensboro because it is also home to a mortgage processing arm of US Bank (one of the largest in the country). Three-quarters of US Bank's employees in Owensboro are still working from home.

    Despite challenges like parents trying to work full-time while helping their child through school, Owensboro has been the closest to a "V-shaped" recovery than any other city in the country. I think this goes to show that economic recovery in the US during this pandemic is very much possible, but some places, without as much luck as Owensboro, may need a lot more time, energy, and resources.

Kentucky City Enjoys Booming Economy Amid Pandemic As Rest Of Country Reels

Job Report August: Payroll increases as unemployment falls

 One of the biggest downfalls that has occurred during the pandemic is the lack of jobs. When the pandemic occurred the was a spike in the unemployment rate as many people either were furloughed or simply were out of work. With that aid the economy has taking a massive hit too because of the pandemic, within this article from CNBC there is information that points towards a positive outlook regarding the unemployment rate and ultimately in some sense the economy as a whole. 

In August the unemployment rate dropped to 8.4%, although still way above the comfortable margin this is a good indication that the country is slowly climbing out of the downturn created by the pandemic. The biggest take away from the article though is that government hiring aided in the decrease of the unemployment rate. This was followed by adding gains in the retail, education, and health services sector. Overall aside from the government leading the way with hiring, nonfarm payrolls increased from 1.32 million to 1.37 million this month. Nonfarm workers are all workers aside from government workers, private household workers, proprietors, non profit employees, and farm workers. Within this category there was a payroll increase which is indicative of the economy fighting its way out of this downturn caused by the pandemic. Overall the month of August can be viewed in a very positive light as these statistics or indicators show that the economy is on the road to recovery. 

https://www.cnbc.com/2020/09/04/jobs-report-august-2020-.html

Policy Implication, Supply Chains and Bottlenecks of Global PPE Shortage

 In class, we have recently been discuss the benefits of market economies: one of which being our market stability and a market's ability to self-correct when necessary. In this brief, Park et al. seek to explore some of the ways in which the PPE market responded to the overwhelming, global shortage that came as a result of the sudden and immediate necessity for PPE. 

One of the main arguments of this brief suggests that "Since the COVID-19 outbreak, the supply chain for personal protective equipment (PPE) has not adequately functioned to meet the surge in demand" (Park et al 2020). While I can certainly agree that this would have been the case at the time this brief was published, in April of 2020, it is my opinion that the market has since had sufficient time to begin correcting this shortage and has effectively risen to the challenge. In my experience working for a company that has their hand in the PPE supply chain, I have seen that, although personal protective equipment is still not as readily available as this pandemic necessitates, for every PPE request that exists, there is a competitor that is willing and able to offer these products (even at prices lower than they would those pre-pandemic). 

Interestingly, this brief also discusses policy implementations of the Asia Development Bank, done to aid  the procurement of PPE for Asian companies. Within these policies is included a Supply Chain Finance Program that offered $200 million to aid in the manufacturing of PPE. Reading this article, I was hoping to see data or information on China's policy implementations, being that their economic institutions lean more toward communist/socialist ideologies and it would have been interesting to be able to compare.

With 1.4 million jobs added in August, unemployment rates fell below 10%.

     In August, 1.4 million jobs were added to the economy, which led to unemployment rates to fall below 10%. This is perhaps a small sign of a better future, especially when the pandemic is still rampant across the U.S. With unemployment at 8.4%, signs of a slow recovery within the U.S economy are showing. Yet, half of the 22 million lobs lost between the February-April period have not been returned, and economists warn that in the coming month's financial conditions are going to take another downturn, saying that the worst is yet to come. Government jobs like those of temporary census workers have found recovery as 1/6 jobs have returned as of August, but this doesn't mean that other sectors have benefitted the same way. Departments like retail, hospitality, and education have improved their condition a little, but their losses are still apparent. The Republicans seem to be satisfied with the way they have helped this economic "turn-around' considering the jobs that have been created. At the same time, the opposition claims that the pandemic required better leadership, and no good has come from the way President Trump and co. Handled everything. Many companies have already burned through the aid they were given without signs of recovery. Also, some of the added money to unemployment benefits even expired at the end of July.

    On the other hand, national factory activity is at an all-time high compared to 2019, home sales have been doing well, and the stock market has also seen some good times recently. The unemployed and underemployed who are eligible for aid are still at high numbers (29 million people). People are now staying more time unemployed than they really were in April, so that is also a terrible sign for the economy. People have lost their once stable jobs with benefits also expiring. According to economists, recovery will begin when Congress resumes sessions and works on these problems. A big fear of economists is also that these positive job numbers mentioned earlier might influence lawmakers into thinking their work is done, which is far from the truth. Not to forget that unemployment has a starkly disproportionate effect on women, and also minorities in terms of race. There is also an indication of incorrect measurements of jobs reported, according to the Bureau of Labor Statistics, which will also definitely cause a lot of problems, especially when there is no room for such errors in this pandemic.

 https://www.washingtonpost.com/business/2020/09/04/economy-adds-14-million-jobs-august-unemployment-rate-fell-below-10-percent-first-time-since-pandemic-took-hold/

A VACCINE WONT CURE THE GLOBAL ECONOMY

It has been in the news recently that there is a vaccine that will be realized later this year for Coronavirus. Some are saying that it will reach the United States by October, but some are saying that the Vaccination will arrive by the middle of next year. Distribution could be a really big problem not only to different countries, but within countries as well. 

An economist Neil Shearing talked about how the economy will have many potential outcome once the vaccine get distributed. He said that only about 1 billion vaccinations will be sent out across the world and the rest next year in 2021. there will be many important things which would need to be looked into like their will be special syringes which will be needed for the vaccine. But there are many people in different countries that are not wanting the vaccination if it will reach by next year. Only about 60% of people in France are going to get a vaccination if it reaches next year,  and in other part of Europe and America only 70% of people are planning to take the vaccine when it is released. Biotech and pharma stocks like Moderna have reached great height because they promised the vaccine for the Cornavirus. They have reached many differned traders and even on the robinhood platform. 

I think that this is going to be a blood battle just for the vaccine in a couple of few months. even though some people say that it might be distributed globally this year I feel like it is very unlikely for that to happen. when the vaccines come out it is from that time when we see who are really the important people who need the vaccine and who will have to wait till next year. 

If you were told you wait till next year for the vaccine, would you get the vaccine next year, or would you be okay without a vaccine?   

https://www.cnn.com/2020/09/06/investing/stocks-week-ahead/index.html

WEEKLY JOBLESS CLAIMS DECREASE AS LABOR MARKET CONTINUES TO HEAL

 Last week’s unemployment claims added up to 881,00 about 100,000 less from what was predicted by the analysts, mainly due to the seasonal adjustment process by the labor department. The labor department reported the lowest unemployment rates since the start of the pandemic. The article talks about how government, retail, health, and education sectors have increased hiring that enables the labor market to gradually recover from the pandemic crisis. The statistic shows that the number of people on temporary layoff decreased from 18.1 million in April to 6.2 million in August, which indicates that people are going back to work.

Although the figures are way better compared to the situation we had 5 months ago, but still we are far away from the normal, at this pace it will take a while to recover all the jobs lost due to the pandemic.  

     

https://www.cnbc.com/2020/09/03/weekly-jobless-claims.html

https://www.cnbc.com/2020/09/04/jobs-report-august-2020-.html   

COVID-19 Effect in Low Income Countries

 In the US we saw a steep decline in the economy in March and April, however had the fastest recovery from a bear market in history. This has not been the case for low income countries who are in some cases either still in or re-entering lockdown due to the virus are in a very different situation. These countries, such as Peru, Mexico, and India, rely heavily on manufacturing to carry their GDP. With a large portion of the workforce in quarantine, they are unable to produce at a level they are capable of. In Brazil, they government removed the cap on public spending, which increased capital outflows and increased interest rates. Globally interest rates are at historic lows leaving room quantitative easing programs to repurchase bonds. This has pushed a bond issuance from low income countries, allowing for money to re-enter markets. For Low income countries to avoid serious recessions they will need for programs similar to this to continue pushing their economy, as well as make a tough decision between avoiding lockdown to increase GDP or continue a lockdown and risk COVID mortalities.

https://www.ft.com/content/62358c60-f3f4-4961-a33f-76ab4ef91350?ocid=uxbndlbing

Coronavirus and Universities

 In class we have talked about formal and informal rules. Formal rules are laws, regulations, and directives while informal rules are practices, customs, and beliefs. This has led me to my topic. Do students not take the formal laws being implemented on their campus for masks and social distancing, no partying or large gatherings as formal? Do they believe these are suggestions and not regulations?

On Friday, September 4th, eleven students were notified that they were dismissed from Northeastern University and that they had 24 hours to vacate the hotel they were living in. Northeastern also declined to refund their $36,500 tuition. Purdue University has also suspended 36 students after they were caught at a house party 24 hours after their president outlawed off-campus parties. Finally, several students were suspended at the University of Connecticut for throwing a mask-free party. 

Colleges across the country are struggling to figure out how to stop campus partying, which has already set off outbreaks at a number of schools and shut down some classes. The New York Times has counted at least 51,000 cases in universities and colleges around the country since the start of the pandemic, and many major college towns have become national hot spots. Many colleges, including OWU, are sending warnings and pleas but should they take more drastic matters like these universities by suspending students and sending them home? Or will we all eventually be sent home because of the number of increasing cases?

https://www.nytimes.com/2020/09/05/world/coronavirus-covid.html

Inflation Is Higher Than the Numbers Say

Are the numbers telling the true story behind what is really happening? The recent inflation statistics say prices have risen by 1% over the past year, but yet economic life is seemingly more expensive. "The problem is that measures like real output, real wages and poverty are calculated using inflation adjustments that don’t reflect the higher cost of living during a pandemic. This might help explain why measured poverty has fallen even as lines at food banks have grown." The BLS tracks the monthly percentage change in the price of a basket of goods and services that represents the average American. Typically, the substitution effect occurs when prices rise because people are taking the lower-cost alternatives. This has changed since the pandemic because people are buying more essential items, such as groceries, which is causing prices to rise and buying less non-essential things, such as airplane tickets, which is causing those prices to fall. Also, the pandemic has causes variety shortages. The calculations “impute the price of what a sold-out good would have been if available, effectively ignoring the inflationary costs of pandemic-fueled shortages.” While this rising cost of living may not be a big deal to some, it is directly affecting people on social security and other programs that are linked to inflation. “If inflation were falling — as the official statistics suggest — that would be read as evidence of insufficient demand, as people cut back on their spending. But if inflation is really rising, that suggests that supply side disruptions are a bigger problem than is widely appreciated. The source of these supply disruptions is in plain sight: It’s the virus.”

Wolfers, Justin. “Inflation Is Higher Than the Numbers Say.” The New York Times, The New York Times, 2 Sept. 2020, www.nytimes.com/2020/09/02/business/inflation-worse-pandemic-coronavirus.html.