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The Beatings Will Continue Until The Economy Improves – Forbes

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You can’t live without making certain presumptions. You presume your car will start, your refrigerator will stay cold, and the lights will turn on when you flip the switch.

In fact, you could argue this “predictability” is what separates advanced economies from primitive ones. Most of us don’t have to worry about being attacked in our sleep or having food tomorrow. That security frees us to do other things.

Right now, some basic assumptions are no longer safe. For example, we can’t travel or even go to a restaurant or visit friends without wondering about our health.

The economy will keep suffering until our assumptions are reliable again. Otherwise, we will have to replace them with new assumptions. In the long run (after The Great Reset in the late 2020s), I still foresee a wonderful new world. But we have to get there first.

Economists use the word “recovery” to define a rebound from the previous time period. So if there was a 30% drop, a 10% increase would, for an economist, be a “recovery.” But in the real world, it still means you are 20% below where you started.

Recovery doesn’t necessarily mean recovered. Even optimistic projections say we won’t see anything like 2019 GDP until late 2021. Many suggest it will be even longer.

Even then, the changes we will have to put into our operating business models, not to mention the massive amounts of capital that it will take to start new businesses or resupply old ones, will make the “recovered” economy look significantly different than that of 2019.

For the record, just because I am not optimistic about the speed of economic recovery does not mean that I am necessarily bearish on the stock market. When the Federal Reserve pumps $5 trillion (or whatever) into the system, it is going to find a home. While I think earnings will take a severe hit in 2021, the market could hold simply due to massive Fed support.

There have been numerous times when the economy and the stock market were out of sync. Don’t equate the two. The stock market doesn’t necessarily tell us anything about the economy, or vice versa.

What we can presume is that there will likely be at least a $1 trillion additional stimulus package before July 31 that extends the additional $600-a-week unemployment benefits for some period. There is some debate on the amount. I expect a further multitrillion-dollar stimulus/infrastructure bill before the election.

This table from the Economic Policy Institute shows hourly wages of all workers, by wage percentile, for 2000–2018 (in 2018 dollars).

Current federal unemployment benefits of $600 per week, assuming a 40-hour week, equal $15 an hour (plus the state portion, which varies).

That means the bottom 30% of US workers are better off keeping unemployment as long as they can. Especially the bottom 20%. Even the 40th percentile might be better off taking the unemployment benefit as they have no cost of getting to and from work.

I have no idea what the next level of benefits will be or how long they will last. But as I said earlier, we are moving toward a Guaranteed Basic Income which, added to other entitlement spending, would push us closer to $2 trillion-plus annual deficits.

The world will not come to an end with a $30 trillion US debt. How far will future US Congresses push that number? Explaining to the average politician that debt is a drag on future growth is futile. Spending money today helps them get reelected tomorrow.

This, along with Federal Reserve policy, is going to push us to a very uncomfortable place towards the end of this decade. 

I predict an unprecedented crisis that will lead to the biggest wipeout of wealth in history. And most investors are completely unaware of the pressure building right now. Learn more here.

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Economy

How will the U.S. election impact the Canadian economy? – BNN Bloomberg

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How will the U.S. election impact the Canadian economy?  BNN Bloomberg



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Economy

Trump and Musk promise economic 'hardship' — and voters are noticing – MSNBC

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Trump and Musk promise economic ‘hardship’ — and voters are noticing  MSNBC



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Economy

Economy stalled in August, Q3 growth looks to fall short of Bank of Canada estimates

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OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.

Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.

The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.

The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.

Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.

The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.

But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.

Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.

Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

This report by The Canadian Press was first published Oct. 31, 2024

The Canadian Press. All rights reserved.

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