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AFF Sentinel Sen V20#33-Where Is the Economy Now?

U.S. Trends and Global Trends


Source: Steve Dittmer | AFF Sentinel

Sent to subscribers 07/17/2023


In tracking and monitoring economic facts and opinions recently, one of the most startling realizations was this: the world’s #1 economy and the world’s #2 are not being run by governments focused on growth.


The Chinese government is presiding over the most tepid growth in many years, having slapped down big tech companies, slowed the housing industry and politically frightened away much of the foreign investment that fueled its growth for decades. The West has been looking for alternatives to Chinese factories and the government is not going for growth at all costs. It was expected to report seven percent growth for the second quarter Monday but instead clocked in at 0.8 percent growth from the first quarter. Such a shocking drop in China’s GDP will have repercussions throughout the global economy.


It will remain to be seen if seriously slowing growth will affect China’s importation of American beef.

Of course, our Federal Reserve seems to think the only way to tame inflation is to throttle demand. Neither the Fed nor the Biden administration favor policies stimulating growth, except in government spending and government hiring. In the latest job reports, government employment was the biggest source of new jobs (60,000).

The economy has proven more resilient than many expected.


But policies subsidizing dubious energy projects, taxing and regulating private sector business, boosting “diversity, equity and inclusion” (DEI) and ESG goals instead of growth are not helping the U.S. Many big corporations have torpedoed their own sales and economic performance by concentrating on DEI goals instead of improving performance and prioritizing corporate and shareholder returns.

In fact, Black Rock’s Larry Fink, the CEO of the world’s largest financial firm and fervent apostle of ESG goals for corporations, the firm that helped blacklist any company that didn’t hew to ESG leftist philosophy and high figures on ESG score sheets, has publicly said he is backing off on talking about ESG. Why? Because the movement has become too “politicized,” he said.


How can so many “smart” people be so dumb? That’s like eschewing ketchup because it’s become too “tomatoey.” ESG was a political movement from inception. People have just caught on, Mr. Fink.

We like the comment from a comedian-commentator on Greg Gutfeld’s show the other night. Commenting on a similar issue, Hotep Jesus said many of the younger generation’s “highly intelligent” understand the Marxist policies because of their college indoctrination. The average common sense people look at these same policies and say, “Well, no, that’s crazy.”


At any rate, it is difficult to determine just where the economy is, much less, where it’s headed. Most economists have decided the recession won’t happen until 2024, if it happens at all. Sectors of the economy are doing fine, others are moribund. We’re lucky in that demand for beef has held up well, even in the face of stout prices to consumers.


Our product quality has never been higher across the board. Our production system, rewarding better carcasses and getting better sat producing and identifying them, has done that. And the timing is fortunate. If we had the uncertain quality of a decade or two ago, many consumers might not be willing to pay today’s prices.


Most worrisome, beyond the Fed’s leaning towards more rate hikes, evidently not believing that their first 10 hikes have taken effect yet, is that consumer debt is increasing. Remember when you couldn’t use credit cards at the grocery? Many of you don’t remember when you could buy a decent used car for $1,000. Now, the stats tell us many families have car payments totaling a grand a month, while the average payment is now $700/month. People are engaging in travel and entertainment under a philosophy some economists are terming YOLO -- You Only Live Once.


Those of us who lived through the inflation of the late ‘70s and early ‘80s will also remember people’s attitude to buy at whatever inflated prices you can now because it will cost more later. Add to that the new wrinkle of today’s supply chain problems: it might not be available next time. It becomes a cascading effect, feeding on itself cycle after cycle.

But many people, forced to spend more money on necessities like insurance, taxes, gasoline, electricity and food, are shifting away from “like to” things to “have tos.” Luckily for beef, we seem to be in the have-to category, as even the best cuts have been moving most of the time. Foodservice continues to hire people, the restaurants seem to be humming and people still like to grill out or run the smoker.


M2, the general money supply, has not been growing for months, so it has to be a case of people reallocating their money, not getting more from somewhere. And the last couple generations are going to have to resume making their student loan payments, despite President Biden’s efforts to “forgive” $439 billion or more in student loans and buy those votes. As we all know, all debts are paid. It just depends on who pays them. And in this case, the left is trying to shift the payment to the taxpayers.


Larry Kudlow talked to David Malpass, former Treasury official and most recently president of the World Bank about the big picture global economy. The ESG movement is like the New Deal and Great Society all in one, Malpass said. If the U.S. keeps this spending on these priorities at this level, there will not be any money left in the global system for the poorer countries. If poorer countries see no way out, that has political implications.


Malpass also doesn’t like the Fed concentrating on buying short term bonds, as that tends to continue the inverted yield curve.


He also believes government policy should be to increase the supply by increasing production and productivity, not curbing demand. What happened to a “rising tide lifts all boats,” he asked. Instead, we have governments adding regulations and restrictions that make employees less productive. That supports inflation.


And curbing demand risks triggering a recession instead of a soft landing.


Malpass made one last point. The experts are projecting huge U.S. budget deficits for the next 30 years. That’s never happened. No one knows the implications. But China would never run these kinds of deficits.


But a 0.8 percent quarter may test that last opinion.

But higher taxes and more regulation is not the way out.

Which means all of us keeping informed and putting pressure on our government representatives at all levels to cut spending, cut climate change subsidies, cut regulations and help productivity.


Next time: Discussion of more economic factors and data.



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