U.S. banks are again in the crosshairs. Standard and Poor’s has downgraded five new middle-tier banks and put three others on negative outlook. This follows sweeping downgrades earlier in August by Moody’s, which cut credit ratings on 10 banks and placed four of the 15 largest U.S. banks on review for possible downgrade. As with the banks going into receivership earlier this year, concerns include interest rate risk due to unrealized losses from long-term securities. Meanwhile, the U.S. government itself has been downgraded by Fitch Ratings, which questions the government’s ability to finance its nearly $33 trillion federal debt.
When the FDIC put Silicon Valley Bank (SVB) and Signature Bank into receivership in March, a study reported on the Social Science Research Network found that nearly 200 midsized U.S. banks were similarly vulnerable to bank runs. First Republic Bank went into receivership in May, but the feared contagion of runs did not otherwise occur. Why not? As was said of Lehman Brothers 15 years earlier, the targeted banks did not fall; they were pushed, or so it seems. One blogger shows how even JPMorgan Chase, the country’s largest bank, could be pushed — not perhaps by local short-sellers, but by China.
There should be no doubt that Kenya is in an intractable economic crisis. Filling up gas for a drive from Nairobi to my hometown in Limuru cost 10,000 ksh (about USD70). As a result of the high gas costs prices for everything else have gone up, including public transportation. And those who cannot hike up operating costs, such as the hordes of boda boda motorcycle taxis, are hardly making anything or operating at a loss. Tax hikes mean those who are employed are taking less money home. And no point in kidding ourselves, in a corrupt country some of that money being generated from the higher taxes is going to the politicians.
June 25 marked two years since Tunisian President Kais Saied virtually took over the country in what has come to be called a ‘Presidential coup.’ Over the past two years, he has sought to reshape the state to fit his own vision. Notably missing in this project has been the people of Tunisia. Two years later, Tunisia has a new constitution and a new parliament but these were ‘approved’ despite intense opposition from political parties and civil society and extremely poor participation from the people. In a statement released on the anniversary of the Saied’s takeover, the Workers’ Party of Tunisia said that two years later, “the country is on the verge of bankruptcy and is suffering from increasing dependence.
“Rather than collecting taxes from the wealthy,” wrote the New York Times Editorial Board in a July 7 opinion piece, “the government is paying the wealthy to borrow their money.” Titled “America Is Living on Borrowed Money,” the editorial observes that over the next decade, according to the Congressional Budget Office (CBO), annual federal budget deficits will average around $2 trillion per year. By 2029, just the interest on the debt is projected to exceed the national defense budget, which currently eats up over half of the federal discretionary budget. In 2029, net interest on the debt is projected to total $1.07 trillion, while defense spending is projected at $1.04 trillion.
For today’s episode, we want to talk about what’s going on in the US economy. Because when you look at the discussion that’s going on, you see a lot of contradictory narratives. On the one hand, you have people like Bank of America’s CEO Brian Moynihan, who said on Sunday that the country may face a mild recession later this year. You see a lot of major CEOs making similar predictions. By contrast, the Biden administration and much of the US mainstream media are insisting that the US economy is showing extraordinary resilience. So, Michael, I want to ask you, what is your analysis on the current state of the US economy?
One of my favorite NYC restaurants had become understaffed and dirty – a shadow of its former self. I learned an interesting fact: a couple of years ago, a private equity firm had bought the local chain. The same type of firm that had already ruined my beloved neighborhood grocer. The kind that was rapidly taking over vet clinics, dental offices, and gyms on every block – though you wouldn’t know it unless you did some sleuthing. Price hikes, deteriorating conditions, and poor service — along with a certain slickness of marketing — could be signs that ownership of a business you count on has transferred to one or more firms in a rapidly-expanding Wall Street industry.
Washington, DC — The International Monetary Fund is requiring that some of its most heavily indebted borrowers pay billions in unnecessary and counterproductive fees, new research from the Center for Economic and Policy Research (CEPR) shows. The new issue brief, “The Growing Burden of IMF Surcharges: An Updated Estimate,” by Francisco Amsler and Michael Galant, finds that the IMF will charge over $2 billion per year in surcharges through 2025, even as IMF Managing Director Kristalina Georgieva warns that “poverty and hunger could further increase,” and as the Fund notes that some 15 percent of countries are experiencing debt distress “and an additional 45 percent are at high risk of debt distress.”
An enormous debt bomb threatens the US federal government and the nation’s financial system unless warring politicians can agree on a plan to defuse it. However, there are even bigger debt bombs ticking away beneath us all, of which fewer people are aware. It may be impossible to disarm all of them, but action is required to minimize the casualties. Let’s start by focusing on the immediate US debt threat, then widen our view to take in longer-term and more serious liabilities that have the potential to bring down the entire global industrial economy.
During the past decade, Venezuela lived through the largest economic contraction documented in the history of the Western Hemisphere. The implosion took place at the same time as the U.S. government barred oil purchases, froze government bank accounts, prohibited the country from issuing new debt, and seized tankers bound for Venezuela. One would think it should be self-evident that any account of Venezuela’s economic contraction would place economic sanctions in a central role. However, sanctions play a surprisingly limited role in most mainstream accounts of the Venezuelan crisis. A recent Council on Foreign Relations background piece on Venezuela mentioned sanctions only in passing and instead attributed the country’s economic collapse to “decades of poor governance” and the “perils of becoming a petrostate.”
On November 14, the Biden administration announced yet another round of sanctions on Russia, targeting this time Russia’s military supply chains by imposing sanctions on 14 individuals and 28 entities that it said were part of a transnational network that procured technology to support Moscow in its invasion of Ukraine. One of the companies blacklisted was Milandr, a Russian microelectronics company that Washington says is part of Moscow’s military research and development structure. The sanctions additionally targeted several aviation-related companies and two individuals—Abbas Djuma and Tigran Khristoforovich Srabionov—who facilitated the Russian mercenary Wagner Group’s acquisition of Unmanned Aerial Vehicles (UAVs) from Iran, which have been used in the Ukraine War.
Thousands hit the streets in Haiti once again on Monday, September 26, protesting amid the economic, political and social crisis in Haiti, demanding the resignation of de-facto Prime Minister and acting President Ariel Henry. In the capital of Port-au-Prince, protesters organized two massive simultaneous marches to Henry’s official residence. Citizens gathered at the Champs-de-Mars public square and at the Airport Crossing, renamed by protesters as the Resistance Crossing, from there marching to the Prime Minister’s residence. Similar massive rallies were held in the Carrefour and Gonaïves communes. Demonstrations, protests, roadblocks, and sit-ins denouncing the Henry government were organized in almost all main cities.
On Monday, August 22, thousands of Haitians took to the streets across the country to protest against rampant insecurity, chronic gang violence and a rising cost of living. The protesters demanded the resignation of Prime Minister and acting President Ariel Henry, arguing that under his management, the economic and social crisis deepened in the Caribbean country. In the capital of Port-au-Prince, members of several civil society organizations, popular movements, trade unions, and opposition parties held a massive rally, condemning fuel shortages and soaring prices of essential commodities and basic services. Protesters blocked roads with burning tires in and around the capital. Haiti’s central bank reported that inflation had reached 29% and hit a 10-year high.
Sri Lanka, an island-nation of 22 million people, has been the center of political and economic turmoil since the United National Party government defaulted on $51 billion in foreign debt during May. For months the country has experienced severe shortages of fuel, food and other commodities amid an inflationary spiral. Motorists have lined up for blocks to get fuel and cooking oil. A failed agricultural fertilizer policy has been cited as the cause behind the decline in agricultural production. The shortages of fuel have hampered the production and marketing of agricultural products such as tea which is exported from Sri Lanka. Due to the lack of fuel, trucks which transport these agricultural commodities for internal marketing and export have been drastically reduced. Workers and small business operators have lined up sometimes for two days in order to purchase limited amounts of fuel.
Rising housing costs have made housing largely inaccessible and unaffordable to most Americans, but have acutely impacted communities of color and low- to moderate-income families over the past several decades. The median asking rent in the United States rose above $2,000 for the first time in June 2022. Given that the U.S. Department of Housing and Urban Development (HUD) sets the standard of affordability at 30% of household income, $2,000 per month would only be “affordable” for households earning at least $80,000 per year—well above the median U.S. household income ($67,521). A growing housing supply shortage is a key contributor to the housing affordability crisis. Following the Great Recession, the share of homes being built fell significantly, causing buyer demand to exceed housing production.