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The Economy Is Beginning To Shudder – The Lag Effect

The Economy Is Beginning To Shudder – The Lag Effect

Authored by Bruce Wilds via Advancing Time blog,

Shudder is an interesting word, in…



The Economy Is Beginning To Shudder - The Lag Effect

Authored by Bruce Wilds via Advancing Time blog,

Shudder is an interesting word, in this case, when talking about the economy, it is being used as a verb that means to wobble or shake in not a good way. While the verdict is not yet in, recently there has been more talk about the lag effect coming home to roost. The lag effect suggests that it sometimes takes a while before we witness the effect of an action. When you poison a plant, or tree there is a time lag before the damage you have inflicted upon it becomes obvious. 

This subject was focused on in two previous articles here on AdvancingTime. The first piece was titled "Mind The Gap." The second looked at how the policy of promoting the "Wealth Effect" has started to shift into reverse. It highlighted the fact that when people see their wealth decline or feel poor they tend to cut spending. Today we must add into the economic mix the toll inflation is taking on consumers. This is a difficult situation to correct.

The reversal in liquidity coupled with higher interest bodes poorly for the economy going forward. The full impact of this has until now been ignored by the market. Today all the preconditions of a major pullback exist. Not only are some of us looking at a hard landing, many of us are expecting a doozy of a crash. Ironically, much of the market's strength now seems rooted in squeezing shorts out of their positions.

Through injecting a huge amount of liquidity and credit into the financial system central banks have sidestepped or lessened recessions since 2008. History indicates the probability of a major recession or worse is nearly unavoidable. Likely this time will not prove to be different and making matters worse is the high level of debt currently outstanding has the potential to create the mother of financial storms.

 As for the lag effect, roughly a year ago the Fed embarked upon one of the sharpest-ever reversals in interest policy in history. Most of the impact from that has yet to be fully felt and will take many months to ripple through the economy. The financial system is not the economy even though many people do not recognize the distinction. The important issue here is that much of Main Street has not yet recovered from the damage fostered upon it during the Covid-19 diabolical and the damage from soaring inflation and now it faces a slowing consumer spending. This is a recipe for disaster.

Most programs unleashed by the "Financial-Political Complex," due to Covid resulted in much of the money spent flowing rapidly into the pockets of those atop the wealth pyramid. Large businesses such as Amazon and major hospitals have been the winners while the big losers have been the middle-class, small businesses, and social mobility. For years the Financial-Political Complex ignored the growing weakness on Main Street and focused on rising GDP numbers that were driven by government deficit spending. Addressing this now is like trying to turn a battleship around in a lake the size of a bathtub, nearly impossible. 

No matter how much money they throw at this the economy will not turn around on a dime or spring back.  We are in the early inning of a long game, we have yet to feel the full power of the lag-time effect. Anyone that thinks next month will be a return to business as usual and fails to mind the gap between expectations and reality is primed for disappointment. Too Big To Fail has become deeply embedded in our crony capitalist society and a key part of the Financial-Political Complex that now runs the show.

Much of the rationale behind QE has been that it creates what the Fed calls a “Wealth Effect.” For years this has been a key driver of central bank policy. This view is firmly embedded in the macroeconometric models used by the Fed. The idea is that by inflating asset prices to make the wealthy (the asset holders) even wealthier, these people will spend more of what they see as free money from asset price inflation. The premise is that this additional spending will create additional demand for goods and services thus providing jobs for the masses. 

Sadly, several times over the years the wealth effect formula has slid off the tracks and most likely will again. Consumption does not create wealth, it creates debt. The example that stands out in the minds of most people is from back in 2008. By loaning money against homes with little scrutiny as to the borrower's ability to repay them the Fed created a financial bubble with broad implications. It could be argued that since 2008, Fed policy has never really addressed that mess but attempted to paper over it by printing money and expanding debt through quantitative easing.

Wealth Effect Policies Have Failed To Generate Enough Growth

Looking back at how pursuing policies that breed the Wealth Effect can slide off track or lose their effectiveness, we see it always centers on the risk they create.

At some point, the combination of easy-to-borrow money at low-interest rates tends to morph into a high-risk environment of increased speculation and leverage. In short, savers and investors seeking a return on their savings are forced out of traditional accounts because such investments get ravaged by inflation.

Many Consumers Bought Into This

The 2008 financial crisis caused the biggest recession since the great depression of 1930. It is also referred to as the global financial crisis (GFC). Over the last several years, the Fed has been getting a great deal of well-deserved bad press for driving inequality and fracturing society. Since 2008 it has become apparent the Fed has created an unfair system that is broken, unfair, and corrupt. This has affected different generations in rather specific ways.

Following the GFC the Federal Reserve and the Bush administration spent hundreds of billions of dollars to add liquidity to the financial markets. They worked hard to avoid a complete collapse. They almost didn't succeed. Today we are spending not billions, but trillions of dollars to keep the same corrupt policy moving forward. 

History shows investors should treat the wealth effect with caution because it is susceptible to reversals. One elephant in the room when it comes to growing the economy is how "the broken window theory" is spun and interpreted. The gist of this theory is that if a window is broken, the subsequent repair expenditure will have no net benefits for the economy. Still, it is not uncommon to see destruction touted as a good thing because it promotes spending. In truth, the idea destruction is good discounts several facts. 

One has to do with where the money is coming from but whether it is from an insurance company or someplace else, it still means the money is diverted from being used on another purchase. Repairing a broken window is maintenance spending which doesn’t improve growth because it doesn’t improve productivity. This expenditure would have occurred anyway. The only thing a broken window does is  cause maintenance spending to occur earlier and lower the useful life of the window. Maintenance spending may keep the economy going it doesn’t provide a boost. Instead, it is better to invest the money in something which creates wealth by increasing productivity.

Many people and even economists have real misconceptions as to how the economy works. Where money flows and who it enriches is a key component of economics. The failure to consider this is a blind spot many people have. Years of being told everything revolves around spending has diminished the important role savings play in the scheme of a balanced economy. Fans of Keynesian economics that encourage government spending to stabilize the economy during a downturn tend to discount the importance that where and how money is spent matters a great deal. 

Wealth Effect Policy Has A Poor Record

In the end, the nightmare we face all comes back to the fact current policies are presenting us with diminishing returns while increasing risk. Sadly, financial corruption has played a huge role in getting us here. Never before in our history have Presidents, Fed Chairs, and politicians in general been able to exploit their power and gained massive wealth following their time as so-called public servants. A big part of our current problems is the elite top-down efforts to control our society has created an army of government workers, most un-elected that have been empowered to nibble away at our rights.  

Bubbling up to the surface is the recognition the Fed has to shoulder a huge responsibility in pushing inequality higher. Powell has even gone so far as to claim there was little demand for loans below $1 million. Sadly, the same policies that dump huge money into larger businesses because it is an easier and faster way to bolster the economy give these concerns a huge advantage over their smaller competitors.

The long-term ramifications of destroying smaller businesses will hurt America in the long run. It eliminates competition, reduces opportunity, and over time fuels inflation. This drives my angst directed at companies such as Amazon and big tech. The policy of making people feel better so they spend more than they can afford is part of voodoo economics.  So is sending jobs abroad and increasing our consumption of imported goods which has resulted in a massive trade deficit. Good economic policy encourages personal responsibility and is rooted in saving not spending. 

Tyler Durden Thu, 05/11/2023 - 06:30

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Turley: New Evidence May Destroy Biden’s Defense In His Classified Documents Case

Turley: New Evidence May Destroy Biden’s Defense In His Classified Documents Case

Authored by Jonathan Turley, op-ed via The Hill,

This month,…



Turley: New Evidence May Destroy Biden's Defense In His Classified Documents Case

Authored by Jonathan Turley, op-ed via The Hill,

This month, the sudden appearance of Special Counsel Robert Hur caused as much of a stir as Bigfoot suddenly appearing on Pennsylvania Avenue.

Unlike his counterpart, Special Counsel Jack Smith, who has been aggressively prosecuting former president Donald Trump, Hur has virtually disappeared since his appointment to investigate President Joe Biden. Hur surfaced to interview Biden over his possession of classified documents, including some that go back to his time as a U.S. senator.

I have referred to Hur as a “neutron prosecutor” — a special counsel with no possible charge, under Justice Department policy barring the indictment of a sitting president. If that was not enough of a problem, Hur may have growing evidence that accounts offered by the White House over the discovery of the documents are false.

The new evidence could prove transformative, not only for the criminal but the impeachment investigation of the president.

This week, the House Oversight Committee released a new timeline on the discovery of classified documents in various locations associated with Biden. From the outset, many of us flagged problems with the account that had been given by Biden, who insisted that he had no knowledge or involvement in the removal or use of the documents.

The most glaring problem is that, after they were removed at the end of his term as vice president, the documents were repeatedly moved and divided up. Some were found in the Penn Center office used by Biden in Washington, D.C. Others were found in his garage and reportedly in his library. 

Biden made clear from the beginning that he expected the investigation to be perfunctory and brief. He publicly declared that he has “no regrets” over his own conduct and told the public that the documents investigation would soon peter out when it determined that “there is no ‘there’ there.”

Now, however, it appears that a critical claim by the White House in the scandal may not only be false, but was knowingly false at the time it was made. The White House and Biden’s counsel have long maintained that, as soon as documents were discovered in the D.C. office, they notified the national archives. Many asked why they did not call the FBI, but the White House has at least maintained that, unlike Trump, they took immediate action to notify authorities.

However, it now appears that this was not true.

One of the closest aides to Biden and a close friend to Hunter Biden is Annie Tomasini. She referred to Hunter as her “brother” and signed off messages with “LY” or “love you.”

Tomasini was once a senior aide to Joe Biden and, according to the Oversight Committee, inspected the classified material on March 18, 2021, two months after Biden took office — nearly 20 months before they were said to be found by the Biden team.

The committee now alleges that the White House “omitted months of communications, planning, and coordinating among multiple White House officials, [Kathy] Chung, Penn Biden Center employees, and President Biden’s personal attorneys to retrieve the boxes containing classified materials. The timeline also omitted multiple visits from at least five White House employees, including Dana Remus, Anthony Bernal, Ashley Williams, Annie Tomasini, and an unknown staffer.”

If true, the evidence demolishes the timeline long maintained by the Biden team. That could have an immediate impact on both the criminal and impeachment investigations.

The timeline has been a critical distinction drawn by the White House in distinguishing this matter from the Trump indictment, in which Smith charged the former president with 37 counts, including retaining classified information, obstructing justice and making false statements, and other charges.

Biden insisted that he was entirely “surprised” by the discovery of the documents in Nov. 2021.

He echoed the narrative of both his lawyers and the media at large:

“And they did what they should have done,” he said.

“They immediately called the Archives — immediately called the Archives, turned them over to the Archives, and I was briefed about this discovery.”

In reality, Biden’s counsel and associates conducted repeated searches and declared repeatedly that no further classified documents were found. That was repeatedly found to be untrue.

Moreover, the concern is that Biden’s lawyers, in the course of these private searches, may have consolidated material and contaminated the scene by the time FBI agents conducted their searches. This includes changing how documents were originally stored and whether classified markings were visible to anyone working around the Biden home or garage.

Now it appears that the discovery had actually been made months earlier.

The timeline would now more closely mirror Trump’s timeline in the knowing retention of classified material, the failure to turn over all of the classified material despite assurances from counsel, and alleged false accounts about the document’s discovery.

It is not clear what Hur can do if he finds either from witnesses or forensic testing (including perhaps fingerprints on the documents) that President Biden lied.

I have long disagreed with the policy that the Justice Department has long held, that prosecutors should not indict a sitting president. Were he to seek an indictment, Hur would have to ask for reconsideration of the policy based on a decades-old memo issued by the Office of Legal Counsel under President Bill Clinton, who at the time faced calls for an indictment for perjury.

The DOJ policy will also put pressure on the House in its ongoing impeachment inquiry. In my recent testimony at the first Biden impeachment inquiry hearing, I mapped out four possible articles of impeachment. They included obstruction and abuse of power.

If this new timeline is accurate, the question is whether Biden knew that the account being put forward by his staff and counsel was false. It also raises the question of whether the president knowingly possessed classified documents and lied about their removal, use, and discovery. Finally, if Biden repeated his public denials to Hur, there could be added allegations of false statements to federal investigators, another commonly-charged federal crime.

We still have to see if there is evidence to support such crimes, but what is clear is that the past narrative may no longer suffice.

In his press conference announcing the criminal charges against Trump, Smith declared, “We have one set of laws in this country, and they apply to everyone….Nothing more, nothing less.”

The question for Hur is whether they can also apply to a sitting president. Likewise, if these allegations are true and Biden knowingly committed these crimes, the question for Congress could be whether he should remain as president. 

Tyler Durden Sun, 10/15/2023 - 22:00

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Which Countries Receive The Most Foreign Aid From The US?

Which Countries Receive The Most Foreign Aid From The US?

The United States provided more than $50 billion in aid to over 150 countries…



Which Countries Receive The Most Foreign Aid From The US?

The United States provided more than $50 billion in aid to over 150 countries and territories, regional funds, and NGOs in 2021.

Each year, Congress appropriates foreign assistance based on national security, commercial, and humanitarian interests.

In this map via Visual Capitalist's Bruno Venditti, USAFacts uses data from the U.S. Agency for International Development (USAID) to highlight the countries that received the largest portion of aid.

Food Assistance and the War on Drugs

In 2021, the U.S. directed its aid towards nations grappling with internal conflicts and humanitarian crises.

Following the withdrawal of American troops that same year, Afghanistan emerged as the primary recipient of substantial aid, receiving billions of dollars annually as part of the humanitarian response.

Country Assistance (USD) Top Activity
???????? Afghanistan $1.5 billion Humanitarian Assistance
???????? Ethiopia $1.4 billion Emergency Food Assistance
???????? Jordan $1.3 billion Cash Transfer
???????? Yemen $1.1 billion Emergency Food Assistance
???????? South Sudan $1.0 billion Emergency Food Assistance
???????? DRC $891 million Emergency Food Assistance
???????? Syria $844 million Humanitarian Assistance
???????? Nigeria $828 million Global Health Supply Chain
???????? Colombia $761 million Counter-Narcotics
???????? Sudan $620 million Emergency Food Assistance

Among the top countries benefiting from U.S. assistance are various African nations contending with both famine and internal conflicts. Notably, Colombia stands out in the top 10, receiving millions of dollars to combat drug trafficking.

Israel Leading in Aid Over Time

Since the end of World War II, the U.S. has disbursed more than $3.75 trillion in foreign aid (adjusted for inflation).

The post-war years saw foreign aid peak, primarily because of the Marshall Plan. This initiative aimed to assist in restoring the economic infrastructure of post-war Europe.

At its height in 1949, U.S. foreign aid totaled nearly $100 billion.

Israel has been by far the largest cumulative recipient of U.S. foreign assistance. Since the 1940s, Israel has received more than $300 billion, with most of it in military support, aiding the country in developing a missile defense system and other projects.

The primary reason for this foreign aid has been to guarantee U.S. interests in the region, given Israel’s proximity to Syria to the northeast, Hezbollah-influenced Lebanon to the north, and an Islamist insurgency in Egypt’s Sinai to the south.

After a two-decade conflict that took millions of Vietnamese lives and roughly 58,000 American lives, Vietnam is Washington’s second-largest recipient of financial support. This money is used for economic and technological cooperation, military support, and even to aid cleanup efforts from the U.S. military’s use of Agent Orange in Vietnam during the war.

Since 1975, Egypt has been a significant recipient of substantial foreign aid from the United States, primarily as part of diplomatic efforts to mitigate tensions in the Arab-Israeli context.

Washington also sent large aid packages to South Vietnam, South Korea, and other countries during the Cold War.

Since 2003, much of the money has been directed toward Iraq, Afghanistan, and Pakistan.

The Debate Surrounding U.S. Foreign Aid

According to a recent report by the Congressional Research Service, foreign aid can serve as a means to bolster the United States’ global influence, tackle worldwide challenges, and advance common values.

Nonetheless, the same report reveals that certain Americans and Members of Congress consider foreign aid an expenditure the country cannot afford, given current budget deficits and competing budget priorities.

In 2021, U.S. assistance to other countries accounted for around 0.7% of the federal government’s total expenditures.


Tyler Durden Sun, 10/15/2023 - 22:35

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Experts “Quite Worried” About High Turnover Among Election Workers

Experts "Quite Worried" About High Turnover Among Election Workers

Nothing screams ‘secure elections’ like high turnover of local election…



Experts "Quite Worried" About High Turnover Among Election Workers

Nothing screams 'secure elections' like high turnover of local election officials and workers in key states.

According to The Hill, that's exactly what's going on, after a 'surge of local election officials' have left their posts in recent years. This could leave polling locations with understaffed and inexperienced teams (who might not know all the nuances behind scanning machines and which tables the extra ballot suitcases are stored under?).

UCLA election law expert Richard Hasen is "quite worried" about the turnover of election officials and workers nationwide, but says it's "not surprising" given how the 2020 election played out.

"Some of the language that’s been used against these officials has been really shocking," he told The Hill. "And why would you stay in a job that is high-stress to begin with, when you’re not going to be all that well-paid, and then to face this kind of abuse? People have to be really committed to democracy to want to stay in these jobs. And it’s asking a lot."

Does that mean people who weren't committed to democracy were counting the ballots in 2020?

A Brennan Center survey of local election officials taken in March and April, around the same time many White House candidates were jumping into the race, found that 1 in 5 are expected to be serving in their first presidential election in 2024. 

The rate of turnover found in the survey is equivalent to “one to two local election officials leaving office every day since the 2020 election.” 

Nearly a third said they’d personally been “abused, harassed, or threatened” because of their jobs, and nearly three-quarters said they felt threats have gone up in recent years. Nearly a quarter said they personally know at least one election official or worker who’s left the job due to threats, harassment or fear for their safety.  -The Hill

"Your dedication to public service … can only take you so far, when day after day you have people showing up in your office, or you have phone calls or emails accusing you of not doing everything you can to provide the best election experience, but also secure elections," said Lisa Bryant, chairwoman of the department of political science at California State University, Fresno, and an expert with MIT’s Election Lab. 

Perhaps not covering windows in cardboard, blocking election observers, faking burst pipes to delay voting for two hours, and a national judiciary that dismissed the vast majority of election fraud cases over 'lack of standing' (i.e. no personal harm was suffered, therefore no jury gets to see your evidence), would go a long way to instilling voter confidence.

We digress.

In 2021, the Biden DOJ formed an Election Threats Task Force, citing a "significant increase in the threat of violence" against the 'election community' during and after the 2020 election.

While research hasn't concluded that threats are driving workers out of the field, the turnover appears to be driven by various sources of burnout, such as interfacing with voters, responding to public records requests, fielding media inquiries and dealing with the public scrutiny.

"The job of an election official has gotten increasingly difficult over the last few years, and it has not been matched by how they’re being compensated or whether they have the resources to do all of the additional things on their plate," said Rachel Orey, senior associate director of the Bipartisan Policy Center’s Elections Project.

Maybe if America had a national voter ID, perhaps election workers might feel more comfortable in their jobs?

Tyler Durden Sun, 10/15/2023 - 20:25

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