Martin Luther King Jr.’s Call for Peace

Answering the Kennedys’ Call

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Daily Kos

Martin Luther King, Jr. was assassinated on April 4, 1968, and his loss is felt even more than 50 years later as we continue to fight wars both foreign and domestic. He was organizing a march on Washington when he was killed. Who knows what might its effect have been on the Vietnam War if he had lived and mobilized America to end the war sooner?

King called it the Poor People’s Campaign, said a Daily Kos commentator on Monday’s Martin Luther King, Jr. Day. He wanted to dramatize the suffering of the nation’s poor by bringing them to the capital. Poor people would live together on the National Mall – the long strip of land between the U.S. Capitol and the Lincoln Memorial – and engage in widespread civil disobedience. King wanted to force the federal government to deal with poverty.

MLK gave a speech on 4 April, 1967 to over 3,000 at New York’s Riverside Church that is memorialized at Stanford’s Martin Luther King, Jr. Research and Education Institute. The speech was drafted from a collection of volunteers, including Spelman professor Vincent Harding and Wesleyan professor John Maguire. King’s address emphasized his responsibility to the American people and explained that conversations with young black men in the ghettos reinforced his own commitment to nonviolence.

“There is at the outset a very obvious and almost facile connection between the war in Vietnam and the struggle I and others have been waging in America,” said MLK. “A few years ago there was a shining moment in that struggle. It seemed as if there was a real promise of hope for the poor, both black and white, through the poverty program. There were experiments, hopes, new beginnings. Then came the buildup in Vietnam, and I watched this program broken and eviscerated as if it were some idle political plaything on a society gone mad on war. And I knew that America would never invest the necessary funds or energies in rehabilitation of its poor so long as adventures like Vietnam continued to draw men and skills and money like some demonic, destructive suction tube. So I was increasingly compelled to see the war as an enemy of the poor and to attack it as such….”

The TET Offensive of January 30, 1968 by the Vietcong had just happened, which made Americans first realize that we weren’t winning the Vietnam War. Robert Kennedy, then campaigning in Indianapolis, gave an impromptu speech on learning of his death:

“What we need in the United States is not division; what we need in the United States is not hatred; what we need in the United States is not violence and lawlessness, but is love, and wisdom, and compassion toward one another, and a feeling of justice toward those who still suffer within our country, whether they be white or whether they be black.

So I ask you tonight to return home, to say a prayer for the family of Martin Luther King — yeah, it’s true — but more importantly to say a prayer for our own country, which all of us love — a prayer for understanding and that compassion of which I spoke.”

Robert Kennedy was assassinated two months later on June 5, 1968, just after he was declared the winner in the South Dakota and California presidential primary of the 1968 election. It looked like he would ride the Kennedy tide to become President, instead of Richard Nixon, who managed to prolong the war until 1974 and his impeachment.

These were our visionary leaders of that time that we should remember for what they stood for—that one day we may realize their hope for a peaceful America.

Harlan Green © 2019

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Retail Sales Strengthen Q4 Growth

The Mortgage Corner

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FRED

It looks like consumers came through during the holidays, as retail sales jumped 0.3 percent in December and are up 3.5 percent from a year ago, per the above FRED (St. Louis Fed) graph.

It might be enough to get Q4 GDP back to a 2 percent growth rate, from predictions as low as 0.5-1.5 percent from the Atlanta Federal Reserve.

And now that the Phase I China Trade Agreement is signed, the financial markets should stabilize. But that won’t bring back economic growth in this new year, as much of the damage from the 2-year tariff wars has been done, especially in so-called capital expenditures, the seed-corn of future growth in private-sector companies.

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FRED

The FRED graph shows how capex spending in plants and equipment soared after the 2007 Great Recession, then leveled to around 5 percent annual increases until 2016, when it actually declined. It picked up again in 2017-18 before beginning its current decline to a 2.8 percent annual increase in Q3 2019.

And there is still real damage to growth coming from the continuing trade wars. The NYTimes and others have documented ongoing damage to the same Midwest states that elected Trump—especially in Wisconsin.

Wisconsin will wind up losing 37,000 jobs because of Trump’s trade war, according to the pro-trade group Tariffs Hurt the Heartland, while the state’s businesses and residents have already paid $598 million in higher costs for goods and services because of U.S. tariffs, per a Huffington Post article.

This is while “Railroads and trucking companies have been cutting jobs, and consumers—at least in the parts of the country most affected by the trade disputes—maybe pulling back as well,” said a recent NYTimes article. “Freight volumes in 2019 had the largest decline since the Great Depression, and transportation and warehouse companies have cut more than 10,000 jobs since December.”

That means it will be up to consumers and the retail sector to maintain U.S. economic growth at its current level. But that means no further declines in capex spending.

And here’s another thought. What if Republicans hadn’t made the draconian 2017 tax cuts to corporate profits that has now created a $1 trillion budget deficit? What if they had instead voted to save those tax revenues to begin reconstructing our ageing infrastructure, or for education, or environmental protection, or more research?

Then we wouldn’t need to have this conversation about declining growth.

Harlan Green © 2020

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Housing Construction at 13-Year High

The Mortgage Corner

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Wrightson.com

U.S. homebuilding surged to a 13-year high in December as activity increased across the board, suggesting the housing market recovery was back on track amid low mortgage rates, and could help support the longest economic expansion on record.

Total housing starts increased 16.9 percent in December to a seasonally adjusted annual rate of 1.61 million units, according to a report from the U.S. Housing and Urban Development and Commerce Department. This is the highest total since 2006.

The December reading of 1.61 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts increased 11.2 percent to a 1.06 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 29.8 percent to a 553,000 pace.

Total housing starts for 2019 were 1.29 million, a 3.2 percent gain over the 1.25 total from 2018. Single-family starts in 2019 totaled 888,200, up 1.4 percent from the previous year. Multifamily starts in 2019 totaled 401,600, up 7.3 percent from the previous year.

“The solid housing production numbers are in line with strong builder sentiment, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde.

“The year ended on a high note with solid gains in single-family and multifamily production,” said Danushka Nanayakkara-Skillington, NAHB’s Assistant Vice President of Forecasting and Analysis. “And while the December estimates will likely be revised down, the trend moving forward is still positive.”

Overall permits, which are a harbinger of future housing production, decreased 3.9 percent to a 1.42-million unit annualized rate in December. Single-family permits decreased 0.5 percent to a 916,000 rate while multifamily permits also fell 9.6 percent to a 500,000 pace.

The lower permit total is why the starts number may come down next month, as it is being viewed as an outlier due to warmer weather in December.

Harlan Green © 2020

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What Is American Socialism?

Financial FAQs

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What is American Socialism that candidate Bernie Sanders has talked about ever since he has been running for President? In fact, our one and only example of something that represents any definition of Socialism and concerted government planning benefiting all Americans was President Roosevelt’s New Deal.

But there has never been any actual American government ownership of businesses and its profits that is Socialism spelled with a capital ‘S’. Rather, it has been the taxation of private businesses and individual incomes that have financed government programs and investments.

New Deal-type programs were needed because we were living through the Great Depression with 25 percent of Americans unemployed that required government planning and investments to bring the U.S. economy back to life; which also enabled the U.S. to win World War II.

There has never been American Socialism or socialist programs as defined by Marx-Engels’ classical definition that communist countries have espoused; that have worked for a time in dictatorships by a wealthy elite such as rule China, North Korea and Russia.

Why did the New Deal work so well? By directing public investment in both infrastructure and the American people while building up an industrial base that could quickly convert to a war footing by converting automobile and aircraft factories to tank and military aircraft factories in 1941.

The investment in people was firstly creating social security, labor union legislation, Workman’s Compensation and other labor protections to support American workers, while paying Americans to keep working in such as planting trees, building dams, power grids, post offices, and all the public infrastructure we needed to boost the productivity of our economy.

The Roosevelt administration even created the Home Owners Loan Corporation (HOLC) to purchase and refinance more than one million delinquent home mortgages to keep homeowners who had lost jobs in their homes until the Depression was over.

Have we seen any such programs created today that helped US out of the Great Recession and the busted housing bubble? There were one-time spending boosts to public spending and the TARP bank bailout in 2007-08, but no new HOLC program to purchase and refinance delinquent loans that kept homeowners in their homes, which would have mitigated effects of the Great Recession and the tremendous losses for homeowners.

Yet even today, die-hard Republicans (and President Trump) call Bernie’s socialism no different than China’s or North Korea’s, or even Russia’s; where Russia is ‘owned’ by a very wealthy elite controlled by Putin and his oligarchs.

The New Deal was working so well by 1937 that Republicans gained a majority in congress, and convinced Roosevelt to begin to pay back the public debt that had boosted growth. But he had to reverse course in 1938 when the U.S. plunged back into the depression that lasted a total of 10 years, hence came to be called the Great Depression for its repeat performance.

The only reason the Great Recession didn’t become another Great Depression was a proactive Federal Reserve that printed $billions when it realized government aid and action was necessary to fill the gap vacated by private business.

Why is a new New Deal necessary today? We are ignoring very real crises that could precipitate another Great Depression—maybe not this year or next. One such is looming Climate Change, or Global Warming, that could even create another World War says the U.S. Pentagon in several congressionally-mandated reports, as increasing droughts and rising oceans begin to drown coastal cities and even countries.

Professor James Livingston, a Rutgers University historian, has highlighted the excesses in capitalism responsible for the many post- World War II recessions we have had to endure (five just since 1980) in a NYTimes Op-ed.

It’s the decline of private investment over the past century in anything that continues to grow the American economy for Americans. Corporations instead began to pay themselves a larger share of their profits in stock buybacks and higher CEO and executive salaries.

“So corporate profits do not drive economic growth — they’re just restless sums of surplus capital, ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.”

In the words of columnists Nicholas Kristoff and wife Sheryl Wudunn via a NYTimes’ Op-ed describing their new book, Tightrope, a chilling portrait of the decline of Kristoff’s tiny rural Oregon home town since the Great Recession, “First, well-paying jobs disappeared, partly because of technology and globalization but also because of political pressure on unions and a general redistribution of power toward the wealthy and corporations.”

Bernie Sanders doesn’t have to call his election platform Socialism, since the New Deal was not really a lesson in socialism, but how governments should work for all Americans in a capitalist, private-ownership economy.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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December Job Formation Slipping

Popular Economics Weekly

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MarketWatch

This MarketWatch graph gives an instant picture of December payroll formation. The consumer-driven service sector is booming with more than 154,000 nonfarm payroll jobs created in December, but 19,000 jobs were lost in the Mining and Manufacturing sectors. Average hourly pay growth is slowing as well.

This is worrisome in the sense that plenty of lower-paying jobs are being created in Construction, Retail and Wholesale Trade, Transportation, Professional Services, Education/Health, and Leisure activities; hence the record low unemployment rate; but higher-paying job losses for blue collar workers (-19,000) brought the net job gains down to 145,000.

The Labor Department also reported, “In 2019, payroll employment growth totaled 2.1 million, compared with a gain of 2.7 million in 2018. Incorporating revisions for October and November, which decreased payrolls by 14,000, monthly job gains averaged 184,000 over the past 3 months.”

MarketWatch’s Jeffry Bartash conjectured that skilled workers are so hard to find that companies are afraid to layoff anyone in case the economy does speed up. Hence the job growth is in services, rather than manufactured things made by those blue collar workers.

We now have to look for signs that a signed Phase I tariff agreement with China can keep this economy growing. Estimates for Q4 GDP economic growth are still hovering around just one percent, because companies are not investing in capital investments for future growth. And so manufactured exports that were supposed to expand due to the various trade agreements are also declining.

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In fact, this St Louis Federal Reserve-generated graph since 1994 for nondefense capital orders of manufacturing goods excluding aircraft shows that so-called capex expenditure growth was 10 percent during boom periods (Gray bars portray 2001 and 2007-09 recessions). But such investments are currently contracting at 1 percent, not a good sign for future growth.

The growth rate was last at 10 percent from 2010-12 due to a boost in government spending that brought us out of the Great Recession, but Tea Party-led Republicans then decreed spending caps and even a 2013 government shutdown that has limited public investments since then.

Private sector corporations would rather use their record profits from the Great Recession recovery to buy back stock and enhance CEO salaries, as I have been saying, so there has been little investment in public works—like infrastructure, education, the environment, and Research & Development, all spending that would restore our flagging labor productivity.  Hence annual economic growth has slowed to the current crawl of 2 percent since then.

And Iraq is now asking U.S. soldiers to leave Iraq because the U.S. Iraqi Prime Minister Adel Abdul-Mahdi in a late Thursday night phone call to Secretary of State Mike Pompeo also said, “American forces had entered Iraq and drones are flying in its airspace without permission from Iraqi authorities, and this was a violation of the bilateral agreements.”

War is a great distracter from real problems that only better economic growth can solve. How can such hostile behavior help to keep any economy growing, much less ours? That is the question yet to be answered.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Why Irrational Exuberance In A Year of Living Dangerously?

Financial FAQs

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Wrightson.com

We are now living in a much more dangerous world, because there is the possibility of war in the Middle East that is accompanying the various trade wars waged by the “Make America Great” White House.

In fact, it may have already begun with the “revenge” missile attacks by Iran against two Iraqi military bases housing U.S. personnel—though no casualties were reported. My wonder is that stocks are rallying on the news, with the DOW Jones up 200 points at this writing. Have stockholders forgotten the irrational exuberance reigning during Fed Chairman Greenspan’s tenure in the last decade?

It was such that Greenspan, et. al., raised the Fed’s interest rates 16 times (a total of 4 percent) over 2 years, which ultimately led to a busted housing bubble and the 2017-19 Great Recession that hasn’t been a full recovery for the majority of Americans.

In fact, median household incomes are still at 1970’s levels when inflation is subtracted, because most of the growth has been in stocks owned by just 50 percent of households, not with the wages and salaries of working folk. Hence the record income inequality that isn’t getting better, even at full employment.

And what if stocks plunge again as during the Great Recession that lost an estimated $9 trillion in value, with housing values also declining almost as much (the mainstay of middle class wealth)?

Greenspan had held rates too low for too long to finance the Bush/Cheney Iraq and Afghanistan occupations while cutting taxes at the same time, resulting in rising inflation and the largest federal budget deficit of the time.

In fact, we seem to be at the beginning of another period of irrational exuberance. The Fed dropped interest rates three times last year to boost slowing economic growth.

Manufacturing activity has been declining for the last five months, per Reuter’s Wrightson ISM Manufacturing Index graph above, mainly due to the various tariff hikes that bumped up prices on European and Chinese imports.

The service industries have been declining from a higher level to the current 55 percent, reflected in the latest ISM non-manufacturing survey (also see graph, where a 50 percent result of those surveyed means breakeven growth).

“The upside surprise (of non-manufacturing survey) was almost entirely due to the subjective general business activity index, which rebounded by nearly six points to 57.2,” said Reuters.  “The employment and new orders indexes both fell.  The drop-off in employment was minimal (down 0.3 to 55.2), but the orders index fell off noticeably (down 2.2 points to 54.9, versus an annual average of 57.5). ”

Also important is the effect on world oil prices and economic growth in general, as I said in my last column, since the only reason the U.S. economy is continuing to grow is the very low inflation coupled with very low, recession-level interest rates. And that can’t be maintained if oil prices spike for some reason.

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FRED.gov

We are skating on thin ice, economically, as I said, even if oil prices and inflation don’t spike as they did during the early and mid-2000s. Oil may not be as important, but 39.7 million Americans still live at or below the U.S. poverty level, which is $21,300 for a family of three in 2017, per the U.S. Census Bureau, and median household incomes after inflation are not improving.

So the real question is why on earth did the U.S. kill Iran’s leading general and several Iraqi militia commanders at a time of recovery from the Great Recession, slowing worldwide growth, amid growing geopolitical uncertainty?

It has to be another form of irrational exuberance held by certain parties that believe this will make America Great Again, but without the friends and alliances that in fact made America great until now.

Harlan Green © 2019

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2020—A Year of Living Dangerously

Popular Economics Weekly

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FRED.gov

There is plenty of speculation on the effects of killing Iran’s Quds Force General Qassem Suleimani. Of course the first question is how Iran will retaliate? But terrorist attacks by its proxies, such as by the Iraqi militias that were bombed by the U.S., should be the least of our worries.

More important is the effect on world oil prices and economic growth in general, since the only reason the U.S. economy is continuing to grow is the very low inflation coupled with very low, recession level interest rates. And that can’t be maintained if oil prices spike for some reason.

I say recession-level rates, since current interest rates were last this low during the Great Recession. It’s one reason the Federal Reserve had to lower interest rates three times last year. Otherwise the U.S. would already be in recession territory, since the manufacturing component has been shrinking for the past 4 months, according to the ISM’s Manufacturing survey.

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Wrightson.com

We are skating on thin ice, economically speaking, since there were dangerous signals in 2018 when the Fed was raising interest rates to slow down incipient inflation and had to reverse course. The stock market plunged, because money was no longer cheap, and it raised fears of an oncoming recession.

So the unique combination of low rates plus low inflation has kept the U.S. growing in the 11th year of this recovery from the Great Recession, which is the longest post—WWII recovery on record.

But low inflation cannot last forever, as past history has shown. The question may not be skyrocketing oil prices, since the U.S. in now domestically producing more than 7 million barrels per day. But economic growth is already slowing with the tariff wars that have cut foreign trading by almost 25 percent, the UK’s Brexit battle, and now a possible Middle East war. Iran has many ways to create more trouble.

Texas intermediate crude prices per barrel stayed in the $100 per barrel range from 2011 to 2015, per the FRED graph, before coming down to the $50-$60 range in 2015. It was a major reason economic growth hasn’t risen above 2 percent this decade.

Then why has the U.S. been killing Iran’s leading general and Iraqi militia commanders in the recent drone attacks? Reuters is reporting that Iran-backed militias had already been planning attacks on U.S. installations and civilians with advanced weaponry brought in from Iran.

So a new Middle East war may have already begun.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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