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Bill Gates Joins Growing Chorus Against Trump’s Plan to Reopen Economy

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Bill Gates Joins Growing Chorus Against Trump’s Plan to Reopen Economy

Bill Gates is the latest in a growing chorus to voice concerns over statements made by President Trump that he would like to get America’s economy running again by Easter.

During a recent TED talk (as reported by Recode), Gates said “it’s very irresponsible for somebody to suggest that we can have the best of both worlds,” implying our ability to contain the virus and keep Americans safe while keeping the economy open and running at full speed.

He added “There really is no middle ground, and it’s very tough to say to people, “Hey, keep going to restaurants, go buy new houses, [and] ignore that pile of bodies over in the corner. We want you to keep spending because there’s maybe a politician who thinks GDP growth is all that counts.”

Trump has said he wanted to re-evaluate his administration’s initiative to slow or contain the spread of the virus which included “social distancing.” 

The initial 15-day period ends next week and on Tuesday during an Fox News town hall, Trump said “I give it two weeks,” suggesting he was ready to end the 15-day self-isolating guidelines when they expire. 

“I guess by Monday or Tuesday, it’s about two weeks. We will assess at that time and give it more time if we need a little more time. We have to open this country up.”

He added “I would love to have the country opened up, and rarin’ to go, by Easter” and “people can go back to work and practice good judgment.”

Trump reasoning for the accelerated timeline is that the longer the economy is effectively shut down, the longer it will take to get it up to full speed.

However, Gates is just one of a growing chorus of experts and politicians who worry that pushing the economy to reopen in an effort to help the stock market recover is ignoring the very real likelihood that we would be putting citizens at danger if the spread of the virus isn’t under control.

New York Gov. Andrew Cuomo, whose state is battling the highest number of coronavirus cases in the US, made similar comments to Gates on Tuesday.

“No American is going to say, accelerate the economy at the cost of human life, because no American is going to say how much a life is worth. Job [No. 1] has to be save lives,” he said.

Maryland Gov. Larry Hogan, a Republican and head of the National Governors Association, expressed concern over the need to meet a schedule on an “imaginary clock.”

No matter how much pressure President Trump places on governors or even citizens to get back to work, legally there’s not much he can do.

Legal experts say a U.S. president has quite limited power to order citizens back to their places of employment, or cities to reopen government buildings, transportation, or local businesses.

The policies that Trump announced on March 16 for slowing the spread of the novel coronavirus (such as social distancing) were merely guidelines, and the same goes for any newer, less restrictive policies he unveils, according to Robert Chesney, a professor of national security law at the University of Texas.

“Those are guidelines. He can change his advice,” Chesney said. “He is free to advocate. And that is an important part of the presidency — the bully pulpit.”

Consumers

US Consumer Spending Up Modest 0.2% in February

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US consumer spending up modest 0.2% in February

WASHINGTON (AP) — Americans increased their spending by a modest amount in February but the expectation is that spending will be hit hard in coming months reflecting the shutdown of the American economy by the coronavirus.

The Commerce Department reported Friday that spending edged up 0.2% in February, matching the January gain but below the 0.4% increase in December.

Personal incomes rose a solid 0.6 percent in February, matching the January gain. Those strong increases are likely to fall-off as millions of Americans lose their jobs although the Senate has passed a $2.2 trillion economic relief package that would cushion the blow by providing checks of up to $1,200 to individuals and expanding unemployment benefits.

The hope is that the relief package, which was expected to clear the House Friday, will keep the economy from falling into a deep recession because of the shutdowns. The Federal Reserve has also moved to slash its key interest rate to a record low near zero and is providing billions of dollars in support to keep credit flowing.

Economists have said all these efforts will not be enough to keep the country out of a downturn, but they could help promote a stronger and quicker rebound once the virus is contained.

A key inflation measure was up 1.8% for the 12 months ending in February, according to the latest data, below the Fed’s 2% target. The absence of inflation worries has allowed the central bank to focus on supporting economic growth.

Consumer spending accounts for 70% of economic activity but surveys are already showing the virus is having a big impact on the biggest driver of the economy. Coresight, a data research firm, found that almost half of U.S. consumers — 47% — are now extremely concerned about the outbreak, up 10 percentage points in just one week.

“With high-frequency data showing a collapse in economic activity over the past couple of weeks, overall consumer spending is likely to have plummeted in March,” said Andrew Hunter, senior U.S. economist at Capital Economics.

Hunter said he was expecting around a 40% decline in consumer spending in the April-June quarter.

Many economists believe that a recession has already begun although they are forecasting it could be a short one, lasting only two quarters, if the government’s efforts to contain the coronavirus are successful.

The Trump administration is hoping to get the new programs in the $2.2 trillion relief package up and running quickly. Treasury Secretary Steven Mnuchin said Friday he wanted to get a program to supply small businesses with bank loans operational in a week and IRS payments of up to $1,200 per individual being sent to households in three weeks.

Asked in an interview on Fox Business Network about the record 3.3 million applications for unemployment benefits reported on Thursday, Mnuchin said, “These numbers matter because people are losing their jobs.” But he said the government programs in the rescue bill should either get people back to work or supply financial support until they can find new jobs.

The 1.8% 12-month rise in the inflation gauge tied to consumer spending has been below the Fed’s 2% target for more than a year and now is expected to fall even lower with the drop-off in economic activity and a big fall in energy prices.

The spending report said that the personal saving rate rose in February to 8.2% of after-tax income, the highest level in 11 months and up from 7.9% in January.

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Entertainment Companies and Retailers Could Face Mass Extinction

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Entertainment Companies and Retailers Could Face Mass Extinction

Whether or not the country decides to enact official lockdown measures in an attempt to halt the spread of the coronavirus, some cities like Los Angeles New York City are taking their own measures to try and halt the spread.

Mayors in both cities ordered bars to close and restaurants to only offer take-out and delivery services.

On top of that, movie theaters and concert venues in both cities have been ordered to close.

How other cities handle the coronavirus outbreak remains to be seen, but it’s clear that any business that relies on people gathering in one place could face a serious survival threat in the coming weeks and months.

Here are a few industries and businesses that could face extinction in the coming months if the coronavirus outbreak become a full on pandemic here in the US:

Entertainment companies

The first ones to come to mind are theater companies if the order to close becomes widespread. The largest two are Cinemark (NYSE: CNK), AMC Entertainment (NYSE: AMC). Also consider National CineMedia (NASDAQ: NCMI) which runs all the ads you see before a movie.

Michael Pachter, an analyst at Wedbush Securities says “There is a genuine concern that [coronavirus] will limit theatrical attendance globally, whether driven by theater closures or fear of contamination.”

Also look at financial pressure being put on companies in the food and entertainment space like Dave & Buster’s (NASDAQ: PLAY).

Particularly vulnerable could be Diversified Restaurant Holdings (NASDAQCM: SAUC), which operates 64 Buffalo Wild Wings Franchises. With restaurants forced to shut down, the company could focus more on take-out orders for it’s popular wings and appetizers. 

However, with nearly every major sports league shut down, including the upcoming NCAA March Madness tournament, there’s little need for large orders of wings to feed family and friends at home.

Retailers

Most vulnerable could be the already struggling retailers like Ascena Retail Group (NASDAQ: ASNA) which owns brands like Ann Taylor, Loft and Lane Bryant.

JCPenney (NYSE: JCP) has managed to hold on a lot longer than many predicted, but this latest blow could be the final one for the company originally founded in 1913. The company’s footprint is now so small that any drop in business due to shoppers staying away could be fatal.

The last retailer is GNC (NYSE: GNC), the seller of supplements and vitamins. This one might be a “beating a dead horse” type of investment as the share price has already plunged from 98% in the last five years. But there’s never any foot traffic in the stores despite near-permanent sales and discounts, so this could be the final straw.

On the other side of the coin, if there are quarantine efforts put into place, it’s clear that a vast majority of Americans will simply double or triple their orders from Amazon for all their purchases. We will also likely see viewing time on Netflix soar. 

Also expect a massive uptick in business for delivery companies like GrubHub (NYSE: GRUB).

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Federal Reserve Leaves Rates Untouched

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Federal Reserve Leaves Rates Untouched

The Federal Reserve has yet again failed to change interest rates.

Interest rates have remained frozen since last December.

Rates remain the same

Janet Yellen, Chair of the Federal Reserve, announced on June 15th that yet again interest rates would remain the same, despite slow signs of growth in some regions of the economy.

Interest rates rose for the first time since the financial crisis in December 2015, and the Federal Reserve have not raised the interest rate since.

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Why do rates remain frozen?

The Federal Reserve is currently reluctant to increase interest rates for some reasons, these include:

  • The rate of employment has slowed down
  • Fixed investments in business have been cautious
  • Market measures of inflation have fallen
  • The upcoming UK referendum regarding the EU
  • The German 10-year bund remains small

The key focuses for keep interest rates unchanged, however, have been the decline in the job market and the EU referendum in the UK (Brexit).

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Slow Jobs Market

The slowdown in the jobs market has concerned the Federal Reserve.

Work vacancy production plummeted in May 2016, the Federal Reserve are planning to review the figures in July to see if there are signs of improvement in the jobs market this month.

The vacancy production in the US fell to the lowest levels in six years in May 2016.

While the figures for job production are disappointing, Loretta Mester, Federal Reserve President in Cleveland, has reportedly stated that we should not focus on one number too much.

She believes there are many factors to take into consideration such as seasonal demands.

Job production has been falling since February when the rate of job production was 233k.

The rate fell to 186k in March and 123k in April.

The last recorded figure was in May when job production dropped to 38k.

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Brexit

Yellen has said that the upcoming Brexit has influenced the Federal Reserve’s decision to keep interest rates unchanged.

Opinion polls for the upcoming referendum show that results are still close.

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Yellen has warned of the possible financial consequences that the results of the referendum could have on global markets.

The Bank of England has recently stated that the UK leaving the EU would cause a global financial crisis.

Signs of growth in the markets

Although it may not appear so, there is evidence of growth in the US economy.

The Federal Reserve predicts that unemployment will remain below 5% for the next three years.

Earlier this month there were reports that the manufacturing industry experienced an unexpected boost.

Manufacturing companies have welcomed the news, but they have remained cautious.

They have called the increase a move in the right direction.

The journey to economic recovery

There have been signs of a US recovery for years.

With this in mind, lack of change in interest rates have surprised and frustrated many.

The US economy started to show signs of growth back in the second half of 2009.

Current production of services and goods have risen 10% higher than its pre-recession figures, and is 15% higher than the lowest point during the recession.

The slowdown in growth, however, predates back before the recession.

The decline of growth is due to some different factors:

The US economy has had a slow journey to recovery, and there is still a long way to go.

The Federal Reserve’s interest rate policy has played its part.

Only so much will protect the US from the potential global economic breakdown.

Summing it up

The current state of the US interest rates has frustrated many people;  Janet Yellen and the Federal Reserve have been determined to keep interest rates at a steady level for six years.

There has only been one increase in six years, and the next growth is uncertain.

There are many reasons for the Federal Reserve’s reluctance to increase interest rates, mainly the current lack of job production and the upcoming UK referendum.

The fall of job production in May has had many people alarmed.

However, Loretta Mester has stressed that we cannot focus on one figure.

The upcoming UK referendum has the potential to cause an economic catastrophe.

The UK public remains evenly divided with opinion polls showing an almost 50-50 split.

The US has come a long way in its journey to recovery, but there is still a long way to go.

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