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Borrowing Back On The Menu for U.S Politicians

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Borrowing Back On The Menu for U.S Politicians

The amount of borrowing the U.S. economy relies on has always been huge.

Treasury bonds are astronomical in total value, and many have been calling for slashing the cost of borrowing for years.

However, recently the argument has turned from one of cutting to one of accommodating.

Read on for more.  

Reduce spending? Carry on

Whoever wins the election this year, be it, Trump or Clinton, don’t expect either candidate to have an appetite for an agenda of cutting public borrowing.

For several reasons, the agenda is now how American can best take advantage of its increased leverage in the loan.

–    Demand for Treasuries means more borrowing available, thanks to strong U.S. performance

–    Low-interest rates worldwide mean cheap money

–    Deficit has been cut, and recent economic data is propitious

With weak economic growth in Europe, the U.S. stock market is seeing record gains and demand for Treasuries has skyrocketed.

With this, the USA can now borrow more as confidence in its economy is extremely high compared to other OECD nations.

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At certain points, there has been debate over who can best strike a grand bargain, to slash the debt which stands as the highest among those in the developed world.

Right now, it stands at almost $19.5 trillion dollars.

This is the largest gross amount in the world and puts the United States in the top 20 countries regarding debt to GDP ratio (the highest being Japan).

Trump has certainly been advocating more borrowing.

With his proposed tax cuts in the trillions of dollars, his spending promises would necessitate it without a doubt.

Meanwhile, Hilary has made a similar approach, perhaps not to allow Trump to gain the upper hand in the game of spending promises.

Neither has mentioned cutting the debt but have instead talked of a Federal stimulus.

The GOP platform does call for a balanced budget, but this is much easier said than done and the ability to pass a budget resolution in Congress by Republicans this year proved a tall order and a fruitless one at that.

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Clinton and the Democrats

Clinton has proposed tax rises on those in higher income brackets and the finance industry.

This would be used to increase spending on roads and higher education which remains unaffordable to most.

To demonstrate the shift, consider that the Democratic party platform in the 2012 election referred to cutting the deficit a total of seven times.

This year’s platform in Philadelphia?

Not even once.

In fact, it calls for more spending.

In 2012, the economic crisis was still on the tip of everyone’s tongues and at the forefront of everyone’s list of issues.

Now it is a recent memory: not forgotten, but assumed to have been dealt. 

The massive spending deficits are seen during the worst years of around 2009 terrified people about the prospect of uncontrolled inflation that would destroy growth.

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Obama subsequently brought in piecemeal reforms to tackle the issues.

Within the U.S. political system, it is tough to impose wide-ranging reform unless the country is in a crisis such as a war or depression-style meltdown. So he:

–    Raised taxes on the wealthy

–    Loosened automatic curbs, which became known as the “sequester” (though federal budget continued to rise, just at a lesser rate)

The last few years have seen curbs on domestic and military programs that have seen spending increase rather than decrease.

In fall of 2015, Congress agreed to a budget that boosted spending but also implemented tax breaks without accounting for them in other budget areas.

Why the shift?

The U.S. economy has been performing well over the last few years.

In the face of a slowing down Chinese economy, and a stagnant Eurozone due to the Euro crisis, the US is an outlier, and there is global confidence in its ability to weather storms and deliver economic growth.

Thanks to the economic growth and budget agreements in this period, the near-term annual deficits have been reduced to their long-run historical averages, after the huge figures seen during the crisis.

The growth in the cost of health-care has slowed.

This is very often responsible for massive deficits, and Obamacare has not been the disaster that people predicted, even though it is still a sensitive topic for both sides of the debate.

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The world is in a low-interest rate borrowing frenzy, with little, zero or even negative interest rates the norm across much of the developed countries.

This means low costs for borrowing for the foreseeable future, which helps business run.

So to sum up, the shift is due to:

–    High economic growth

–    Lower deficits than during the crisis

–    Health-care cost growth falling

–    Low-interest rates worldwide making borrowing cheap

–    Payments on national debt at lowest level since 1968

There are still long-term deficits.

The budget office of Congress said that national debt in 2033 would exceed the total output of the economy.

Last year the forecast was for this to be the case by 2039.

Last year’s policy changes bear some responsibility for this re-forecast.

More and more of federal spending will be inflexible and on a course of autopilot in the coming years.

This is so because more retirees will qualify for medicare and social security benefits.

These spending figures are not appropriated by Congress in the annual budget.

Interest rates as a basis for long-term growth

Many commentators are wary of the weak economic foundation that low-interest rates provide.

Michael Peterson, president of the Peter Peterson Foundation, says that the low-rate environment offers borrowers and politicians a false sense of security.

His group advocates for deficit reduction.

Strong demand from the world for US treasury bonds, thanks to its strong performance, could work to keep rates lower longer.

Were this to be the case, higher debt levels would be easier tolerated.

Boosts in spending could be used to raise productivity as a more long-term way to deal with economic inefficiency and stagnation.

However, regarding innovation is a world leader, so the U.S. economy is already looking bright in that aspect.

Future outlook

If interest rates are below economic growth rates, the government can borrow while still maintaining a small and manageable debt-to-GDP ratio.

The low rates available may ensure this.

Larry Summers is an economist at Harvard.

He was also U.S. Treasury secretary.

He explains that low levels mean the economics of public spending and investment is substantially and intrinsically different to that of a decade ago when rates were higher.

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Secular stagnation is when there is a deficiency of investment that means a rut of low growth.

This is avoided by low-interest rates.

As populations age in other developing countries demand for Treasuries increase, meaning the United States can maintain a low-rate, high-save program for the foreseeable future.

Spending challenges will come in the future, but for now, the environment looks propitious for the U.S.

 

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Las Vegas Sands Once Again Recognized as World Leader for Climate Change

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Las Vegas Sands Once Again Recognized as World Leader for Climate Change
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Las Vegas Sands has again been recognized by CDP, the international nonprofit environmental disclosure platform, on the Climate Change A List. This is the company’s fifth year in a row to attain a leadership position for Climate Change, a distinction shared by only 2% of disclosing companies.

“The CDP provides a comprehensive framework that continues to inspire us to become leaders in our industry and provide guidance for strategic direction,” Katarina Tesarova, senior vice president of global sustainability at Las Vegas Sands, said. “Among the thousands of companies that were scored this year, Sands is one of a very small number from around the world to make the A List. We’re proud to be recognized, and we will continue to work towards additional reduction of our environmental impact.”

Through Sands ECO360, the company’s award-winning global sustainability program, Sands has reached several environmental milestones, all contributing to its placement on the Climate A List. The iconic ArtScience Museum at Marina Bay Sands in Singapore is the first Asia-Pacific region museum to achieve LEED (Leadership in Energy and Environmental Design) certification, and The Parisian Macao achieved LEED Silver certification for newly constructed buildings – the first building in Macao to receive this distinction. Additionally, the implementation of 38 energy-efficient ECOTracker projects are expected save more than 48 million kilowatt hours of electricity every year, through LED lighting upgrades, energy savings campaigns focused on consuming less electricity and more.

Sands has participated in the CDP environmental disclosure platform since 2012, starting first with reporting on climate change initiatives. Achievement of the Climate Change A List highlights the company’s work towards cutting emissions, mitigating climate risks and building integrated resorts responsibly.

The company has also retained its leadership in corporate sustainability with its most recent recognitions on the Dow Jones Sustainability Indices (DJSI) and America’s Best Employers by Forbes.

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Finance

Dow Jones Industrial Average Breaks 29,000 For The First Time in History

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Screenshot of Dow Jones Industrial chart taken January 15, 2020.
By ELAINE KURTENBACH, AP Business Writer

Slight gains send Dow Jones Industrial Average above 29,000!

The Dow Jones Industrial Average closed above 29,000 points for the first time and the S&P 500 index hit its second record high in three days Wednesday.

The milestones came on a day when the market traded in a narrow range as investors weighed the latest batch of corporate earnings reports and the widely anticipated signing of an initial trade deal between the U.S. and China.

President Donald Trump and China’s chief negotiator, Liu He, signed the “Phase 1″ deal before a group of corporate executives and reporters at the White House. The pact eases some sanctions on China. In return, Beijing has agreed to step up its purchases of U.S. farm products and other goods.

“This was telegraphed well enough that the market is kind of looking through it and toward the next phase and what that means,” said Keith Buchanan, portfolio manager at Globalt Investments.

Health care stocks accounted for much of the market’s gains. Utilities and makers of household goods also rose. Those gains outweighed losses in financial stocks, companies that rely on consumer spending and the energy sector.

The S&P 500 index rose 6.14 points, or 0.2%, to 3,289.29. The index also climbed to an all-time high on Monday.

The Dow gained 90.55 points, or 0.3%, to 29,030.22. The Nasdaq composite added 7.37 points, or 0.1%, to 9,258.70.

Smaller-company stocks fared better than the rest of the market. The Russell 2000 picked up 6.66 points, or 0-4%, to 1,682.40.

The benchmark S&P 500 index is on track for its second straight weekly gain.

Bond prices rose. The yield on the 10-year Treasury note fell to 1.78% from 1.81% late Tuesday.

While limited in its scope, investors have welcomed the U.S.-China deal in hopes that it will prevent further escalation in the 18-month long trade conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy. The world’s two largest economies will now have to deal with more contentious trade issues as they move ahead with negotiations. And punitive tariffs will remain on about $360 billion in Chinese goods as talks continue.

With the “Phase 1” agreement now a done deal, investors have more reason to focus on the rollout of corporate earnings reports over the next few weeks. Earnings have been flat to down for the last three quarters, and if the fourth quarter meets expectations, it should be around the same.

However, analysts are projecting 2020 corporate earnings growth to jump around 9.5%, which is why traders will be listening this earnings reporting season for any clues management teams give about their business prospects in coming months.

“We’re expecting a reacceleration in the back end of the year, so any (company) guidance that brings any type of skepticism to that could threaten the recent rally we’ve had and the gains that we’ve accrued in the past few months,” Buchanan said.

Health care stocks powered much of the market’s gains Wednesday. Several health insurers climbed as investors cheered a solid fourth-quarter earnings report from UnitedHealth Group.

The nation’s largest health insurer, which covers more than 49 million people, said its revenue rose 4% on a mix of insurance premiums and growth from urgent care and surgery centers. Its stock rose 2.8%. Other health insurers also moved higher. Anthem gained 1.6%, Cigna added 1.5% and Humana climbed 1.9%.

Technology companies also rose. The sector is reliant on China for sales and supply chains and benefits from better trade relations. Microsoft gained 0.7% and Advanced Micro Devices gained 0.8%.

Utilities and consumer staples sector stocks also notched gains. Edison International climbed 2.5% and PepsiCo rose 1.7%.

Financial stocks fell the most. Bank of America slid 1.8% after reporting weaker profits due to the rapid decline of interest rates in late 2019.

Energy stocks also fell along with the price of crude oil. Valero Energy dropped 3.3%.

Homebuilders marched broadly higher on news that U.S. home loan applications surged 30.2% last week from a week earlier. The pickup in mortgage applications reflects heightened demand for homes and suggests many buyers are eager to purchase a home now, rather than waiting for the traditional late-February start of the spring homebuying season. Hovnanian Enterprises jumped 6.4%.

Target slumped 6.6% after a disappointing holiday shopping season prompted the retailer to cut its forecast for a key sales measure in the fourth quarter. The company said weak sales of electronics, toys and home goods crimped sales growth to just 1.4% in November and December.

Benchmark crude oil fell 42 cents to settle at $57.81 a barrel. Brent crude oil, the international standard, dropped 49 cents to close at $64 a barrel.

Wholesale gasoline fell 1 cent to $1.64 per gallon. Heating oil declined 3 cents to $1.88 per gallon. Natural gas fell 7 cents to $2.12 per 1,000 cubic feet.

Gold rose $9.70 to $1,552.10 per ounce, silver rose 25 cents to $17.92 per ounce and copper fell 1 cent to $2.87 per pound.

The dollar fell to 109.91 Japanese yen from 110.00 yen on Tuesday. The euro strengthened to $1.1150 from $1.1128.

Markets in Europe closed mostly lower.

AP Business Writer Damian J. Troise contributed.

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Aircraft

Uber and Hyundai Are Planning to Offer Flying Taxi Rides by 2023

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Hyundai/Uber Flying Taxi Source: Hyundai
By Cat Ellis

At CES 2020, Uber and Hyundai showed off a full-size mock-up of a flying taxi that both companies hope will be ferrying you above congested city streets by 2023.

The electric plane, called Uberdai, will carry a pilot and three passengers up to 60 miles, at speeds of up to 180mph, slashing journey times and helping get cars off the road. Eventually the craft will be automated, but for now the two companies are focusing on manned craft.

The flying taxi market is starting to get pretty lively. Last year, Boeing began test flights to test the safety of Boeing. Next, an electric aircraft with passenger pods designed to travel up to 50 miles, and Bell Helicopter unveiled the Bell Nexus, which the company hopes will “redefine air travel”.

The difference with Hyundai’s plane is its partnership with Uber, which is a name synonymous with ride-sharing throughout much of the world, and already has the infrastructure in place to offer flights as an option alongside trips by car, bike, scooter, helicopter and even submarine.

Ready for lift-off?

Uber has been aiming for the skies for several years now, teaming up with various aerospace companies to build a fleet of mini aircraft. At the Uber Elevate Summit in June 2019, it revealed a concept created in collaboration with Jaunt Air Mobility – a business that’s aiming to create a fully autonomous aircraft by the end of 2029.

This design was a cross between a helicopter and a plane, with a rotor to get it off the ground, and wings for gliding once airborne to conserve power.

“It’s called the compound aircraft, and what it’s doing is really trying to get the best of both worlds of hover and high-speed efficient flight,” Uber’s head of engineering Mark Moore said at the event.

Uber intends to launch its first swarm of flying cars in the US and Australia in 2023, with schemes planned for Dallas, Las Vegas and Melbourne. We’ll keep you updated as we learn more over the coming months. 

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