Thursday 23rd of January 2020

down the rabbit hole...


WASHINGTON (Sputnik) - The United States’ benchmark interest rate will decrease by 25 basis points to a range of 1.75 percent to 2 percent, the US Federal Reserve’s policy-setting Federal Open Market Committee said in a statement.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability," the statement said on Wednesday. "In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent."

The Fed committee pointed to weak exports and trade uncertainty as drivers behind the decision. Federal Reserve Chairman Jerome Powell, during a press briefing after the announcement, underscored these critical issues.

"Business investment and exports have weakened amid falling manufacturing output. The main reasons appear to be slower growth abroad and trade policy developments," Powell told reporters. "Trade policy tensions have waxed and waned, and elevated uncertainty is weighing on US investment and exports."

Powell also mentioned the imposition of additional tariffs as another factor driving the decision to lower the interest rate.

Powell emphasized, however, that the Fed cannot provide a "settled roadmap for international trade" sought by businesses. The Fed plays no role in trade policy, which he said is up to Congress and the Trump administration.

The Fed chairman indicated that central bank policy is focused on offsetting, to the degree possible, the impact of tit-for-tat tariff increases by the US, China, the European Union and other American trading partners.

The reduction fell short of demands by President Donald Trump, who earlier this month called on the Fed to match rate cuts by US trading partners such as the European Union and China.


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pig in tutu..



the political classes hate the homeless they created...

President Trump arrived in California on Tuesday night and declared that Los Angeles and San Francisco will “destroy themselves” if they don’t clear out homeless encampments that threaten to ruin the “prestige” of our “best highways, our best streets, our best entrances to buildings.” Trump has directed aides to launch a major crackdown on homelessness in California, which could involve removing people residing on California’s streets. It all seems to echo Trump’s attempted crackdowns on undocumented immigrants in liberal “sanctuary cities,” this time applied to another marginalized group in Democratic strongholds. The president often blames Democrats for sustained poverty and crime in major cities, and he’s used typically stigmatizing language to describe homelessness: “You take a look at what’s going on with San Francisco, it’s terrible,” he told Fox News recently. “. . . We may intercede. We may do something to get that whole thing cleaned up. It’s inappropriate. Now, we have to take the people and do something.”

But the residents and leaders of these liberal cities are also intolerant of the unhoused. On the West Coast, criminalizing homelessness is already policy orthodoxy — even among those who are part of the vanguard of the anti-Trump resistance. 

Democratic Gov. Gavin Newsom’s spokesman called on Trump to put “serious solutions, with real investment, on the table,” rather than just divisive rhetoric. But as mayor of San Francisco, Newsom pushed a successful ballot initiative to make it illegal to sit or lie on city sidewalks. State Sen. Scott Wiener (D-San Francisco), who said this month that Trump should “back off,” co-sponsored a successful ballot initiative that bars camping in public spaces in his hometown. San Francisco Mayor London Breed said that “simply cracking down on homelessness without providing the housing people need is not a real solution.” Meanwhile, during her term, the city’s police department has increased the number of officers assigned to addressing homeless complaints from 24 to 58, while also raising the number of sanitation workers dedicated to sweeping encampments. Voters in these liberal cities not only continually pass these laws, they call on the police to enforce them. In 2017, San Francisco police were dispatched nearly 100,000 times for caller complaints of homeless concerns.


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Read from top.

the rotten smell of surplus in hard times...

What's that old saying about those who fail to learn the lessons of history? Something about being doomed to repeat it.

And so it was this week that Federal Treasurer Josh Frydenberg finally, after repeated failures, broken promises and false starts, declared an end to our decade of deficits.

On Thursday, the Treasurer announced a deficit of $680 million for the financial year just passed which, given the size of the overall budget, is little more than a rounding error. Balanced, in other words.

It's taken much longer than expected. In the aftermath of the global financial crisis, then treasurer Wayne Swan promised an early return to surplus.

Then, in the lead up to the 2013 election, treasurer-to-be Joe Hockey declared a "debt and deficit disaster", vowing an Abbott government would deliver a budget surplus in the first year and then in every year after.

Except, in the time the Abbott, Turnbull and Morrison governments have been in office, the deficits have continued and national debt has doubled. 

In fact, three years after winning office, a dejected Mr Hockey was forced to concede the Budget may never return to surplus, as resource prices slumped.

So, what's to be learned from all this? If there's one message our politicians should heed from the past decade, it is the folly of using the windfall gains from temporary booms to justify permanent restructures of the tax system.

Essentially, it's taken 10 years of tax bracket creep, a blitz by the Australian Taxation Office and a combination of surging iron ore prices and a dramatically weaker dollar to finally bridge the gap between what we earn and our spending.

The huge cuts in personal income tax in the years leading up to the 2008 global financial crisis — after the first round of the resources boom flooded the Treasury with revenue — left the cupboard bare once the crisis moved into full swing and locked the nation into a structural deficit.

Spending discipline may be crucial to balancing a budget. But when it comes to federal finances, it's revenue gyrations that have the biggest impact.

When a surplus can hurt

We've heard it for so long now, it's become ingrained into the collective psyche. Surplus good, deficit bad.

Both sides of politics have adopted it, almost as a mantra. The only problem is that it's not true. For a sustained surplus can be every bit as debilitating to an economy as ongoing deficits.

They may not run you into a debt crisis. But perpetual surpluses deny vital public services, undercut living standards and usually result in higher unemployment. 

What governments should aspire to is a balanced budget over the long term by banking cash in the good times so they have enough ammo to ride through tough times.

To a certain extent, it happens automatically. In buoyant times, companies earn bigger profits and pay more tax and, with more people in work, personal income tax rises and there is less to spend on unemployment benefits. More income. Less spending. That leaves spare cash.

When things turn down, the opposite occurs. Tax revenue drops and spending rises. 

Deficits add fuel to economic growth. Surpluses put a brake on the economy. 

Is this the right time?

No matter how you look at it, our economy is sputtering. Growth is the slowest in a decade, household debt is at nosebleed levels, wages growth is anaemic and unemployment is creeping higher. Little wonder consumers have shut their wallets and retailers are doing it tough.



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increasing productivity for no-one to buy?...

Australia has been caught up in a sharp downturn being forecast for the global economy as headwinds from the US-China trade war and Brexit tensions bite into growth.

Key points:
  • IMF warns slashing interest rates close to zero won't be enough to stimulate economic growth
  • Treasurer Josh Frydenberg says returning the budget to surplus remains a priority
  • Money markets see a 41pc chance of a rate cut on Melbourne Cup day


The International Monetary Fund is predicting a "synchronised slowdown" with global growth in 2019 downgraded once again to 3 per cent — noting a "serious climbdown" from 3.8 percent in 2017.

The slowest pace of growth since the global financial crisis is being blamed on rising trade barriers and higher uncertainty from swirling geopolitical issues, which are putting a dent in manufacturing and global trade.

In its latest World Economic Outlook, the IMF says Australia's economy will weaken to 1.7 per cent growth in 2019, down a full percentage point from 2.7 percent in 2018.

In a statement reacting to the gloomy outlook, Treasurer Josh Frydenberg confirmed that while the fundamentals of the Australian economy remain sound, "we do face headwinds".

"We have a AAA credit rating, record labour market participation and welfare dependency at its lowest level in three decades. We are in our 29th year of consecutive economic growth — a record unmatched by any other developed nation," Mr Frydenberg said.

"But the international challenges are a stark reminder of why we must stick to our economic plan which will deliver lower taxes so Australians can keep more of what they earn, more infrastructure to create jobs and boost productivity."


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See toon at top..


At least the slowdown should reduce emissions of CO2 while increasing politicians' hot air production...