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woodlu

Why Democrats' tax plans are such a mess | The Economist - 0 views

www.economist.com/...rats-tax-plans-are-such-a-mess

politics policy economics

shared by woodlu on 29 Oct 21 - No Cached
  • 0E BIDEN promised to pay for his big social-spending proposals by raising taxes on the rich and nobody else.
  • Now Democrats are rushing to find a big pot of money without raising headline rates of tax at all.
  • predicting that they would soon reach a compromise on a social-spending bill that would pass in both the House of Representatives and the Senate, where they cannot afford a single dissenting vote in their ranks.
  • ...27 more annotations...
  • Kyrsten Sinema of Arizona,
  • satisfy two centrists:
  • Joe Manchin of West Virginia
  • desire for higher tax revenues without higher tax rates has left Democrats scrambling to make deep changes to how some levies work
  • new minimum tax on the biggest corporations’ accounting profits, which can exceed those declared to the tax authorities.
  • is a levy on
  • firms that buy back their own stock, a longtime bugbear on the left
  • a reform to the federal capital-gains tax that is designed to ensnare the ultra-rich. It would tax them annually on the paper gains of their investment portfolios, rather than when assets are sold, as under the current system
  • firms could avoid the tax attached to them by paying dividends instead.
  • no sound economic reason for penalising share buy-backs
  • A tax on the book profits of companies would outsource tax rules to unaccountable accounting bodies, reduce the efficacy of desirable tax deductions for investment and, by interfering with the ability to carry forward losses, play havoc with firms whose profits are volatile.
  • The “mark-to-market” capital gains tax is a messy attempt to rapidly extract enormous amounts from a tiny number of the very rich
  • proposal which is even more poorly designed, and which Mr Manchin is right to oppose
  • That would ultimately be bad for investment and the incentive to innovate, and would get in the way of the widespread ownership of equities.
  • straightforward result of their fragile control of Congress and the idiosyncrasies of two of their senators
  • failed to bring in straightforward reforms that raise revenue by enlarging the tax base
  • abolishing the egregious exemption that resets accrued capital gains to zero when owners die and pass on their estates.
  • Taxing capital gains at death, as Mr Biden first proposed, would raise more than $200bn over a decade—not far off the “several hundred billion” Democrats say the tax on investment portfolios would yield
  • lobbyists defeated the idea
  • also preserved the carried-interest loophole, which lets investment managers class their fees as lightly taxed capital gains, not income.
  • lifting the cap on an exemption from federally taxable income of money used to pay state and local taxes. Doing that would benefit the wealthy, narrow the tax base and subsidise high-tax states.
  • Mr Biden ignored the example of Europe. Its social spending is funded using broad-based and efficient taxes, most notably value-added tax, a levy on consumption
  • unfriendly to economic growth to begin with. Narrowing the target further—the capital-gains reform would apply only to billionaires and those with more than $100m in annual income sustained over three years
  • this tax would apply only to securities traded on public markets, with different rules for stakes in privately held firms, it would deter entrepreneurs from floating their companies on the stock exchange.
  • Democrats have pretended that raising taxes on businesses would have no negative effect on wages, contrary to the overwhelming consensus among economists.
  • The failure to agree on a tax plan carries echoes of doomed Republican attempts, under Donald Trump, to “repeal and replace” the Obamacare health-insurance system.
  • Democrats will have to confront the fact that permanently expanding the welfare state without damaging the economy means winning an argument for higher taxes, rather than always telling voters that some rich person will pay.
Javier E

The Moral Crisis of America's Doctors - The New York Times - 0 views

www.nytimes.com/...doctors-moral-crises.html

moral crisis doctor medical profession US health care

shared by Javier E on 15 Jun 23 - No Cached
  • Some years ago, a psychiatrist named Wendy Dean read an article about a physician who died by suicide. Such deaths were distressingly common, she discovered. The suicide rate among doctors appeared to be even higher than the rate among active military members
  • Dean started asking the physicians she knew how they felt about their jobs, and many of them confided that they were struggling. Some complained that they didn’t have enough time to talk to their patients because they were too busy filling out electronic medical records. Others bemoaned having to fight with insurers about whether a person with a serious illness would be preapproved for medication. The doctors Dean surveyed were deeply committed to the medical profession. But many of them were frustrated and unhappy, she sensed, not because they were burned out from working too hard but because the health care system made it so difficult to care for their patients.
  • Doctors on the front lines of America’s profit-driven health care system were also susceptible to such wounds, Dean and Talbot submitted, as the demands of administrators, hospital executives and insurers forced them to stray from the ethical principles that were supposed to govern their profession. The pull of these forces left many doctors anguished and distraught, caught between the Hippocratic oath and “the realities of making a profit from people at their sickest and most vulnerable.”
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  • In July 2018, Dean published an essay with Simon G. Talbot, a plastic and reconstructive surgeon, that argued that many physicians were suffering from a condition known as moral injury. Military psychiatrists use the term to describe an emotional wound sustained when, in the course of fulfilling their duties, soldiers witnessed or committed acts — raiding a home, killing a noncombatant — that transgressed their core values.
  • By the time we met, the distress among medical professionals had reached alarming levels: One survey found that nearly one in five health care workers had quit their job since the start of the pandemic and that an additional 31 percent had considered leaving
  • the physicians I contacted were afraid to talk openly. “I have since reconsidered this and do not feel this is something I can do right now,” one doctor wrote to me. Another texted, “Will need to be anon.” Some sources I tried to reach had signed nondisclosure agreements that prohibited them from speaking to the media without permission. Others worried they could be disciplined or fired if they angered their employers, a concern that seems particularly well founded in the growing swath of the health care system that has been taken over by private-equity firms
  • Mona Masood, a psychiatrist who established a support line for doctors shortly after the pandemic began, recalls being struck by how clinicians reacted when she mentioned the term. “I remember all these physicians were like, Wow, that is what I was looking for,” she says. “This is it.”
  • I spent much of the previous few years reporting on moral injury, interviewing workers in menial occupations whose jobs were ethically compromising. I spoke to prison guards who patrolled the wards of violent
  • in recent years, despite the esteem associated with their profession, many physicians have found themselves subjected to practices more commonly associated with manual laborers in auto plants and Amazon warehouses, like having their productivity tracked on an hourly basis and being pressured by management to work faster.
  • it quickly went viral. Doctors and nurses started reaching out to Dean to tell her how much the article spoke to them. “It went everywhere,” Dean told me when I visited her last March in Carlisle, Pa., where she now lives
  • “I think a lot of doctors are feeling like something is troubling them, something deep in their core that they committed themselves to,” Dean says. She notes that the term moral injury was originally coined by the psychiatrist Jonathan Shay to describe the wound that forms when a person’s sense of what is right is betrayed by leaders in high-stakes situations. “Not only are clinicians feeling betrayed by their leadership,” she says, “but when they allow these barriers to get in the way, they are part of the betrayal. They’re the instruments of betrayal.”
Javier E

Opinion | With Covid, Is It Really Possible to Say We Went Too Far? - The New York Times - 0 views

www.nytimes.com/...covid-lockdown-failure.html

covid response backlash revisionist history crisis culture policy

shared by Javier E on 16 Nov 23 - No Cached
  • In 2020, many Americans told themselves that all it would take to halt the pandemic was replacing the president and hitting the “science button.”
  • In 2023, it looks like we’re telling ourselves the opposite: that if we were given the chance to run the pandemic again, it would have been better just to hit “abort” and give up.
  • you can see it in Bethany McLean and Joe Nocera’s book “The Big Fail: What the Pandemic Revealed About Who America Protects and Who It Leaves Behind,” excerpted last month in New York magazine under the headline “Covid Lockdowns Were a Giant Experiment. It Was a Failure.”
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  • we can’t simply replace one simplistic narrative, about the super power of mitigation policy, for another, focused only on the burdens it imposed and not at all on the costs of doing much less — or nothing at all.
  • Let’s start with the title. What is the big failure, as you see it?
  • McLean: I think it gets at things that had happened in America even before the pandemic hit. And among those things were, I think, a failure to recognize the limits of capitalism, a failure of government to set the right rules for it, particularly when it comes to our health care system; a focus on profits that may have led to an increase in the bottom line but created fragility in ways people didn’t understand; and then our growing polarization that made us incapable of talking to each other
  • How big is the failure? When I look at The Economist’s excess mortality data, I see the U.S. had the 53rd-worst outcome in the world — worse than all of Western Europe, but better than all of Eastern Europe.
  • McLean: I think one way to quantify it is to take all those numbers and then put them in the context of our spending on health care. Given the amount we spend on health care relative to other countries, the scale of the failure becomes more apparent.
  • o me, the most glaring example is the schools. They were closed without people thinking through the potential consequences of closing down public schools, especially for disadvantaged kids.
  • to compound it, in my view, public health never made the distinction that needed to be made between the vulnerabilities of somebody 70 years old and the vulnerabilities of somebody 10 years old.
  • In the beginning of the book you write, in what almost feels like a thesis statement for the book: “A central tenet of this book is that we could not have done better, and pretending differently is a dangerous fiction, one that prevents us from taking a much needed look in the mirror.”
  • This claim, that the U.S. could not have done any better, runs against your other claim, that what we observed was an American failure. It is also a pretty extreme claim, I think, and I wanted to press you on it in part because it is, in my view, undermined by quite a lot of the work you do in the book itself.
  • Would the U.S. not have done better if it had recognized earlier that the disease spread through the air rather than in droplets? Would it not have done better if it hadn’t bungled the rollout of a Covid test in the early months?
  • McLean: Everything that you mentioned — the point of the book is that those were set by the time the pandemic hit.
  • in retrospect, what we were doing was to try to delay as much spread as we could until people got vaccinated. All the things that we did in 2020 were functionally serving or trying to serve that purpose. Now, given that, how can you say that none of that work saved lives?
  • McLean: I think that the test failure was baked into the way that the C.D.C. had come to operate
  • But the big question I really want to ask is this one: According to the C.D.C., we’ve had almost 1.2 million deaths from Covid. Excess mortality is nearly 1.4 million. Is it really your contention that there was nothing we might’ve done that brought that total down to 1.1 million, for instance, or even 900,000?
  • McLean: It’s very — you’re right. If you went through each and every thing and had a crystal ball and you could say, this could have been done, this could have been moved up by a month, we could have gotten PPE …
  • When I came to that sentence, I thought of it in terms of human behavior: What will humans put up with? What will humans stand for? How do Americans act? And you’ve written about Sweden being sort of average, and you’ve written about China and the Chinese example. They lock people up for two years and suddenly the society just revolts. They will not take it anymore. They can’t stand it. And as a result, a million and a half people die in a month and a half.
  • Well, I would tell that story very differently. For me, the problem is that when China opened up, they had fully vaccinated just under two-thirds of their population over 80. So to me, it’s not a failure of lockdowns. It’s a failure of vaccinations. If the Chinese had only achieved the same elderly vaccination rate as we achieved — which by global standards was pretty poor — that death toll when they opened up would have been dramatically lower.
  • What do you mean by “lockdown,” though? You use the word throughout the book and suggest that China was the playbook for all countries. But you also acknowledge that what China did is not anything like what America did.
  • Disparities in health care access — is it a dangerous fiction to think we might address that? You guys are big champions of Operation Warp Speed — would it not have been better if those vaccines had been rolled out to the public in nine months, rather than 12
  • . But this isn’t “lockdown” like there were lockdowns in China or even Peru. It’s how we tried to make it safer to go out and interact during a pandemic that ultimately killed a million Americans.
  • McLean: I think that you’re absolutely right to focus on the definition of what a lockdown is and how we implemented them here in this country. And I think part of the problem is that we implemented them in a way that allowed people who were well off and could work from home via Zoom to be able to maintain very much of their lives while other people couldn’t
  • And I think it depends on who you were, whether you would define this as a lockdown or not. If you were a small business who saw your small business closed because of this, you’re going to define it as a lockdown.
  • n the book you’re pretty definitive. You write, “maybe the social and economic disasters that lockdowns created would have been worth it if they had saved lives, but they hadn’t.” How can you say that so flatly?
  • I think there are still open questions about what worked and how much. But the way that I think about all of this is that the most important intervention that anybody did anywhere in the world was vaccination. And the thing that determined outcomes most was whether your first exposure came before or after vaccination.
  • Here, the shelter-in-place guidelines lasted, on average, five to seven weeks. Thirty nine of the 40 states that had issued them lifted them by the end of June, three months in. By the summer, according to Google mobility data, retail and grocery activity was down about 10 percent. By the fall, grocery activity was only down about 5 percent across the country
  • Nocera: Well, on some level, I feel like you’re trying to have it both ways. On the one hand, you’re saying that lockdowns saved lives. On the other hand, you said they weren’t real lockdowns because everybody was out and about.
  • I don’t think that’s having it both ways. I’m trying to think about these issues on a spectrum rather than in binaries. I think we did interrupt our lives — everybody knows that. And I think they did have an effect on spread, and that limiting spread had an effect by delaying infections until after vaccination.
  • Nocera: Most of the studies that say lockdowns didn’t work are really less about Covid deaths than about excess mortality deaths. I wound up being persuaded that the people who could not get to the hospital, because they were all working, because all the doctors were working on Covid and the surgical rooms were shut down, the people who caught some disease that was not Covid and died as a result — I wound up being persuaded about that.
  • We’re in a pandemic. People are going to die. And then the question becomes, can we protect the most vulnerable? And the answer is, we didn’t protect the most vulnerable. Nursing homes were a complete disaster.
  • There was a lot of worry early on about delayed health care, and about cancer in particular — missed screenings, missed treatments. But in 2019, we had an estimated 599,600 Americans die of cancer. In 2020, it was 602,000. In 2021, it was 608,000. In 2022, it was 609,000.
  • Nocera: See, it went up!But by a couple of thousand people, in years in which hundreds of thousands of Americans were dying of Covid.
  • Nocera: I think you can’t dispute the excess mortality numbers.I’m not. But in nearly every country in the world the excess mortality curves track so precisely with Covid waves that it doesn’t make sense to talk about a massive public health problem beyond Covid. And when you add all of these numbers up, they are nowhere near the size of the footfall of Covid. How can you look back on this and say the costs were too high?
  • Nocera: I think the costs were too high because you had school costs, you had economic costs, you had social costs, and you had death.
  • McLean: I think you’re raising a really good point. We’re making an argument for a policy that might not have been doable given the preconditions that had been set. I’m arguing that there were these things that had been put in place in our country for decades leading up to the pandemic that made it really difficult for us to plant in an effective way, from the outsourcing of our PPE to the distrust in our health care system that had been created by people’s lack of access to health care with the disparities in our hospital system.
  • How would you have liked to see things handled differently?Nocera: Well, the great example of doing it right is San Fran
  • I find the San Francisco experience impressive, too. But it was also a city that engaged in quite protracted and aggressive pandemic restrictions, well beyond just protecting the elderly and vulnerable.
  • McLean: But are we going to go for stay-at-home orders plus protecting vulnerable communities like San Francisco did? Or simply letting everybody live their lives, but with a real focus on the communities and places like nursing homes that were going to be affected? My argument is that we probably would’ve been better off really focusing on protecting those communities which were likely to be the most severely affected.
  • I agree that the public certainly didn’t appreciate the age skew, and our policy didn’t reflect it either. But I also wonder what it would mean to better protect the vulnerable than we did. We had testing shortages at first. Then we had resistance to rapid testing. We had staff shortages in nursing homes.
  • Nocera: This gets exactly to one of our core points. We had spent 30 years allowing nursing homes to be owned by private equity firms that cut the staff, that sold the land underneath and added all this debt on
  • I hear you saying both that we could have done a much better job of protecting these people and that the systems we inherited at the outset of the pandemic would’ve made those measures very difficult, if not impossible, to implement.
  • But actually, I want to stop you there, because I actually think that that data tells the opposite story.
  • And then I’m trying to say at the same time, but couldn’t we have done something to have protected people despite all of that?
  • I want to talk about the number of lives at stake. In the book, you write about the work of British epidemiologist Neil Ferguson. In the winter of 2020, he says that in the absence of mitigation measures and vaccination, 80 percent of the country is going to get infected and 2.2 million Americans are going to die. He says that 80 percent of the U.K. would get infected, and 510,000 Brits would die — again, in the abs
  • In the end, by the time we got to 80 percent of the country infected, we had more than a million Americans die. We had more than 200,000 Brits die. And in each case most of the infections happened after vaccination, which suggests that if those infections had all happened in a world without vaccines, we almost certainly would have surpassed two million deaths in the U.S. and almost certainly would’ve hit 500,000 deaths in the U.K.
  • In the book, you write about this estimate, and you endorse Jay Bhattacharya’s criticism of Ferguson’s model. You write, “Bhattacharya got his first taste of the blowback reserved for scientists who strayed from the establishment position early. He co-wrote an article for The Wall Street Journal questioning the validity of the scary 2 to 4 percent fatality rate that the early models like Neil Ferguson’s were estimating and that were causing governments to panic. He believed, correctly as it turns out, that the true fatality rate was much lower.”
  • Nocera: I know where you’re going with this, because I read your story about the nine pandemic narratives we’re getting wrong. In there, you said that Bhattacharya estimated the fatality rate at 0.01 percent. But if you actually read The Wall Street Journal article, what he’s really saying is I think it’s much lower. I’ve looked at two or three different possibilities, and we really need some major testing to figure out what it actually is, because I think 2 percent to 4 percent is really high.
  • He says, “if our surmise of 6 million cases is accurate, that’s a mortality rate of 0.01%. That is ⅒th the flu mortality rate of 0.1%.” An I.F.R. of 0.01 percent, spread fully through the American population, yields a total American death toll of 33,000 people. We have had 1.2 million deaths. And you are adjudicating this dispute, in 2023, and saying that Neil was wrong and Jay was right.
  • hird, in the Imperial College report — the one projecting two million American deaths — Ferguson gives an I.F.R. estimate of 0.9 percent.
  • Bhattacharya’s? Yes, there is some uncertainty around the estimate he offers. But the estimate he does offer — 0.01 percent — is one hundred times lower than the I.F.R. you yourselves cite as the proper benchmark.
  • Nocera: In The Wall Street Journal he does not say it’s 0.01. He says, we need to test to find out what it is, but it is definitely lower than 2 to 4 percent.
  • Well, first of all, the 2 percent to 4 percent fatality rate is not from Neil Ferguson. It’s from the W.H.O.
  • But I think that fundamentally, at the outset of the pandemic, the most important question orienting all of our thinking was, how bad could this get? And it turns out that almost all of the people who were saying back then that we shouldn’t do much to intervene were extremely wrong about how bad it would be
  • The argument then was, more or less, “We don’t need to do anything too drastic, because it’s not going to be that big a deal.” Now, in 2023, it’s the opposite argument: “We shouldn’t have bothered with restrictions, because they didn’t have an impact; we would have had this same death toll anyway.” But the death toll turned out to be enormous.
  • Now, if we had supplied all these skeptics with the actual numbers at the outset of the pandemic, what kind of audience would they have had? If instead of making the argument against universal mitigation efforts on the basis of a death toll of 40,000 they had made the argument on the basis of a death toll of more than a million, do you think the country would’ve said, they’re right, we’re doing too much, let’s back off?
  • McLean: I think that if you had gone to the American people and said, this many people are going to die, that would’ve been one thing. But if you had gone to the American people and said, this many people are going to die and a large percentage of them are going to be over 80, you might’ve gotten a different answer.
  • I’m not arguing we shouldn’t have been trying to get a clearer sense of the true fatality rate, or that we shouldn’t have been clearer about the age skew. But Bhattacharya was also offering an estimate of fatality rate that turned out to be off by a factor of a hundred from the I.F.R. that you yourselves cite as correct. And then you say that Bhattacharya was right and Ferguson was wrong.
  • And you, too, Joe, you wrote an article in April expressing sympathy for Covid skeptics and you said ——Nocera: This April?No, 2020.Nocera: Oh, oh. That’s the one where I praised Alex Berenson.You also cited some Amherst modeling which said that we were going to have 67,000 to 120,000 American deaths. We already had, at that point, 60,000. So you were suggesting, in making an argument against pandemic restrictions, that the country as a whole was going to experience between 7,000 and 60,000 additional deaths from that point.
  • when I think about the combination of the economic effects of mitigation policies and just of the pandemic itself and the big fiscal response, I look back and I think the U.S. managed this storm relatively well. How about each of you?
  • in this case, Congress did get it together and did come to the rescue. And I agree that made a ton of difference in the short term, but the long-term effects of the fiscal rescue package were to help create inflation. And once again, inflation hits those at the bottom of the socioeconomic distribution much harder than it does those at the top. So I would argue that some of what we did in the pandemic is papering over these long-term issues.
  • I think as with a lot of the stuff we’ve talked about today, I agree with you about the underlying problems. But if we take for granted for a moment that the pandemic was going to hit us, when it did, under the economic conditions it did, and then think about the more narrow context of whether, given all that, we handled the pandemic well. We returned quickly to prepandemic G.D.P. trends, boosted the wealth of the bottom half of the country, cut child poverty in half, pushed unemployment to historical lows.
  • What sense do you make of the other countries of the world and their various mitigation policies? Putting aside China, there’s New Zealand, Australia, South Korea — these are all places that were much more aggressive than the U.S. and indeed more than Europe. And had much, much better outcomes.
  • Nocera: To be perfectly honest, we didn’t really look, we didn’t really spend a lot of time looking at that.
  • McLean: But one reason that we didn’t is I don’t think it tells us anything. When you look at who Covid killed, then you have to look at what the pre-existing conditions in a country were, what percentage of its people are elderly. How sick are people with pre-existing conditions?
  • I just don’t think there’s a comparison. There’s just too many factors that influence it to be able to say that, to be able to compare America to any other country, you’d have to adjust for all these factors.
  • But you do spend a bit of time in the book talking about Sweden. And though it isn’t precisely like-for-like, one way you can control for some of those factors is grouping countries with their neighbors and other countries with similar profiles. And Sweden’s fatality rate in 2020 was 10 times that of Norway, Finland and Iceland. Five times that of Denmark. In the vaccination era, those gaps have narrowed, but by most metrics Sweden has still done worse, overall, than all of those countries.
  • On the matter of omniscience. Let’s say that we can send you back in time. Let’s put you both in charge of American pandemic response, or at least American communication about the pandemic, in early 2020. What would you want to tell the country? How would you have advised us to respond?
  • McLean: What I would want is honesty and communication. I think we’re in a world that is awash in information and the previous methods of communication — giving a blanket statement to people that may or may not be true, when you know there’s nuance underneath it — simply doesn’t work anymore
  • o I would’ve been much more clear — we think masks might help, we don’t know, but it’s not that big of an ask, let’s do it. We think the early data coming out of Italy shows that these are the people who are really, really at risk from Covid, but it’s not entirely clear yet. Maybe there is spread in schools, but we don’t know. Let’s look at this and keep an open mind and look at the data as it comes in.
Javier E

'Life without consequences': the fraternity bros who built a multimillion-dollar drug r... - 0 views

www.theguardian.com/...-max-marshall-author-interview

fraternity culture us

shared by Javier E on 29 Nov 23 - No Cached
  • uses the drug ring to show how the fraternity ethos shapes elite societies as a whole, beyond the College of Charleston: with impunity.
  • Marshall shows how being asked to join a fraternity means having a safe place to behave badly between high school and the job that frat puts you on the fast track towards. In his book, he quotes a Cornell Greek life website: “While only 2% of America’s population is involved in fraternities, 80% of Fortune 500 executives, 76% of US senators and congressmen, 85% of supreme court justices, and all but two presidents since 1825 have been fraternity men.”
  • the former fraternity members Marshall interviewed for Among the Bros said their experience selling drugs in college was good prep for their careers: “They’d say things like, ‘I learned supply chain economics, salesmanship, delegation and marketing.’” As a reader, it’s hard to not feel pangs of anger at how for some (“some” being young white men), recklessness could be a stepping stone to a six-figure salary.
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  • It’s hard to wrap your mind around men having fond memories of brutal treatment, but Marshall explained that it was not so simple as looking back on one event of hazing and condemning the entire system: “It’s almost a rational choice of thinking, ‘This was my entry into an oil and gas or real estate job. This is how I got into private equity or politics. And there’s always going to be a group of people who are always going to look out for me whenever I need a favor.’
  • And for those in the bubble, there’s an attitude that the more intense the hazing experience was, the better story you might have, the more other men will respect you.
  • Above all, Marshall’s book explores coming of age in a world that will not hold you accountable, even by law enforcement: “When you can get away with anything, it does lead to an arrested development. If you drive drunk and don’t go get a DUI, how do you learn not to drive drunk? If you commit a much worse crime and don’t get punished, how do you learn not to?”
  • All the men involved in Kappa Alpha’s drug ring were white – in fact, they were often described by their fellow students at the College of Charleston and law enforcement as looking like normal white boys. They were protected by wealthy parents, the best lawyers, and a “boys will be boys” culture. They were emboldened to test the boundaries of their privilege, and they came out with barely a scratch.
Javier E

Two Wall Street titans on why the world is at its most precarious since 1938 - 0 views

www.thetimes.co.uk/...recarious-since-1938-kp5tth208

wall street 2023 inflation

shared by Javier E on 05 Nov 23 - No Cached
  • Israel’s war with Hamas and Russia’s full-scale invasion of Ukraine have made the world a more “scary and unpredictable” place than at any other time since the Second World War, Dimon contended. “Here in the US, we continue to have a strong economy,” he said. “We still have a lot of fiscal and monetary stimulus in the system. But these geopolitical matters are very serious — arguably the most serious since 1938.
  • What’s happening ... right now is the most important thing for the future of the world — freedom, democracy, food, energy, immigration. We diminish that importance when you say, ‘What’s it going to do to the market?’ Markets will be fine. Markets can deal with stuff. Markets go up and down. Markets fluctuate.”
  • That said, the conflict in the Middle East — in which at least 1,400 Israelis have been murdered and 9,000 Palestinians killed in Israeli attacks on Gaza since October 7 — has rattled a financial system already gulping at the prospect of inflation proving sticky and interest rates staying higher for longer. The region accounts for 48 per cent of global energy reserves and produced 33 per cent of the world’s oil last year. Previous crises, such as Saddam Hussein’s invasion of Kuwait in 1990 and the Arab oil embargo of 1973-74, resulted in big price shocks — although so far, at about $86 a barrel, oil has roughly returned to its pre-October 7 level, while gas prices have risen only slightly.
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  • So fear creates recessions in the long run — and if we continue to have rising fear, the probability of a European recession grows and the probability of a US recession grows. Geopolitics is playing a bigger role in everyone’s equations.”
  • Geopolitical risk is a major component in shaping all our lives. We are having rising fear throughout the world, and less hope. Rising fear creates a withdrawal from consumption or spending more.
  • “When the Russian invasion occurred in Ukraine, we said that the peace dividend is over,” Larry Fink, chief executive of investment giant BlackRock, told The Sunday Times. “Now, with the instability in the Middle East, we’re going to almost a whole new future.
  • Dimon noted that inflation had “levelled off a little bit” overall, but said: “It’s not clear to me that long-term forces are not inflationary … And that’s why I’m saying rates could possibly go up from here. That’s life in the fast lane.”
  • Higher borrowing costs have started to hit debt-fuelled sectors that boomed in the zero-rates era — such as commercial property, where $80 billion (£65 billion) of assets across the US are in some form of financial distress, according to MSCI, and private equity.
  • [the legendary investor] Warren Buffett says you see who’s swimming naked when the tide goes out. Not everyone is really ready for 6 or 7 per cent rates, but I wouldn’t rule them out.”
  • Fink pointed out that the transmission of rate rises into the US economy was less direct than in the UK
  • “I’m a fundamental believer that we’re going to have higher inflation for longer, and it’s going to require the [Fed] to raise rates higher — probably one or two more tightenings — and that will ultimately be the way we get into recession.”
  • Many senior figures on Wall Street worry about the US government’s ability to finance itself in the medium term. As in the UK, the market for government debt was underpinned by huge waves of quantitative easing (QE) after the financial crisis, as the Federal Reserve, in effect, bought assets including Treasuries to boost the economy. Following a revival of the programme during Covid, it came to an end in March last year.
  • The withdrawal of QE, combined with lacklustre appetite for Treasuries among US banks and international investors such as China, could force the government to pay higher prices at a time of near-record borrowing.
  • “It might be a 20km headwind right now, but next year it’s going to be 25km and it’s going to grow,” a top investor said of the decreasing international demand for US government debt.
  • US stock market floats and fundraisings, the heartbeat of capital markets, slumped to their lowest level since 1998 last year as the spike in interest rates punctured valuations of growth stocks in sectors such as tech and healthcare.
  • The cautious mood on Wall Street comes against a backdrop of surprisingly strong US growth. The economy expanded by an astonishing 4.9 per cent in the third quart
  • the Biden administration is shovelling stimulus into the system via big pieces of legislation promising to accelerate America’s adoption of renewables, rebuild its advanced semiconductor industry and increase its spending on roads, bridges and broadband.
  • We have huge stimulus,” said Fink. “People are not factoring in the Inflation Reduction Act, the Chips Act and the Infrastructure Act, which are about $970 billion of stimulus. Those are the largest stimuluses ever when there’s not a pandemic or a financial crisis ... And it’s at a time when you can have unions win a 25 per cent labour increase … These are very inflationary, whether it’s the fiscal stimulus or these wage increases.”
  • It all comes back to that word. Unexpectedly high growth, massive government stimulus and now two wars that threaten to spill out into broader crises — it all spells inflation. The flurry of hope in markets that Fed and the Bank of England have reached the top of their rate-raising cycles may yet prove premature
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