Joe Biden's New Government Spending Plans Are Now Up to $4 Trillion

In his State of the Union address before Congress, President Biden released the second portion of his government expansion plan, $1.8 trillion in new spending. That’s on top of the $2.3 trillion infrastructure plan he released at the end of March.

And keep in mind this is also on top of the $1.9 trillion American Rescue Plan that Biden has already signed into law.

If Biden's plans pass through Congress, he will likely be the greatest domestic spending president in history. It is possible his domestic spending could come in at more than 6% of GDP.

No president has spent as much on non-war spending.

Here is how he compares to other big-spending presidents:

Biden's plans will distort the economy away from productive activity toward incentivizing non-work. It will lower the standard of living for almost all, except the crony class and threaten to fuel price inflation beyond the price inflation that is already set to rage in America.

 -RW

BREAKING: Fed Holds Interest Rates Steady

As expected, the Federal Reserve Board at its just-ended two-day monetary policy committee meeting has decided to maintain the interest rates it controls at current levels.

The current Board directed rate for Fed funds is the target range of 0.0% and 0.25%.

Here is a look at the Effective Fed Funds rate over the last 5 years:

Click for larger view.

This is a developing story return to this post for updates.

-RW

UPDATE 1

All voting members of the FOMC voted for continuing the irresponsible Fed money printing.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

UPDATE 2

LOL, in its statement, the Fed called the current accelerating price inflation a transitory, even though they continue to pump massive amounts of money into the system.

From the statement:

 Inflation has risen, largely reflecting transitory factors... The Committee expects to maintain an accommodative stance of monetary policy...

Is This a Signal New Bitcoin Regulation is Coming?

The Securities and Exchange Commission announced today that it is delaying its decision on approving the VanEck Bitcoin ETF until June.

 The SEC typically takes 45 days from when an application is filed to render a decision on whether such a security should be allowed to trade. The 45 day window for the VanEck Bitcoin ETF ends on May 3, but the SEC is extending the deadline.

“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received,” J. Matthew DeLesDernier, Assistant Secretary at the SEC, said in a filing.

The delay may indicate that the government is about to slap more regulations on bitcoin and other cryptocurrencies.

 -RW

These are the Hottest Housing Markets in America

Hottest housing markets in the United States.

Coeur d’Alene, Idaho, tops the list of the country’s hottest emerging housing markets, according to the just-released Wall Street Journal/Realtor.com Emerging Housing Market Index.

Buyers from other Western states are moving to northern Idaho in droves, seeking a more rural and less expensive place to live, said Kristen Johnson, a real-estate agent at Century 21 Beutler & Associates in Coeur d’Alene. Workers able to work remotely are also choosing to relocate, she said.

Coeur d’Alene, Idaho

The median sales price in the Coeur d’Alene region rose in March to $476,900, up 47% from a year earlier, according to the Coeur d’Alene Association of Realtors. 

After Coeur d’Alene, the top metro areas in the ranking are Austin, Texas, Springfield, Ohio, and Billings, Mont. Spokane, Wash., just across the state border from Coeur d’Alene, ranks fifth.

 -RW

This is What is Happening to Prices in Your Grocery Store

 

The above chart shows what has happened to prices in various food categories based on the Bureau of Labor Statistics data and compiled by The Wall Street Journal.

And it is not just at the grocery store, the BLS reports that fast-food restaurant prices have jumped 6.5% over the last 12-months.

Please note, this is only the beginning.

I continue to receive emails asking about various analysts forecasting deflation. 

I am not sure what can convince these people that we are not in a deflationary period given the data.

The price inflation is primarily the result of irresponsible money printing by the Federal Reserve, mad money printing which continues to the present time.

 -RW

Donald Trump: The Herbert Hoover of the 21st Century...

A Zoom meeting with Murray Sabrin, Ph.D., Emeritus Professor of Finance, Sabrin Center for Free Enterprise (founder), Ramapo College of New Jersey

Wed, April 28th @ 4pm EST / 1pm PST

Donald Trump was a one-term president like Herbert Hoover, who occupied the Oval Office during the worst period of the Great Depression.  Democrats successfully ran against Hoover for decades reminding the American people that the GOP president was a "do-nothing" chief executive who allowed the economy to implode during his tenure.  The "Coronavirus recession" and the deaths associated with Covid-19 in 2020 were mainly the factors that caused Trump's defeat last year. 

And after Trump's January 6th rally in the nation's capital that was followed by the  "storming" of the Congress by his supporters, Democrats now have another GOP president that will be their "whipping boy" for years to come. Sabrin is the author of Why The Federal Reserve Sucks: it Causes Inflation, Recessions, Bubbles and Enriches the One Percent.

For the zoom link just register here:  

https://yourfreedomhub.com/TrumpIsTheNewHoover

 -RW

Thank You, Federal Reserve: Worn Nike Air Yeezy Sneakers Sell for a Record US$1.8 Million

This kind of madness only occurs when the Federal Reserve is printing mad amounts of money that fuel the absurd.

A pair of Nike Air Yeezy 1, premiered by Kayne West during the 50th Annual Grammy Awards in 2008, has sold through a Sotheby’s private sale for US$1.8 million, the highest price ever recorded for a pair of sneakers.

The sale price of the Nike Air Yeezy 1, at US$1.8 million, has nearly tripled the previous record for sneakers, which was set by Sotheby’s sale of Nike Air Jordan 1s in May 2020 for US$560,000.

The buyer of the shoes is sneaker investing platform RARES.    

Sneaker investing platform?

Now, I know this is mad.

 -RW

Prepare For Rent Increases

 It is starting but it will only get worse.

Americans are paying more to rent homes again, reports The Wall Street Journal, ending a stretch during the pandemic when they enjoyed flat or falling rental prices and widespread landlord concessions.

Median asking rent rose 1.1% on an annual basis in March to $1,463 a month across the country’s 50 largest markets, according to a report from Realtor.com. That marked the first month where the pace of rent growth had increased since last summer, the report showed.

The mad money printing by the Federal Reserve is hitting the streets after blowing the stock market through the roof. That's how these types of inflation move.

But, I repeat, it is only the beginning.

 -RW

Biden to Order Creation of Pro-Union Task Force Headed by Kamala

Pro-union Joe will sign an executive order creating a task force to promote labor organizing as part of a broader push to strengthen unions after years of declining membership, reports Bloomberg.

The order will direct the task force to propose new ways of using the federal government’s policies and programs to encourage workers to organize. 

The task force is led by Vice President Kamala Harris and Labor Secretary Marty Walsh, and includes much of the president’s cabinet and top domestic and economic policy advisers.

This task force is a very bad idea. I recently discussed why unions are bad for union members and everyone else.

 You can listen to this edition via podcast here or on your favorite podcast platform.

 -RW

Markets, Willingness to Work, Businesses Willing to Hire and Government Distortions

Waiting for this week's bonus Federal unemployment payment to hit.

In reference to my post, Why Joblessness is the New "In" Occupation, Casey Mulligan, Professor of Economics at the University of Chicago, has tweeted out:

The photo from @wenzeleconomics is amusing but market analysis by itself does not allocate blame for outcomes between employer and employee. Employee unwilling to work? Or employer unwilling to pay what it takes to make (or retain) the hire? https://t.co/vuh9q8fXnt

— caseybmulligan (@caseybmulligan) April 26, 2021

I find it difficult to see where in the Wall Street Journal excerpt I quoted I cast "blame" on those unwilling to work or those businesses unwilling to hire.

Rather, I was merely pointing out how governments can end up distorting markets.

It is more about government programs that change options for individuals.

For example, if government programs were to pay $1,000 per hour to people who were unemployed then a lot more people would stay fat and happy on the living room couch. There is no blame on my part for a potential employee taking advantage of such a mad government program. I am merely pointing out the environment.

If government programs were paying only 10 cents per hour then surely many more would get off the couch and start looking for a job.

It is not about, in most cases, absolute willingness to work, but about distorted options created by government unemployment programs.

As things stand, current data suggest that many are happy with the current government handouts so they stay home.

Likewise from the perspective of businessmen, there is no "blame" to be placed on businessmen or some charge of absolute unwillingness to pay more. A lot depends on the existence of consumer surplus for a given product as to whether a businessman would be willing to increase the wage for a potential employee.

If product A is priced at $10 and consumers would be unwilling to pay more than $10 for the product, then it would be difficult for a businessman to increase the wage (especially if materials going into the product have strong demand from other uses).

On the other hand, if product B is priced at $10 but consumers would pay as much as $20 for the product then the businessman would be willing to bid much more in terms of wages to get potential workers off the couch.

Whether we look at it from the perspective of the potential worker or from the perspective of the businessman, it is not about some abstract "willingness" but what options come into existence when government enters the scene and distorts market options.

BTW, Prof. Mulligan was chief economist of the President’s Council of Economic Advisers during part of the Trump administration and has written a book about the experience, You’re Hired!: Untold Successes and Failures of a Populist President. Sounds like it could be insightful

A Bezos boy delivered the book to me a while back and I have now put it at the top of my reading list.

A review will be forthcoming.

 -RW

The Grocery Price Shock That Is Coming to a Store Near You

If you thought the price increases you have seen in the grocery store have been strong, buckle your seat belt, you haven't seen anything yet.

This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures. With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda, reports Bloomberg.

Bloomberg continues:

Soaring raw material prices have broad repercussions for households and businesses, and threaten a world economy trying to recover from the damage of the coronavirus pandemic. They help fuel food inflation, bringing more pain for families that are already grappling with financial pressure from the loss of jobs or incomes. For central banks, a spike in prices at a time of weak growth creates an unwelcome policy choice and could limit their ability to loosen policy.

It is going to get real very soon. 

Hug your gold coins.

 

 -RW

Why Joe Biden's Capital Gains Tax Increase Would Be Disastrous for the Economy

In this edition of "This Week in Economics with Robert Wenzel," I discuss capital gains taxes and why an increase would lower the general standard of living.

   

 The podcast version is here. 

It is also available on your favorite podcast platform. If your platform does not carry the podcast just enter this feed address to start following "This Week in Economics": https://feed.podbean.com/wenzel/feed.xml

 -RW

Why Joblessness is the New "In" Occupation

Wall Street Journal editor Jillian Kay Melchior sets the scene on why business owners are finding it so difficult to find workers:

 The National Federation of Independent Business surveyed more than 500 small businesses and reported last week that 42% of them had job openings they couldn’t fill. “As long as we’ve been conducting the survey, it’s never been that high,” says Holly Wade, executive director of NFIB’s research center. Some 7.4 million jobs were open at the end of February, according to an April 6 report by the Bureau of Labor Statistics.

Some workers still fear they’ll contract Covid if they return to the workplace, and some parents are unable to take on full-time work because their children’s schools remain shut. But there’s another reason for the acute labor shortage: It pays to stay on the couch.

As Covid spread and the nation locked down last spring, Congress approved enhanced weekly benefits of $600, in addition to the usual state-administered unemployment payments, through July 2020. A working paper by the National Bureau of Economic Research found that 76% of those eligible for the $600 bonus could be given at least as much for being jobless as they’d earn by working. Lawmakers have since trimmed the enhanced unemployment benefits to $300 a week and extended them through September 2021. University of Chicago economist Peter Ganong says that even with the supplemental benefit halved to $300, “42% of workers are making more than their pre-unemployment wage.” And these analyses don’t count food stamps, rental assistance and other government help that may be available to the unemployed, or the stimulus payments that have gone to the employed and jobless alike.

In Indiana, the enhanced unemployment has meant that the jobless collected a maximum weekly benefit of $990, and now get up to $690—the equivalent of $24.75 an hour and $17.25, respectively. (The first $10,200 in unemployment compensation is exempt from federal income tax under this year’s Covid relief law.) Ms. Phelps is struggling to compete with what the government offers: “It’s making people terribly lazy. It’s making people not want to be part of the workforce. And that’s not good when the unemployment numbers are where they are”—3.9% in Indiana and 6% nationwide in March...

As vaccination rates rise, demand for goods and services is soaring, but there’s an enthusiasm gap between consumers and workers. The National Restaurant Association’s most recent survey found that 1 in 4 restaurant operators listed recruitment as their top concern, ranking it higher than Covid...

 The BLS reports that some 3.4 million Americans quit their jobs in February. Under last year’s Covid-relief legislation, workers who leave voluntarily are still eligible for federal enhanced unemployment, University of Chicago economist Casey Mulligan notes...

Mr. Mulligan says that with unemployment benefits so high, joblessness “becomes a new occupation—it’s not that different than having an army, except these people’s jobs are to sit at home rather than go to a foreign theater.” He analyzed the BLS data on job openings and labor turnover and noticed that when the $600 unemployment benefit expired, the number of job openings dropped as more Americans returned to work. Ending lockdowns is the first step toward economic recovery, but ending lavish jobless benefits is the next critical move.

 -RW

Thomas Sowell Explains Why Sub-Saharan Africa Remained Underdeveloped

Think about this in terms of what trade barriers, sanctions and other barriers do to the advance of civilization (2 minutes and 29 seconds).

 

 -RW

Why Are So Many Corporate Executives Acting Woke?

Any thinking person looking over the current social, political and corporate landscape is sure to be asking: Why are so many top corporate executives acting woke?

Stephen R. Soukup, in a new book, The Dictatorship of Woke Capital: How Political Correctness Captured Big Business, has taken a major step toward answering the question. 

The book provides an overview of the problem from its historical-philosophical foundations to current day major woke players

From the historical-philosophical perspective, Soukup provides an excellent overview of all the major influencers from Antonio Gramsci and György Lukács to the Frankfurt School and the media-savvy Herbert Marcuse.

He also provides an excellent outline of the role played by Richard Ely, especially his influence on Woodrow Wilson.

He then explains how concern for stakeholders took over concern for shareholders.

And then he moves in on current-day players who are at the forefront of the woke movement. 

He especially singles out Larry Fink of Black Rock. 

Black Rock has $8.7 trillion under management. That is power. Fink being a true believer of wokeism, has enormous sway over corporate heads with his position as CEO of Black Rock which holds massive stock positions in most of the major publicly traded companies in the United States.

Soukup states, "Larry Fink is a religious fanatic; a believer in the pure fundamental practice of his faith... [That is]Fink aligned himself with and placed himself at the forefront of the 'ESG' movement, an investment trend focused on Environmental, Social and Governance matters in assessing a company's long-term value. He placed himself in the position to be crowned king not just of the financial services world but also of 'woke capital,' the top down, anti-democratic means by which some of the most powerful and best-known men and women in American business are endeavoring to change capitalism, the securities markets in the fundamental relationship between the state and its citizens – – and save the world." Fink is playing a major role in all this.

On top of that Soukup explains, Black Rock has been named the administrator and manager of significant portions of the emergency COVID-19 debt-buying program of the Federal Reserve which allows the Fed to lend directly to corporations. That is power.

Sokup also discusses in his book the roles of State Street, Calpers and Bridgewater Associates as major woke influencers

On the individual investor front, he points to, among others, the woke activism of the widow of Steve Jobs. 

Lurene Powell Jobs (worth $20 billion) is a member of the Climate Leadership Council and has bought a majority stake in The Atlantic and Axios. She has been a major money funder of lefty voter registration programs.

It goes on. The book is encyclopedic in coverage and narrative in style concerning the major woke influencers and how they get their fangs into corporate America and elsewhere.

If you want to understand the woke influences, this is the book for you.

The only weakness in the book is the ending where Soukup attempts to discuss how we get out of the current woke mess. Like the rest of us, he hasn't figured that program out yet, but to understand what is going on in terms of woke in corporate leadership and why, there is no better resource than The Dictatorship of Woke Capital: How Political Correctness Captured Big Business.

 -RW

BREAKING: Biden Wants to Double the Top Capital Gains Tax Rate

Okay, it is clear, Joe Biden hates capital and essentially holds a Marxist view on the "struggle" between capital and labor.

According to Bloomberg, the president will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, which, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%.

The plan would boost the capital gains rate to 39.6% for those earning $1 million or more, an increase from the current base rate of 20%.

A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than the top rate on wage and salary income.

The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers.

Well, you could equalize rates by lowering taxes on middle-class workers to capital gains but Joe is all about the big state and he has never ever thought about taking actions to shrink government even when he had a full grasp of his faculties.

We know now the Marxist part of his brain is still functioning--if you can call a Marxist brain ever properly functioning.

For $1 million earners in high-tax states, rates on capital gains could be above 50%.

For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.

 -RW

Yanis Varoufakis On Why We Are in a Post-Capitalist Era

Yanis Varoufakis

What a mess.

Yanis Varoufakis, former Greek Minister of Finance, the co-founder of DiEM25, elected MP and leader of MeRA25 (DiEM25's Electoral Wing in Greece), and Professor of Economics at the University of Athens, delivered a virtual keynote speech on post-capitalism before DiEM25.

Varoufakis told the 6,210 viewers that we are beyond the free-market perspective of "Ludwig Hayek (sic)."

His speech did provide a lot of factual insight as to what has been going on in global economies since 2008 but his failure was astonishing on the theoretical level.

He seemed to have no theoretical understanding of how the financial crisis of 2008 was just one in a long series of crises created by central bank money printing (To understand how the 2008 crisis was one in a series, see my book: The Fed Flunks).

It was clear he has no understanding of business cycle theory.

His correct factual observations on expanding crony-capitalism failed to make the important link between the growth of crony-capitalism and the growth of central power. That is, he failed to reach the important conclusion that if you shrink (end?) the state, you eliminate crony capitalism.

Instead, he called the current period a post-capitalist period and offered a solution, the next step, an economy where every worker owns one share in a corporation and has one vote. Thus completely failing to recognize the extremely important role of insightful individuals, known as entrepreneurs, in an economy. 

To say nothing about his confusion about the role of capital and laborers.

To make it clear, we are not in a post-capitalist period. We are in a typical period of strong central bank money manipulations and expanding government power that results in great corruption.

Varoufakis sees the current corruption but is terribly weak in economic theory and thus misses the solution from the current situation. It is as though he has never read Ludwig von Mises and Friedrich Hayek.

 -RW