Q-1 Economic Update (May 2021)

As a result of actions taken by the previous administration, the US economy and markets performed very well in the first quarter of 2021.  The current administration, however, has already taken detrimental action that will eventually damage the US economy.  The tax hikes being proposed could cost a million jobs, the cancellation of the pipeline will cost over 8,000 jobs, raising corporate taxes and increasing regulation would cause many companies to find more business-friendly nations for their corporate headquarters and production facilities.  What legislation or parts of the spending bills will pass the Senate is still unclear.

According to CNC: “First-time claims for unemployment insurance rose more than expected last week despite other signs of healing in the jobs market, the Labor Department reported Thursday.  The declining headline unemployment rate ignores over 10 million able-bodied Americans between the ages of 25 and 54 who do not have jobs, but are not counted as unemployed because they haven’t looked for a job recently.” 

The future is looking less bright economically, but there are also all kinds of social, constitutional, and international concerns looming as well, with no clear resolution insight.  Even former Clinton appointed Treasury Secretary has criticized Biden’s economic policies. The Epoch Times reported, “Economists, including Larry Summers, the former Treasury secretary of President Bill Clinton, raised concerns earlier about President Joe Biden’s $1.9 trillion relief package and warned that excessive government spending could overheat the economy and fuel inflation.

Behind Biden’s Big Spending Plans, the Waning Sway of Economic Caution (4.29.21) WSJ https://www.wsj.com/articles/behind-bidens-big-spending-plans-the-waning-sway-of-economic-caution-11619710043?mod=hp_lead_pos12

U.S. Economy Grew Robustly in First Quarter (4.29.21) WSJ

https://www.wsj.com/articles/us-gdp-economic-growth-first-quarter-2021-11619658605

Fed Holds Interest Rates Near Zero, Expects Temporary Rise in Inflation (4.28.21) https://www.theepochtimes.com/mkt_morningbrief/fed-holds-interest-rates-near-zero-expects-temporary-rise-in-inflation_3795246.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-04-29&mktids=20537d99b23ee9d3227a6d4d16dbdeb7&est=SXG2KWbqwxOCaot%2FkG%2FOCGXPxSassc8HlJ2ski8yjNhxhlACjUT8emb7I%2FI%3D

Tax Hikes to Cause 1 Million Job Losses by 2023 (4.11.21) https://www.theepochtimes.com/mkt_morningbrief/study-tax-hikes-to-cause-1-million-job-losses-by-2023_3771362.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-04-12&mktids=2f40035469c85954779811da687374cc&est=akLYRy6B4dIwa7jK8ybTCRt5WSNiROev9GhA90gqvg7JMIuJSDOVeXPcwr0%3D

Weekly Jobless Claims Higher Than Expected (4.8.21) https://www.cnbc.com/2021/04/08/weekly-jobless-claims.html

US Taxation & Regulation Not Business Friendly Anymore
Biden’s tax plan will not generate sufficient revenue to pay for the administration’s spending proposals.  In regard to the plan, Reuters wrote, “This bill would help foot the bill for Biden’s ambitious economic agenda. The proposal calls for increasing the top marginal income tax rate to 39.6% from 37%, the sources said this week. It would also nearly double taxes on capital gains to 39.6% for people earning more than $1 million.  That would be the highest tax rate on investment gains, which are mostly paid by the wealthiest Americans, since the 1920s. The rate has not exceeded 33.8% in the post-World War Two era.” 

The US future outlook from a taxation, cost of living and cost of doing business stand point, does not look good.  The outlook of states like California and New York and cites like NY, LA, Portland and Minneapolis are worse because of their mishandling of Covid-19 and the violent riots in 2020 and 2021.  According to a NYT article: 

No man’s life, liberty or property are safe while the Legislature is in session.”  That’s how Gideon Tucker — a New Yorker who knew Albany as a former legislator, secretary of state and judge — put it back in 1866. Yet there is something different, and especially troubling, about this time. The possibility of permanent decline and the ultimate destruction of the New York we know is unmatched in modern memory.  Socking New York’s businesses and wealthy residents with $7 billion in new taxes will likely trigger the worst exodus since the Big Apple flirted with bankruptcy in the 1970s, a huge group of major employers and small business owners warned Tuesday…, In a letter to Gov. Andrew Cuomo and the state’s legislative leaders.”

Most business periodicals give New York City a ten to thirty-year recovery timeline, if they can fully recover at all.  NY and CA are the top exit states in the nation for both businesses and population.  In fact, both states lost one representative in the US House after the 2020 Censes, while Texas and Florida each increased by their US representatives by one.

Biden to Float Historic Tax Increase on Investment Gains for The Rich (4.23.21)

https://www.reuters.com/business/biden-propose-hike-capital-gains-taxes-pay-more-child-care-sources-2021-04-22/

What’s in Biden’s Tax Plan (4.7.21) NYT  https://www.nytimes.com/2021/04/07/business/economy/tax-plan-biden.html

White House Sends Mixed Message on Higher Taxes (4.11.21)

https://thehill.com/policy/finance/547571-white-house-sends-mixed-message-on-higher-taxes

$7B in Proposed Tax Hikes Could Wreak Havoc on NY, 250 Business Leaders Warn (3.23.21) NYP https://nypost.com/2021/03/23/business-leaders-warn-7b-in-proposed-tax-hikes-could-wreck-ny/

Quality of Life Plummets, Taxes Rocket & New York City Faces Doom (4.6.21) https://nypost.com/2021/04/06/quality-of-life-plummets-taxes-rocket-and-new-york-city-faces-doom-goodwin/

Tax Hikes to Cause 1 Million Job Losses by 2023 (4.11.21) https://www.theepochtimes.com/mkt_morningbrief/study-tax-hikes-to-cause-1-million-job-losses-by-2023_3771362.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-04-12&mktids=2f40035469c85954779811da687374cc&est=akLYRy6B4dIwa7jK8ybTCRt5WSNiROev9GhA90gqvg7JMIuJSDOVeXPcwr0%3D

NYC’s Ultra-Rich Face 52% Combined Top Income Tax Rate, Highest in U.S. (4.7.21) https://www.cbsnews.com/news/new-york-city-rich-face-52-percent-combined-top-income-tax-rate-highest-in-u-s/

Quality of Life Plummets, Taxes Rocket & New York City Faces Doom (4.6.21)

https://nypost.com/2021/04/06/quality-of-life-plummets-taxes-rocket-and-new-york-city-faces-doom-goodwin/

Banks & Central Banks

Most Central Banks have continued to print stimulus money and keep interest rates artificially low.  America’s central bank, the Federal Reserve, has continued in this vein as well, with the Epoch times reporting:

The Federal Reserve announced on April 28 that it would keep U.S. interest rates near zero as the pandemic “continues to weigh on the economy.” The Fed officials expect a temporary spike in inflation due to strong consumer spending as the economy continues to reopen.” The WSJ wrote, “The Fed has said it will hold rates near zero until it sees the labor market return to full employment and inflation rise to 2% and is forecast to moderately exceed that level for some time. Mr. Powell reiterated that he thinks it is highly unlikely that the Fed would raise interest rates this year and noted that most central-bank officials see rates remaining near zero through 2023. He also went on to say they expect to reduce bond purchases.”

A new area central banks are venturing into is climate control.  In the past year we have seen the judiciary politicized, and now we are seeing central banks being driven by progressive political agendas instead of economics and monetary policy.  Project Syndicate wrote:

Monetary authorities are increasingly expected to address issues such as climate change and inequality, over the objections of those who insist that central banks’ narrow mandate is what sustains their operational independence. But ignoring these issues, or saying they’re someone else’s problem, is no longer an option.  “We are used to thinking about the remit of central banks as focusing narrowly on price stability, or at most as targeting inflation while ensuring the smooth operation of the payment system. But with the global financial crisis of 2008 and now COVID-19, we have seen central banks intervening to support a growing range of markets and activities, using instruments that extend well beyond interest rates and open market operations.

This, clearly, is not your mother’s central bank.

Fed Holds Interest Rates Near Zero, Expects Temporary Rise in Inflation (4.28.21)

Powell Pledges to Maintain Easy-Money Policies Until Economy Recovers (2.24.21) WSJ https://www.wsj.com/articles/powell-pledges-to-maintain-feds-easy-money-policies-until-economy-recovers-11614180781

New-Model Central Banks (2.9.21) https://www.project-syndicate.org/commentary/central-banks-have-tools-for-climate-change-and-inequality-by-barry-eichengreen-2021-02?barrier=accesspaylog

Central Bank Will Begin Reducing Bond Purchases Well Before Raising Interest Rates, Powell Says (4.14.21) https://www.wsj.com/articles/central-bank-will-begin-reducing-bond-purchases-well-before-raising-interest-rates-powell-says-11618421656

Currency

The world is moving rapidly toward digital currency replacing paper currency.  China declared, last year, that the yuan will go digital Jan 1, 2022, just seven months from now.  Other major global currencies are preparing for that time as well.  Reuters reported:

China proposed a set of global rules for central bank digital currencies on Thursday, from how they can be used around the world to highly sensitive issues such as monitoring and information sharing.  Global central banks are looking at developing digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies like bitcoin and speed up domestic and international payments. China is one of the most advanced in its effort.

Not all countries are supportive of digital currencies.  According to Reuters: “India will propose a law banning cryptocurrencies, fining anyone trading in the country or even holding such digital assets, a senior government official told Reuters in a potential blow to millions of investors piling into the red-hot asset class.  The bill, one of the world’s strictest policies against cryptocurrencies, would criminalize possession, issuance, mining, trading and transferring crypto-assets, said the official, who has direct knowledge of the plan.” 

The reason for this is the way India taxes its citizens, which is based on the amount of Indian currency they have in the bank; they can’t tax digital currency, so they’re attempting to ban it, emphasis on “attempting.”

Bloomberg sums it up this way: “The financial services industry, braced for what could be its biggest disruption in decades, is about to get an early glimpse at the Federal Reserve’s work on a new digital currency.  Banks, credit card companies and digital payments processors are nervously watching the push to create an electronic alternative to the paper bills Americans carry in their wallets, or what some call a digital dollar and others call a Fedcoin.  As soon as July, officials at the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology, which have been developing prototypes for a digital dollar platform, plan to unveil their research, said James Cunha, who leads the project for the Boston Fed.  A digital currency could fundamentally change the way Americans use money, leading some financial firms to lobby the Fed and Congress to slow its creation — or at least ensure they’re not cut out.   Seeing the threat to their profits, the banks’ main trade group has told Congress a digital dollar isn’t needed, while payment companies like Visa Inc. and Mastercard Inc. are trying to work with central banks to make sure the new currencies can be used on their networks.  A U.S. digital dollar could also put the final nail in the coffin for Bitcoin as a means of exchange, Brito said. Crypto enthusiasts have already started to acknowledge that’s happening anyway, and instead tout the currency as a store of value or “digital gold.”

China may test its digital currency with foreign visitors at the 2022 Beijing Winter Olympics (4.18.21) https://www.cnbc.com/2021/04/19/china-may-trial-digital-currency-with-foreign-visitors-at-beijing-olympics.html

Federal Reserve’s Digital Dollar Push Worries Wall Street (3.22.21) Bloomberg https://www.bloomberg.com/news/articles/2021-03-22/federal-reserve-s-digital-dollar-momentum-worries-wall-street

China Proposes Global Rules For Central Bank Digital Currencies (3.25.21) Reuters

https://www.reuters.com/article/us-cenbanks-digital-china-rules/china-proposes-global-rules-for-central-bank-digital-currencies-idUSKBN2BH1TA

Bitcoin Hits $60,000 in Record High (3.13.21)

https://www.reuters.com/article/us-crypto-currency-bitcoin-high/bitcoin-hits-60000-in-record-high-idUSKBN2B50BV

India to Propose Cryptocurrency Ban, Penalizing Miners, Traders (3.21.21) Reuters https://www.reuters.com/article/uk-india-cryptocurrency-ban/india-to-propose-cryptocurrency-ban-penalising-miners-traders-source-idUSKBN2B60QP

Billionaire hedge fund manager urges diversification out of the dollar (3.29.21) SMC https://www.sovereignman.com/international-diversification-strategies/billionaire-hedge-fund-manager-urges-diversification-out-of-the-dollar-31723/

Debt

The new administration has spent more in its first hundred days than any other before it.  The Hill wrote, “No sooner did Biden sign the $1.9 trillion COVID relief bailout bill in March, than his administration proposed another $4 trillion of deficit spending for “infrastructure.” The Democrats are in a super rush to get this done.”  

A common misconception is that you can print your way out of a financial crisis, but every county that’s tried has failed.  Albert Einstein said “The definition of insanity is doing the same thing over and over again, but expecting different results,” and Winston Churchill said, “A nation that forgets its past has no future.”  However, the current administration doesn’t remember history, which shouldn’t surprise us, considering who is advancing this agenda.

Pelosi wants Biden infrastructure bill done by August (4.8.21)

https://thehill.com/homenews/house/547224-pelosi-wants-biden-infrastructure-bill-done-by-august

White House Eyes Sweeping $3T Spending Proposal (3.22.21)

https://thehill.com/homenews/administration/544400-white-house-eyes-sweeping-3t-spending-proposal

Some Clear Thinking on the Yesterday’s Massive Deficit Announcement (4.13.21) SMC https://www.sovereignman.com/trends/some-clear-thinking-on-the-yesterdays-massive-deficit-announcement-31964/

It Took 25 Years For Stocks To Recover Inflation Losses From the 1970s (3.14.21)) SMC https://www.sovereignman.com/trends/it-took-25-years-for-stocks-to-recover-inflation-losses-from-the-1970s-31500/

Gold & Silver

Gold, silver and precious metals have risen rapidly over the last year, and it is unlikely that trend will subside in 2021.  BullionStar.com has expressed concerns that, if the rapid rate of precious metal purchases continues, it could create shortages.  Simon Black also shared his thoughts on the rapid ascendancy of gold & silver saying, “It appears that the Federal Reserve has landed itself in this position.  In its efforts to boost the economy during the pandemic, the Fed slashed interest rates so much that the average 30-year mortgage rate for homebuyers reached an all-time low of 2.65% earlier this year.  Similarly, AAA-rated corporate bond yields reached record low 2.14% last summer.  The US government 10-year Treasury Note dropped to a record low 0.52%.  And the 28-day US government Treasury Bill rate actually turned negative for a brief period– something that has never happened before.  The effects of such cheap rates are obvious.”

LBMA acknowledges Buying Frenzy in Silver Market and silver shortage Fears (4.14.21) https://www.bullionstar.com/blogs/ronan-manly/lbma-acknowledges-buying-frenzy-in-silver-market-and-silver-shortage-fears/

Gold vs. the Stock Market (3.17.21) SMC https://www.sovereignman.com/investing/golds-vs-the-stock-market-31538/

World Economies

Political leadership is changing globally, and in some cases, like the US and Germany, the new leadership is radically different than the old.  The leaders in three of the four largest export economies in the world Japan, Germany and the US, have changed or are about to change.  The WSJ wrote:

With Merkel retiring, surging Greens challenge German orthodoxy on debt and government spending.  A decade ago Germany’s intransigence over bailouts and borrowing prolonged the eurozone’s sovereign debt crisis, one reason the region’s economic recovery lagged behind the U.S.’s.  Another crisis, another lagging recovery for Europe, and again the size of fiscal stimulus is a factor. But Germany isn’t the obstacle it once was, and the rise of its Green Party could further push both country and continent toward the U.S. model of aggressive government stimulus.”

The WSJ also wrote that “Meeting President Biden’s goal of sharply reducing U.S. greenhouse-gas emissions by 2030 would require dramatically reshaping key sectors of the economy.  While U.S. industries are already transitioning to a lower-carbon future, Mr. Biden’s target would require companies in industries from energy to transportation to agriculture to greatly speed the pace of change.  Some segments of the economy appear to be ready. Others would face extraordinary challenges. All would face significant new costs—exactly how much is unknown—and it is unclear how much would be subsidized by government tax policies or incentives, since the Biden administration has yet to detail how it would seek to reach the aggressive new goal.” 

The current US administration is always short on details and their math leaves much to be desired.  Many nations of the world are worse off than the US however, like Zambia which just defaulted and may look to China to bail them out, the price of which will likely be their national sovereignty.

A Green Germany Could Pump Up Europe’s Fiscal Push (4.28.21)

https://www.wsj.com/articles/a-green-germany-could-pump-up-europes-fiscal-push-11619626947

After Default, Zambia’s Outsized Bet on Copper Could Play Into China’s Hands (4.27.21) WSJ https://www.wsj.com/articles/after-default-zambias-outsized-bet-on-copper-could-play-into-chinas-hands-11619514520?mod=world_major_2_pos1

Biden’s Pledge to Slash Emissions Would Require Big U.S. Changes (4.23.21)

https://www.wsj.com/articles/bidens-pledge-to-slash-emissions-would-require-big-u-s-changes-11619184478

Japan’s Stock Market Finally Surpasses Its Level From 30+ Years Ago (2.15.21) SMC https://www.sovereignman.com/trends/japans-stock-market-finally-surpasses-its-level-from-30-years-ago-30875/

Political Unrest – Especially in China

The world is still trying to find its footing in the aftermath of the restrictions and disruption caused by the CCP originated virus.  Just as with the virus they caused, the entire world is also reacting to an increasingly aggressive Chinese government that is threatening and intimidating others with economic and military actions, not to mention their severe and inhumane treatment of their citizens who profess faith in God and not the CCP.  The Epoch Times reported:

The UK and the West in general may be forced to capitulate “without a shot being fired” if they continue “ceding the strategic initiative” to rivals such as China and Russia, a senior British military commander has said.  “While we drained our strength in interventions like Iraq, others used the time and space to further their interests more strategically,” General Sir Patrick Sanders, commander of the UK’s Strategic Command, wrote in The Times of London on Saturday. … China has pursued a strategy of winning without fighting, changing the terms of the international order,” he said.”

Epoch Times also reported, “The Chinese regime is on its way to becoming a “near-peer competitor” for the United States and is the “unparalleled priority” for the country’s intelligence community, the U.S. Director of National Intelligence (DNI) said on April 14.”

China is threatening so many nations, individuals, companies, groups and organizations, that, rather than list them all, I’ve included links to articles below that you can read for yourself.  Other areas of political unrest are Iran, Chad, Egypt and Russia, however, it is becoming increasingly difficult to determine who the bad guys and good guys are in all of these situations.   France and other nations are beginning to deploy AI in their quest to monitor and identify those they see as aggressors within in their country, with the WSJ reporting, “The government of French President Emmanuel Macron aims to deploy algorithms and other technology to monitor the web-browsing of terror suspects amid growing tensions over a group of retired generals who recently warned the country was sliding toward a civil war.” 

France’s Macron Eyes Artificial Intelligence to Monitor Terrorism (4.29.21) WSJ

https://www.wsj.com/articles/frances-macron-seeks-broader-counterterror-surveillance-11619629713?mod=world_major_1_pos4

Strongman’s Death Spotlights Complexity of Africa’s Desert Wars (4.29.21)

https://www.wsj.com/articles/strongmans-death-spotlights-complexity-of-africas-desert-wars-11619695391

U.S. Warship Fires Warning Shots in Encounter With Iranian Vessels (4.27.21) WSJ https://www.wsj.com/articles/u-s-warship-fires-warning-shots-in-encounter-with-iranian-vessels-11619566150?mod=world_major_1_pos7

Iranian Ships Swarmed U.S. Coast Guard Vessels in Persian Gulf, Navy Says (4.26.21) WSJ https://www.wsj.com/articles/iranian-ships-swarmed-u-s-coast-guard-vessels-in-persian-gulf-navy-says-11619461317?mod=world_major_1_pos8

West Faces Moment of Reckoning Over Chinese Tech Threat UK Intelligence Chief (4.23.21) https://www.theepochtimes.com/mkt_breakingnews/west-faces-moment-of-reckoning-over-chinese-tech-threat-uk-intelligence-chief_3788508.html?utm_source=News&utm_medium=email&utm_campaign=breaking-2021-04-23-2&mktids=678ba993858548fdbd58186448bd8ecc&est=afZSAEfbul6YthGZOWP%2B9gDkIOpEPtrOT08KG9%2BD0PorxKaNDO6gXLpjAes%3D

China Threat an Unparalleled Priority for US Intelligence Community (4.14.21) https://www.theepochtimes.com/mkt_breakingnews/china-threat-an-unparalleled-priority-for-us-intelligence-community-spy-chiefs_3775798.html?&utm_source=News&utm_medium=email&utm_campaign=breaking-2021-04-14-2&mktids=adf90e38f5f3c2c4b6fcd5da90f11c05&est=I6cuHvVJaEjVceXSG32aPdX6jluXxP0Pjif3ctOR24eIE6jcN8f5fLKaXoY%3D

Vladimir Putin Issued Stark Warning to US, NATO (4.21.21) Video 2.5 mins https://www.youtube.com/watch?v=XM62PIYYGFs

Putin Warns West of Rapid & Harsh Response From Russia if it Crosses Red Lines (4.21.21) BBC News https://www.youtube.com/watch?v=4jL0CG68554  (Video)

Beijing Accelerating Timeline for Possible Invasion of Taiwan, Expert Warns (4.4.21) https://www.theepochtimes.com/mkt_breakingnews/beijing-accelerating-timeline-for-possible-invasion-of-taiwan-expert-warns_3759688.html?&utm_source=news&utm_medium=email&utm_campaign=breaking-2021-04-05-1&mktids=c14cbb7a295332445e2d1242c43aa9a4

Communist China’s No. 1 Goal; India China Standoff Fall of Hong Kong (3.3.21) CPAC 2021 https://www.youtube.com/watch?v=_KgM2-l2uzE

West Must Stop Ceding Strategic Initiative to China, Russia UK Commander (3.13.21) https://www.theepochtimes.com/west-must-stop-ceding-strategic-initiative-to-china-russia-uk-commander_3731942.html?utm_source=news&utm_medium=email&email=fsheen@gmail.com&utm_campaign=breaking-2021-03-13-1

US Military Official China and Russia May Be Collaborating South of US Border (3.17.21) https://www.theepochtimes.com/us-military-official-china-and-russia-may-be-collaborating-south-of-us-border_3738033.html?utm_source=morningbrief&utm_medium=email&email=fsheen@gmail.com&utm_campaign=mb-2021-03-19

In closing, Simon Black wrote: “Last week I wrote to you about billionaire hedge fund manager Ray Dalio’s most recent advice for people to diversify their investments OUT of the US dollarDalio didn’t pull any punches when he laid out his analysis for America’s economic future.  He warned readers of the very real risk of stagflation (starting “late this year”) and tax increases that could be even “more shocking than expected”.  He also advised people to anticipate the possibility of capital controls and prohibitions against assets like gold and cryptocurrency.”

JP Morgan CEO Acknowledges Something has Gone Terribly Wrong in America (4.8.21) SMC https://www.sovereignman.com/trends/jp-morgan-ceo-acknowledges-something-has-gone-terribly-wrong-in-america-31859/

When the Lord Protector Turned Out to Be the Worst Tyrant of All (4.26.21) SMC https://www.sovereignman.com/trends/when-the-lord-protector-turned-out-to-be-the-worst-tyrant-of-all-32032/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s