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On taxes instead of $100 billion a year increase in the deficit that the 2017 tax cut of Biden's predecessor cost the Treasury -which benefited average Americans only $750 a year studies show, and reduced corporate taxes from 35% to 21% shifting billions to large corporations- Biden proposed $500 billon cut in the deficit by putting a 25% tax on 1000 billionaires in the US. Biden's guarantee that no one making less than $400,000 a year would pay an extra penny in taxes. Everyone would be better off, no one worse off. His predecessor's 2017 tax cut did not increase investment spending by companies which remained same as before. "There are 1,000 billionaires in America.   You know what the average federal tax rate for these billionaires is? 8.2 percent!  That’s far less than the vast majority of Americans pay.   No billionaire should pay a lower tax rate than a teacher, a sanitation worker, a nurse!  That’s why I’ve proposed a minimum tax of 25% for billionaires. Just 25%.  That would raise $500 Billion over the next 10 years." Only some of it would pay for the following the rest to cut the deficit- "Imagine what that could do for America. Imagine a future with affordable child care so millions of families can get the care they need and still go to work and help grow the economy.  Imagine a future with paid leave because no one should have to choose between working and taking care of yourself or a sick family member.    Imagine a future with home care and elder care so seniors and people living with disabilities can stay in their homes and family caregivers get paid what they deserve!  Tonight, let’s all agree once again to stand up for seniors! "       ...

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Beige Book in April shows economic activity slowing in 9 of 12 Federal reserve districts with exceptions being Cleveland Richmond and Boston.

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An enormous achievement of president Joe Biden and of the Federal Reserve's Powell goes unrecognized with the highest growth of any the economically developed nations by far in the US, as groups stuck in old frayed concepts of economic orthodoxy and wanting to keep as FDR said "their place in the economic order," work to denigrate this achievement. They have sold trickle down economics, broken some common sense rules about failures in indiscriminate use of tariffs from the 1930's, which will put at risk this remarkable growth in the US economy. And does the current economic leadership respect Rural White people, Republicans in Republican States Absolutely. It is sending the largest part of the IRA Act funds to these states. It is also standing up for workers and families even on the picket lines for higher wages, a better future for America. True it is that in 4 years the effects of problems that were unanticipated from the pandemic relief and the supply chain crisis with ensuing inflation and price gouging in groceries and essential items, have affected the most depressed groups in America including blacks and Latinos and rural White Americans. These also are largely in the process of being overcome.      ...

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This editorial in the WSJ points out that U.S. president Obama made economic inequality "the defining challenge of our time" in his State of the Union address in 2013, yet the U.S. has seen widening economic and social disparities in his two terms- creating the situation where Bernie Sanders is now in a virtual tie in Iowa with Hillary Clinton. It says Hillary Clinton wins handily over Sanders on three of four issues of the most concern for Democratic caucus voters in pre-entrance polls, healthcare, terrorism, and on the important issue of jobs and economy by 51% to 42%. Where she falls behind is on the issue of income inequality, and by a very wide margin reflecting voter disillusionment with policies that resulted in marginalization of some workers through globalization and long term unemloyment, and reduced access to education with high tution costs- there Sanders wins by 61% to 34%. Federal Reserve policies that kept rates low near zero hurt middle class savers, working class savers, and benefitted disproportionately upper class investors in the stock market, widening the social and economic disparities....

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The number of student loan borrowers in the U.S with loans over $100,000 has surged from about 1 million in 2010 to 1.82 million in 2014, according to the Federal Reserve Bank of New York. Th borrowers are graduate students who have piled up so much debt in the last decade that 40% of student debt of $1.19 trillion in 2015 is from graduate student debt. A major problem is that there are no limits to graduate student borrowing and the rates are higher because of bad loans in the system, increasing the size of the burden of student debt on individual borrowers rapidly, ironically at a time of low interest rates. This leaves borrowers worse off with unpayable student debt affecting them all their lives, taxpayers paying more, prudent student loan borrowers paying higher rates, and all the time reducing the pressure on universities and colleges to reduce costs for affordable graduate education. This is now a major problem in the U.S. and a major issue in the 2016 presidential election.

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Conventional monetary policy is ineffective in a liquidity trap. At that point short term interest rates are at zero, and conventional monetary policy is ineffective at this zero bound. Unconventional policies such as buying long term Treasury bonds by the Federal Reserve may be adopted, but their effectiveness has not been proven. This is something the Fed is attempting to do in the U.S. after the 2008 financial crisis. This was tried in Japan in a deflationary situation and the results did not show conclusively that it works, because Japan remained at a borderline deflationary situation for years while this policy was implemented by the Bank of Japan. The $600 billion bond buying program of the U.S. Fed in late 2010, known as QE II, was implemented to reduce the chance of deflation taking hold and to stimulate growth. Krugman and others argue for the need of fiscal policy and government spending to step in to support the unconventional monetary policy. This becomes more difficult to do with the increasing budget deficit the U.S. is facing in 2011....

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The failure of the Obama administration to negotiate a trade treaty with South Korea during the G-20 talks in Seoul. The lack of efforts to lay the groundwork for such a treaty in the last 2 years. The Journal is critical of Mr. Obama's embrace of Federal Reserve policies to buy $600 billon of Treasury securities, which drew criticism from all sides during the G-20 talks. Failure of Mr. Geithner and Mr. Obama to draw attention to China's sterilization of capital inflows and recycling them into US government debt, instead of allowing capital to flow in and out more freely. Overfocus on the call for limiting each nation's trade surplus to 4% of GDP, when attention could have been drawn to a number of serious concerns about China's policies. Valuable political energy lost in defending the Fed's move and calling for the 4% of GDP limit to surpluses. Result is a loss of American leadership for the first time at a summit conference of world leaders.

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In April 2013 an estimated 11% of Japan's financial assets were invested in the stock market and mutual funds. This compares with 45% in the U.S. and 22% in Europe, according to data from U.S. Federal Reserve and the Bank of Japan. Mom and pop retail investors are beginning to come back to Japan's stock market after 2 decades, making up 20% of trading value in October 2012, and up to 31% of trading value by April 2013. Japanese households have a larger amount of holdings of cash and bank deposits than U.S. households after the two decade stock market plunge in Japan and higher savings rate- about $8.9 trillion compared to $7.7 trillion. Japanese households had 6.8% of their financial assets in shares and equities in 2012, compared to 14% for Europe and 33% for the U.S., according to the Tokyo Stock Exchange and the Bank of Japan, showing the room for households to increase share and equity investments as confidence returns to the Tokyo Stock Exchange.

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Consumer lending went down by 1.7% in October 2009 according to Federal Reserve data. A WSJ analysis of Fed data shows corporate and consumer credit markets have shrunk by 7% or $1.5 trillion in the 2 years through early November 2009. And ont he other hand the Treasury debt outstanding has gone up quickjly by 40% as the governmet tries to finance large deficits. The market for every type pf bond has recovered from the crisis, and money is going into the markets, but this does not mean more money is flowing into the economy. The tighter lending results in consumers and businesses more reluctant to hire and invest. Mohamed El-Erian, CEO of Pacific Inestment Management Company says this means the US econom will grow at 1.5% to 2% ayear compared to the 3% growth that is typical for healthy growth. Says Erian: "the idea that we have reset to where we came from is false. It is abumpy journeyto anew destination with significant long-term effects."

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 Americans in the southern states forget that president Kennedy made the famous statement about "a rising tide lifts all boats" in Arkansas, a poor southern state, saying that America must invest in all regions in people in all parts not just in well off northeastern states. In a handful of southern states expanding Medicaid to about $43,000 or 138% of the federal poverty level for a family of four is now being taken up by Republican leaders who show new openness- in Alabama, Georgia and Mississippi. Noah Weiland -of NYT looks at one particular battle -between Democrat Governor Laura Kelly in Kansas and Republican Speaker Hawkins- in Topeka, Kansas, where the fight goes on. Hawkins calling it the greatest Ponzi scheme devised and Kelly telling this reporter that she has included a work requirement so there is no excuse for not doing this. Republicans are coming around and so are states in other places. Missouri, Nebraska, and Oklahoma, states that lie next to Kansas have approved this through ballot initiatives. The point here is that in the years as America comes out of the pandemic there is and should rightly be a realization that this is different, that the children of low income families deserve as equal a chance as their higher income fellow Americans, that depriving them of good medical care makes America a weaker country. As Jerome Powell of the US Fed said in Stanford today about Kennedy's expression of "lifting all boats," it is just this that is needed today. It will be the No.1 election issue in Kansas in 2024, says Governor Kelly. The Republicans are also having second thoughts and are now just face saving. Consider that the Kansas Health Institute a research group, says 70% of the people becoming eligible for Medicaid expansion are working. Many are restaurant business workers who cannot provide proper medical care to children who form the next generation of America. And hiring in rural hospitals would expand for health workers instead of layoffs in southern states lifting financial strain on rural healthcare with additional Medicaid funds. This helps rural America when it needs it most. ...

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Capital One's financial practices that affected subprime borrowers. This as an executive of Capital One is nominated by Bush for aseat on the Federal reserve Board.

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Volcker helped set the autocratic tradition at the Federal Reserve which Greenspan followed. Actually this may not have been a good thing- not to have any dissent and to all speak in one voice as often there are many angles to one issue and only more than one viewpoint can accomodate the different angles which all have to be taken into account. Meltzer describes it as a club with al the members supportive of the club and its chairman. This may not be a healthy thing in the long run. Mr. Volcker at a recent meeting questioned Mr Greenspan's cheerleading of the " bright new financial system" as he called it and which in the end with all the brains and talent as well as greed failed the American people.

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A Governor of the Federal Reserve Board, Edward Gramlich warned of the dangers of excesses in the housing industry and published a book on the subprime mortgage situation in June.

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Dilution of the Volcker Rule by defining "hedging" as covering bank risk on a "portfolio basis," "including aggregate risk of one or more trading desks." The new wording is in a 174 page draft proposal for the rule released by regulatory agencies. The Federal Reserve, the FDIC, the CFTC, the SEC, and the Treasury Department are putting together the final wording. This opens the door for banks to engage in proprietary trading on their own account. Experts say this makes it possible for financial firms to make all kinds of bets on the market, by defining the risk of its portfolio broadly, such as a U.S. recession. Additional changes are the deleting of the requirement that chief executives pledge their firms are not engaging in proprietary trading. Another change that is being debated is whether to require banks to report all trading to a single repository so that regulators can see if there is systemic risk. The result of this would be a watering down of the original Volcker Rule provision in the Dodd-Frank legislation, that banned proprietary trading after the 2008 financial collapse on Wall Street....

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Daniel Altman's proposal for a tax on wealth over $1 million. He makes the case for taxing wealth not incomes to reduce inequality as this is where the situation in terms of inequality has worsened for the U.S. in recent decades. To support this proposal Altman cites the change in the U.S. Ginni coefficient, which measures inequality. The Ginni coefficient is anumber from 0 to 100 which goes up with higher income inequality. From the late 70's to the 1990's, the Cnesus Bureau showed this to be in the low 40's. By 1992 the Ginni coefficient went up to the mid-70's, according to the Federal Reserve data. It increased to about 80 in 2010. In 1992 the top 10% in the U.S. population controlled 20 times the wealth of the bottom 50%. By 2010 this figure triples to 65 times. and the graduated income tax even if it redistributes a small share of the wealth does little to affect the trend of wealth extremes from building up and threatening the social fabric of America, reducing mobility and opportunities for the bottom 50% to unprecedented levels since the 1950's. ...

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In a policy shift the Bank of England's Governor, Mark Carney, announces that the central bank will keep interest rates low and bond purchases at the current level till the unemployment rate drops to 7%. This is similiar to the policy action of the U.S. Federal Reserve chairman, Ben Bernanke, to keep interest rates low till the unemployment rate reaches 6.5%. Carney said conditions under which this could change are if inflation increased or financial stability was affected by the easy monetary policy. He said: "Our biggest concern is the possibility that as the recovery gathers pace, that there is an unwarranted change in expectations about the pace of the withdrawal of monetary policy stimulus." "That is one of the principal points of providing explicit forward guidance." BOE said the official unemployment rate was 7.8% in the three months to May, and it is unlikely to decline to the 7% level till early 2016. The inflation rate for Britain was 2.9% in June. The higher inflation rate is partly due to the higher taxes and large increase in university tution fees which are unlikely to be repeated. The BOE's Monetary Policy Committee sees inflation declining to 2% by 2015....

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Deborah Lucas, Finance Professor at the Kellogg School of Management and her views on the bailout plan and alternatives. She does not believe that the markets are near panic and thinks that Congress should move slowly before it passes any legislation. She is glad that the Treasury proposal has failed. She does not think piecemeal guaranteeing of assets is that valuable. In her view they need to do the harder thing, that is to really have a direct discovery process, where they figure out who they are going to shut down, and what its going to cost. Government examiners she says should quickly examine the books of every major financial insitution involved in the crisis, including insurers, pension funds, and banks, determine which are the weakest and which can survive. Ms Lucas points to the Federal Reserve and FDIC actions in the deal for Citigroup to take over Wachovia on Sunday as examples of how the crisis is already being addressed. Her thinking is that the core problem is a crisis of confidence , which can only be resolved with increasing transparency, not a government bailout....

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The NASDAQ index reached 5000 by April 2015, a level reached in the stock market boom in 2000. Yet investment strategists who were wary of the stock market in the period before the 2000-2002 collapse of the market see this market differently. The NASDAQ itself is not what it was in 2000, with the 2015 NASDAQ component stocks being different for the most part, and the healthcare and other sectors better represented in the index. Only three of the stocks in the top ten in 2000 are in the top ten today, including Microsoft. The S&P 500 trades in April 2015 at 18.5 times its company earnings for the past 12 months, compared to an historical average of 15.5, according to research firm Bespoke. A big part of the difference today is the investment climate of low inflation, which gives the U.S. Federal Reserve flexibility in raising rates. Low rates make bonds with lower yields less attractive, and increase the present value of future earnings. The yield of the 10 year U.S. Treasury was 1.917% on April 25, 2015. In April 2000 it was 6%, and in mid 2007 it was 5.3% before the financial crisis in the two periods. James Paulsen, chief investment strategist at Wells Capital Management oversees $347 billion in fund investments. He also was wary of the U.S. stock market in 1999, yet he does not see the similiar kind of risks today, and sees a long term bullish trend. The scenario he envisages is more of a pause or temporary decline. Paulsen has shifted money to European markets, as U.S. stocks are becoming more expensive relative to their European counterparts, a strategy that is being followed by other money managers since 2014. Higher price volatility is seen in the markets in 2015, with the S&P 500 up 2.9% for the first four months of 2015, and the Dow up 1.4%. ...

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The Fed over the past year has assumed, backstopped, or committed to take on about $2 trillion in assets from shaky financial institutions including Bear Stearns, AIG, Citigroup and Bank of America. In some cases the banks will assume some of the losses, or Treasury will accept some of the losses before the Fed comes into the picture. Another $1 trillion in lending could occur in 2009 as liquidity programs are tapped further by borrowers and the Fed purchases more bonds such as the ones sold by Fannie and Freddie, and securites backed by student loans, auto loans, credit card receivables and small business loans. This would result in a balance sheet for the Fed over 3 times what it was 18 months ago in mid 2007.

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After creating new money at ablistering pace to try and slow down a precipitate downturn, and getting interest rates on Treasuries to a negative interest rate, (in effect people paying the Treasury to park money there), the Federal Reserve will now turn to quantitiative easing. The speed with which this has happened is shown by the fact that the Fed's balance sheet has gone fro $900 billion in September 2008 to just over $2 trillion by December 12, 2008. Till Septemeber 2008 the Fed had financed its lending to banks and other financial institutions by lending with its existing reserves, mostly Treasuy securities, by exchanging its cash or Treasury securties for hard to sell securities. Analysts fear unintended consequences from the kind of quantitative easing that the Fed will now have left by way of tools to address the crisis as the Fed funds rate is now close to zero.

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Efforts by the Federal Reserve, the Administration coming around to the Fed's view of the need for help,and private lenders with persuasion from the Fed Chairman and others, to soften the impact of the mortgage blow to the economy by getting Federal Housing Administration, Fannie Mae and Freddie Mac to help subprime mortgage holders avoid foreclosures. Additional pressure from the Democrat controlled House and Senate.

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Several experts point to a dangerous change in the nature of unemployment in this downturn. Heidi Shierholz of the Economic Policy Institute, says people are more likely to get stuck with unemployment now than at any time in the post war period. Andrew Stettner, deputy Director of the National Employment Law Project, says a larger share of the unemployed are not going to be able to go to the same line of work. They will need new skills, just like an auto worker in a permanently downsized industry would have to find new skills to make a product in the renewable energy field or health care. And the law as it currently stands does not help either. Because if an unmeployed worker looks for training or goes back to school he loses his unemployment benefits, something the Obama administration proposes to change. What this means is that many of the unemployed will end up as permanent job losers. Rob Valetta, an economist at the San Francisco Federal Reserve Bank says that throughout the the last 3 decades including good times, the unemployment pool is shifting towards permanent job losers. Lawrence Katz, a Harvard University economist, points out that once workers exhaust their unemployment benefits and don't get new training, they become disconnected to the labor market, and bascially end up on disability or become permanently unemployed. The statistics bear this out. In April 2009, 47.1% of the people collecting state unemployment insurance exhausted the usual 26 weeks of benefits without finding work, according to the Bureau of Laor Statistics, that is the highest rate on record. In December 2007, there were about 2 unemployed workers for every job opening, according to Labor Department data. In March 2009 there were five unemployed workers for every opening. Mark Beaupre, 49, of Providence, R.I. lost his $8 an hour manufacturing job an year ago, one of many manufacturing jobs he has held since the 1980's. His wife Cathy lost her customer service job a year ago. This couple who together made $50,000 a year, are now behind on their mortgage payments and have applied for food assistance. At a recent job fair in Providence he says three thousand people turned up and he could not even get into the parking lot. ...

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Damian Paletta of the Washington Post says that credit goes to Gary Cohn a former Goldman Sachs president, and head of the president's National Economic Council for the way he has quietly built up a group of leading experts on major initiatives of the Trump administration such as tax reform, infrastructure plans. Compared to the infighting and other problems in the first 100 days of the Trump presidency, Cohn is credited with building a core of ideas and experts that bring Trump more to the centre and with the prospect of winning Democratic party support. He has helped shift the president to set up a more balanced approach, less confrontational with China and not calling China a currency manipulator, getting support for the Export Import Bank, and more receptive to the Federal Reserve led by Janet Yellen. This report says an alliance of moderates is centering around Adviser Jared Kushner, Cohn, and in other reports Tillerson in foreign affairs is seen as being part of this group. On NAFTA the president has moved to a less confrontational approach with Mexico, which has helped the Mexican peso recover and improved prospects for the Mexican economy.  On infrastructure new ideas to find financing are needed and a plan to tax carbon emissions is intended to draw Democratic support as well as provide some of the funding. About $200 billion in taxpayer money and $800 billion from private investors is being discussed at the National Economic Council. This report says Cohn suffered from dyslexia in childhood, graduated from American University, and joined Goldman Sachs in an unconventional way. He shares a passion for deal making with president Trump, yet at the same time values the views of experts he has brought to formulate concrete plans for the way ahead. About 25 experts with extensive experience in government helped put together new tax changes, infrastructure plans, and international trade deal plans. His predecessor at the NEC, Gene Sperling, gives him credit for quietly pulling together the experts and doing the planning that the Trump administration now depends on. ...