InvestMacro

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 1.21%, and the S&P500 Index (US500) closed higher by 0.99%. The NASDAQ Technology Index (US100) jumped by 0.63% on Thursday. ADP private sector employment data in the US pleased a job growth of 278,000 (higher than expected), but wage growth is gradually slowing down. With the number of new jobless claims up slightly last week, the labor market remains resilient, which may encourage the Fed to keep raising rates. The focus now shifts to the Labor Department’s unemployment report for May (Nonfarm Payrolls), which will be published today. The data will help determine whether the Fed will stick with an aggressive rate hike. The better the data comes out, the more likely a rate hike will be in June. A rate hike is positive for the dollar and negative for indices and gold, and vice versa.

Federal Reserve Bank of Philadelphia President Patrick Harker said the US Central Bank is close to the point where it can stop raising interest rates and move to hold them at current levels in an effort to lower inflation even further. The head of the Philadelphia Fed repeated comments yesterday that he favors not raising rates at the June meeting, even if officials then have to raise them again at later meetings.

Stock markets in Europe were mostly up Wednesday. German DAX (DE30) gained 1.21% yesterday, French CAC 40 (FR40) added 0.55%, Spanish IBEX 35 (ES35) increased by 1.54%, British FTSE 100 (UK100) gained 0.59% on the day.

The ECB’s May monetary policy report confirmed that the central bank remains concerned about the risks of rising inflation, and despite slowing inflationary pressures, it was deemed necessary to emphasize that rate hikes will continue in the future. The key challenge for the ECB is to properly calibrate monetary policy in order to return inflation to target levels in time without unduly harming the economy.

Crude oil prices jumped more than 3% on Thursday, offsetting losses of 7% from the previous three trading days, as oil traders expect OPEC+ to announce another production cut at its meeting this weekend. That was one reason oil prices rebounded later in the week, despite a depressing weekly report on oil supply and demand released by the US government.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 0.84% over the day, China’s FTSE China A50 (CHA50) added 0.42%, Hong Kong’s Hang Seng (HK50) ended Thursday down 0.10%, India’s NIFTY 50 (IND50) lost 0.25%, and Australia’s S&P/ASX 200 (AU200) ended the day with a 0.27% gain.

Most Asian stock markets rose on Friday amid optimism over the approval of a deal to raise the US debt ceiling and prevent a default, while Chinese markets are recovering from six-month lows amid renewed hopes for economic recovery in the country.

S&P 500 (F) (US500) 4,221.02 +41.19 (+0.99%)

Dow Jones (US30)33,061.57 +153.30 (+0.47%)

DAX (DE40) 15,853.66 +189.64 (+1.21%)

FTSE 100 (UK100) 7,490.27 +44.13 (+0.59%)

USD Index 103.56 -0.77 (-0.74%)

• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
• – US Unemployment Rate (m/m) at 15:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By Cressida Bowyer, University of Portsmouth; Keiron Roberts, University of Portsmouth, and Stephanie Northen, University of Portsmouth 

Recycling was once considered the obvious solution to the excessive amount of new (or virgin) plastic produced each year. This is no longer realistic. Global recycling capacity simply cannot keep up with the taking, making and wasting of natural resources.

Growing mountains of plastic waste are accumulating in the poorest countries as affluent nations such as the UK ship their recycling overseas. But some nations are importing far more plastic waste than they can possibly recycle.

The recycling process itself also creates problems. A new report by Greenpeace and the International Pollutants Elimination Network has revealed how plastics which are made with or come into contact with toxic chemicals, such as flame retardants, can contaminate the recycling process by spreading these toxins through subsequent batches of plastic waste. Another recent study showed that recycling facilities can release hundreds of tonnes of microplastics into the environment each year.

Only 6-9% of all plastic ever produced has been sent for recycling. Although plastic and other waste is collected for recycling in most countries, the amount of material that is remade into the same or similar products (what is called closed-loop recycling) is extremely low. Only 2% of plastic waste is recycled in a closed loop and not turned into something of lower quality, which is called downcycling. Recycling can not fully replace virgin material as it can only be recycled twice before losing necessary properties, and so most recycling results in a downgraded material that cannot be used for the same purpose.

A more sustainable approach would prioritise preventing plastic waste by taking action at earlier stages of a plastic product’s lifecycle: reducing how much plastic is ultimately made, reusing what exists and replacing plastic with alternative materials where appropriate.

Reduce

Manufacturers must stop making so much unnecessary plastic to reduce the amount entering the economy. There is no case for making plastics that are impossible to collect, reuse or recycle, or are toxic. Yet they are abundant: think multilayered sachets, thin films and wrappers. These should be phased out as a priority.

Global caps on plastic production could restrict its use to reusable products and packaging, reducing the pressure on recycling systems.

You can refuse single-use packaging when shopping if alternatives are available and affordable. Choose loose vegetables, or products wrapped in packaging that can be refilled.

Reuse

Using the plastic you already have for as long as possible reduces the amount of new products and packaging that need to be made and how much waste is ultimately sent for recycling.

Roughly 250 billion single-use coffee cups are used worldwide every year – a figure that could be slashed by governments setting national mandates for reusable cups and bottles. This might involve shops, cafés and other venues providing reusable packaging for any products they sell and ensuring each one is used, tracked, washed, returned and replenished for the next consumer cycle.

Substitute

Metals, glass, or paper can be used instead of plastic, but there is no universal sustainable alternative. The most appropriate material depends on the item’s use.

The environmental consequences of any material should be rigorously assessed across its entire life cycle – from production to use and disposal – to ensure it does more good than harm. And such assessments must consider all social, environmental and economic costs.

The true cost of making, distributing and disposing of plastic is estimated to be more than ten times greater than what the customer pays for the product. Including the hidden costs of environmental damage and human misery arising from pollution in the price of virgin plastic, by taxing manufacturers or retailers for instance, could boost the economic case for alternatives.

Recycling can still be useful

Not all plastics can be reused, especially medical devices. When all alternatives have been exhausted, recycling keeps material in the economy and temporarily delays the need for more virgin plastic. But the existence of recycling shouldn’t justify making more plastic.

Recycling must not pollute. Manufacturers should only make plastics which can be recycled via methods proven to be safe and clean, and ban toxic additives. Simple labelling can help consumers make informed decisions about how, where and what to either reuse or recycle, which would help prevent recycling loads becoming contaminated with non-recyclable waste and toxins.

Plastics sent for recycling should be treated in the most socially and environmentally responsible way. High-income countries which export waste to poorer countries for cheap recycling do so without guarantees that infrastructure exists to manage this waste where it ends up. The result is waste leaking into the environment, and toxic plastic blocking drainage channels and causing floods. Some of this is burned outdoors, which comes with its own risks to health and the environment. Banning or restricting exports would help.

Precarious workers in the informal waste sector collect, sort and sell recyclable materials and carry out 60% of global recycling. Waste reclaimers endure poor health and low pay but their extensive knowledge is invaluable and must be acknowledged. Policies to protect their rights and improve their livelihoods are needed.

Countries meeting in Paris for the second of five rounds of negotiations for an international treaty to end plastic pollution will discuss all areas of the plastic lifecycle – from the extraction of material to manufacturing, use and disposal. Banning unnecessary plastics, toxic additives and waste exports should be high on the agenda, along with schemes to encourage reuse and repair.

Don’t have time to read about climate change as much as you’d like?

Get a weekly roundup in your inbox instead. Every Wednesday, The Conversation’s environment editor writes Imagine, a short email that goes a little deeper into just one climate issue. Join the 10,000+ readers who’ve subscribed so far.

Cressida Bowyer, Senior Research Fellow and Deputy Director, Revolution Plastics, University of Portsmouth; Keiron Roberts, Senior Lecturer in Sustainability and the Built Environment, University of Portsmouth, and Stephanie Northen, Research Associate, Revolution Plastics, University of Portsmouth

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.41%, and the S&P 500 Index (US500) closed lower by 0.61%. The NASDAQ Technology Index (US100) was down by 0.63% on Wednesday. Yesterday the indices were under pressure from declines in consumer and technology stocks. There is also continued uncertainty in the vote on the debt ceiling bill. Most analysts anticipate approval of the bill, but the deadline is close. The US House of Representatives voted for a bill to suspend the debt ceiling late Wednesday night.

The Federal Reserve’s interest rate hike on June 14 may depend on Friday’s jobs report (Nonfarm Payrolls). The Fed tightening by reducing the balance sheet could cause liquidity after the debt ceiling deal, and higher rates could deprive the current rally in the S&P 500 (US500) of energy. On the other hand, confirmation that the labor market is exhaling could lower long-term market interest rates, helping to offset the Fed’s quantitative tightening and provide short-term support for the S&P 500 (US500) and growth stocks.

Shares of HP Inc (HPQ) fell more than 5% after posting mixed quarterly results as revenue fell short of expectations due to lower demand for PCs. NVIDIA Corporation (NVDA) fell more than 5%, while Intel Corporation (INTC) resisted the trend, rising nearly 5% as the chipmaker talked up prospects and received a vote of confidence from Nvidia. Nvidia’s CEO said yesterday that the company could buy chips from Intel. IBM plans to replace nearly 8,000 employees with AI. Most of it will be faced by office support workers, especially in the human resources sector. IBM also announced earlier this year that it would cut 3,900 jobs for more automation and cost-cutting measures.

Stock markets in Europe were mostly down Wednesday. Germany’s DAX (DE30) fell by 1.54% yesterday, France’s CAC 40 (FR40) lost 1.54%, Spain’s IBEX 35 (ES35) decreased by 1.54%, and the British FTSE 100 (UK100) ended the day down by 1.01%.

The latest inflation data showed that consumer prices in France fell from 5.9% to 5.1% y/y, in Italy, inflation fell from 8.2% to 7.6% y/y, and in Germany, CPI fell from 7.2% to 6.1% y/y. Today, the overall Eurozone figure will be released. The Eurozone inflation figure is expected to fall from 7.0% to 6.3% y/y, and the core indicator (which excludes food and energy prices) is expected to fall slightly from 5.6% to 5.5%. But that won’t stop the European Central Bank from raising rates in June.

Oil prices hit a one-month low on Wednesday after weak production data from China, the world’s largest oil importer, raised concerns about demand growth in the second half of the year. Oil prices have fallen more than 16% since the beginning of the year as China’s sluggish economic recovery and the Federal Reserve’s tightening of monetary policy weigh on demand prospects. At the same time, rising demand ahead of summer is not currently supporting prices in any way. Crude oil inventories will be released today, and there will be an OPEC+ meeting on June 4, where there may be surprises in the form of production cuts to support prices.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) shed by 1.41% over the day, China’s FTSE China A50 (CHA50) fell by 1.72%, Hong Kong’s Hang Seng (HK50) ended Wednesday down by 1.94%, India’s NIFTY 50 (IND50) lost 0.53%, and Australia’s S&P/ASX 200 (AU200) closed negative yesterday by 1.64%.

Australian stocks were supported today by stronger-than-expected first-quarter capital spending data. The reading underscores some strength in the Australian economy as it struggles with high inflation, rising rates and slowing growth. Strong economic data also encouraged Japanese stocks as capital spending rose more than expected in the first quarter, indicating a potentially higher revision to first-quarter economic growth data.

S&P 500 (F) (US500) 4,179.83 −25.69 (−0.61%)

Dow Jones (US30)32,908.27 −134.51 (−0.41%)

DAX (DE40) 15,664.02 −244.89 (−1.54%)

FTSE 100 (UK100) 7,446.14 −75.93 (−1.01%)

USD Index 104.23 +0.06 (+0.06%)

• – Japan Manufacturing PMI (m/m) at 02:50 (GMT+3);
• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 12:30 (GMT+3);
• – Eurozone ECB Monetary Policy Meeting Accounts at 14:30 (GMT+3);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Crude Oil Reserves (w/w) at 18:00 (GMT+3);
• – US FOMC Member Harker Speaks at 20:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

The Dow Jones index (US30) decreased by 0.15% at the close of the stock market yesterday, while the S&P 500 index (US500) closed at its opening price. The NASDAQ Technology Index (US100) was up 0.32% on Tuesday.

The leading Republican in Congress, Kevin McCarthy, on Tuesday urged his party to support a bipartisan deal to raise the $31.4 trillion US debt ceiling and avert a catastrophic default ahead of a procedural vote. Both Democratic President Joe Biden and House Speaker McCarthy predicted that they would get enough votes to pass the legislation by June 5. Despite the progress, several Republicans said they would resist the deal.

The news of the debt ceiling agreement still leaves uncertainty about the prospects for US creditworthiness. Analysts believe that despite positive progress toward a deal, there is a high probability that Fitch Ratings will downgrade the US credit rating. During the previous debt ceiling crisis in 2011, Standard & Poor’s rating agency downgraded US’s highest “AAA” rating one notch days after the debt ceiling agreement, citing insufficient steps to fix the country’s financial situation.

The US consumer confidence fell to a six-month low in May. The Conference Board consumer confidence index this month fell to 102.3, its lowest level since last November, from an upwardly revised 103.7 in April. Consumers were less optimistic about the labour market, with the share of those who think jobs are “plentiful” falling to its lowest level since April 2021 and the share of those who think jobs are “hard to get” rising to a six-month-high.

Stock markets in Europe were mostly down on Tuesday. Germany’s DAX (DE30) decreased by 0.27% yesterday, France’s CAC 40 (FR 40) lost 1.29% yesterday, Spain’s IBEX 35 (ES35) fell by 0.18%, and the British FTSE 100 (UK100) ended the day down 1.38%.

Spain’s inflation rate declined from 4.1% to 3.2% yearly. France and Italy will release inflation data today, followed by the overall Eurozone figure tomorrow. Inflationary pressures in the region are expected to continue to ease.

Oil fell 4% yesterday due to concerns over Fed action on rates and OPEC’s production decision. Crude oil prices fell amid growing speculation that the Federal Reserve will raise rates in June. But before the Fed meeting, OPEC+ countries will meet on June 4. Tensions between Saudi Arabia and Russia are rising as Moscow continues to pump huge amounts of cheaper oil into the market, undermining Riyadh’s efforts to maintain energy prices.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 0.30% on the day, China’s FTSE China A50 (CHA50) fell by 0.32%, Hong Kong’s Hang Seng (HK50) added 0.24% on Tuesday, India’s NIFTY 50 (IND50) increased by 0.19%, and Australia’s S&P/ASX 200 (AU200) was negative 0.11% on the day.

Activity in China’s manufacturing sector declined for the second month in a row in May, raising further questions about the country’s economic recovery. Weak demand and slowing capital investment put pressure on the country’s biggest economic engines. The manufacturing PMI fell to 48.8 from 51.4, a reading below 50 indicating contraction. The service sector remained above 50 but declined from 56.4 to 54.5 for the month. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indices fell 1% and 0.6%, respectively, after the news, with the blue-chip index reaching its lowest level in six months. It should be noted that China is also struggling with a resurgence of COVID-19 cases, with some officials warning that the number of cases could peak by the end of June.

In Australia, consumer prices rose much more than expected in April, prompting markets to consider a greater chance of further rate hikes. On an annualized basis, the CPI rose from 6.3% to 6.8%. Governor Lowe said Wednesday that Australia’s Central Bank will do all it can to get inflation under control, warning households to prepare for trouble ahead while risks of higher inflation persist. The RBA predicts that overall inflation will return to the top of the bank’s 2-3% target by mid-2025, which will be slower than in many other countries.

S&P 500 (F) (US500) 4,205.59 +0.14 (+0.03%)

Dow Jones (US30)33,042.85 −50.49 (−0.15%)

DAX (DE40) 15,908.91 −43.82 (−0.27%)

FTSE 100 (UK100) 7,522.07 −105.13 (−1.38%)

USD Index 104.07 −0.14 (−0.13%)

• – Australia RBA Governor Lowe Speaks at 02:00 (GMT+3);
• – Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
• – Japan Industrial Production (m/m) at 02:50 (GMT+3);
• – Japan Retail Sales (m/m) at 02:50 (GMT+3);
• – Australia Consumer Price Index (m/m) at 04:30 (GMT+3);
• – China Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – China non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
• – ECB Financial Stability Review at 11:00 (GMT+3);
• – German Consumer Price Index (m/m) at 15:00 (GMT+3);
• – Canada GDP (q/q) at 15:30 (GMT+3);
• – US FOMC Member Bowman Speaks at 15:50 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
• – Switzerland SNB Chairman Jordan Speaks 18:05 (GMT+3);
• – US FOMC Member Harker Speaks at 20:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

Famous investor Warren Buffett does not believe that Congress will be unable to raise the debt ceiling and the country will default. He compared the current standoff among lawmakers to the previous one, calling such a clash “an idiotic waste of time” and calling for a complete repeal of the borrowing limit. The CEO of Berkshire Hathaway (BRKb) said limiting the borrowing ceiling never made sense because the country’s creditworthiness is growing as it grows economically.

Cathie Wood, manager of the exchange-traded fund ARK Innovation (ARKK), said Monday evening that Nvidia Corporation (NVDA) is overvalued and that Tesla Inc (TSLA) could benefit much more from recent advances in artificial intelligence. In particular, electric car maker Tesla is the “most obvious” beneficiary of recent advances in artificial intelligence, Wood said, citing the firm’s pursuit of autonomous driving technology.

Stock markets in Europe traded flat Monday. Germany’s DAX (DE30) decreased by 0.20% yesterday, France’s CAC 40 (FR40) fell by 0.21% yesterday, Spain’s IBEX 35 (ES35) lost 0.12%, and the British FTSE 100 (UK100) was not trading yesterday.

Bank of America (BoA) is cautious about the outlook for the Euro Area. Europe’s economic data is getting progressively worse. Along with a possible reduction in risk from the debt ceiling, the situation could lead to an even stronger dollar and a lower euro in the short term.

European stocks declined in trading on Monday due to losses in technology companies and bank stocks. The STOXX 600 pan-European index closed down 0.1% after recording its strongest one-day gain in nearly two months on Friday.

Spanish Prime Minister Pedro Sanchez unexpectedly announced an early national election, and his main rival declared his goal of becoming the country’s next leader after leftist parties were defeated in regional elections.

The credit agency Standard and Poor’s notified France of a possible downgrade.

Oil prices rose in weakly volatile trading on Monday. But on Tuesday, oil started to decline again. Concerns about further interest rate hikes by the Federal Reserve and a slowdown in economic growth largely offset optimism about an increase in the US government debt ceiling. The main focus of oil traders now is the OPEC+ meeting on June 4.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 1.03%, China’s FTSE China A50 (CHA50) was 0.49% lower, Hong Kong’s Hang Seng (HK50) fell by 1.04% lower on Monday, India’s NIFTY 50 (IND50) gained 0.54%, and Australia’s S&P/ASX 200 (AU200) was 0.87% higher on the day.

Most Asian stock indices fell on Tuesday as optimism over a deal to raise the US debt ceiling was offset by fears of worsening relations between Beijing and Washington amid renewed trade and political sanctions disputes. China’s CSI 300 index fell to a five-month low after China rejected a request for a meeting between US Defense Secretary Lloyd Austin and Chinese Defense Minister Li Shanfu at a forum in Singapore later this week. The deterioration in relations between the two countries also comes amid waning optimism about China’s economic recovery this year, with attention now focused mainly on the May manufacturing and service sector activity figures due Wednesday.

S&P 500 (F) (US500) 4,205.45 0.0 (0.0%)

Dow Jones (US30)33,093.34 0 (0%)

DAX (DE40) 15,952.73 −31.24 (−0.20%)

FTSE 100 (UK100) 7,627.20 +56.33 (0.74%)

USD Index 104.28 +0.08 +0.07%

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By Bryan Keogh, The Conversation and Matt Williams, The Conversation 

President Joe Biden and House Speaker Kevin McCarthy on May 27, 2023, agreed in principle to a tentative deal that would raise the debt ceiling while capping some federal spending at current levels.

The accord, if approved by both houses of Congress, would avert an unprecedented default that threatens to derail the economy and put hundreds of thousands of Americans out of work. Negotiators agreed to lift the ceiling for two years – past the 2024 presidential election – while putting a temporary cap on most nondefense spending at 2023 levels. It would also reduce planned funding for the IRS, impose new work requirements on some people who receive benefits from the federal program known as SNAP and claw back billions of unspent funds from pandemic relief programs.

The Conversation has been covering the debt ceiling drama since January, when Republicans took over the House, raising fears that brinkmanship would lead to an economic catastrophe. Here are five articles from our archive to help you make sense of a couple key aspects of the tentative deal and provide context on the debt ceiling fight.

1. What is the debt ceiling

First some basics. The debt ceiling was established by the U.S. Congress in 1917. It limits the total national debt by setting out a maximum amount that the government can borrow.

Steven Pressman, an economist at The New School, explained the original aim was “to let then-President Woodrow Wilson spend the money he deemed necessary to fight World War I without waiting for often-absent lawmakers to act. Congress, however, did not want to write the president a blank check, so it limited borrowing to US$11.5 billion and required legislation for any increase.”

Since then, the debt ceiling has been increased dozens of times. It currently stands at $31.4 trillion – a figure reached in January. The Treasury has taken “extraordinary measures” to enable the government to keep borrowing without breaching the ceiling. Such measures, however, can only be temporary – meaning at one point Congress will have to act to lift the ceiling or default on its debt obligations, which is expected to happen by June 5, according to Treasury Secretary Janet Yellen, if the deal isn’t approved in time.

2. The trouble with work requirements

One of the biggest sticking points toward the end of negotiations was work requirements for recipients of government aid. The tentative deal would raise the age for existing work requirements from 49 to 54 years on able-bodied adults who have no children. This is less than what Republicans had earlier sought. There are exceptions for veterans and the homeless.

But if the goal is to help people find jobs and make more money, work requirements don’t actually do the job, wrote Kelsey Pukelis, a doctoral student in public policy at Harvard Kennedy School who has studied the issue. Rather, they make it much harder for people who need food aid to get it.

“Our findings do suggest that work requirements restrain federal spending by reducing the number of people getting SNAP benefits,” she explained. “But our work also indicates that in today’s context, these savings would be at the expense of already vulnerable people facing additional economic hardship at a time when a new recession could be around the corner.”

3. IRS funding takes a hit

The deal also takes aim at a big boost in spending Congress gave the Internal Revenue Service beginning in 2022 to crack down on tax cheats and upgrade its software. Democrats agreed to a Republican demand to cut the extra IRS funding from $80 billion to $70 billion.

Back in August 2022, Nirupama Rao, an economist at the University of Michigan, explained why Democrats included all that funding in their Inflation Reduction Act and how it would help the IRS collect more tax revenue, since the agency does not fully collect all the taxes that are owed.

“The main target of this spending is the so-called tax gap, which is currently estimated at about $600 billion a year,” she wrote. “While an $80 billion investment that returns $204 billion already sounds pretty impressive, it may be possible that it’s a conservative estimate.”

4. The hard road to compromise

It took a long time for Republicans and Democrats to get the current agreement.

Yellen warned in January that the government was about to hit the debt limit and would be unable to pay all its bills by May or June. McCarthy and House Republicans, who hold a razor-thin majority, appeared unwilling to raise the debt ceiling unless they could extract deep spending cuts. Meanwhile, Biden refused to negotiate, insisting on a clean debt ceiling bill. Both of those positions were dropped during negotiations.

Why did it take so long for them to reach a compromise?

Blame political trends that have been accelerating for decades, explained Laurel Harbridge-Yong, a specialist in partisan conflict and the lack of bipartisan agreement in American politics at Northwestern University. Many Republicans come from very safe districts, which means their primary against other conservatives is more important than the general election. This makes it more important to stand firm and fight until the bitter end.

“So you now have many Republicans who are more willing to fight quite hard against the Democrats because they don’t want to give a win to Biden,” she wrote. “Democrats are also resistant to compromising, both because they don’t want to gut programs that they put in place and also because they don’t want to make this look like a win for Republicans, who were able to play chicken and get what they wanted.”

5. Latest in a long line of fiscal crises

This was hardly the first fiscal crisis the U.S. government has faced. In fact, there have been many – including 22 government shutdowns since just 1976.

Raymond Scheppach, a professor of public policy at University of Virginia, offered a brief history of recent crises and the damage they’ve caused – and why a default would be far more consequential than past crises.

“While these were very disruptive and damaged the economy and employment, they pale in comparison to the potential effects of failing to lift the debt ceiling, which could be catastrophic,” he wrote. “It could bring down the entire international financial system. This in turn could devastate the world gross domestic product and create mass unemployment.”

Editor’s note: This story is a roundup of articles from The Conversation’s archives. Portions of this article originally appeared in a previous article published on May 2, 2023.

About the Author:

Bryan Keogh, Deputy Managing Editor and Senior Editor of Economy and Business, The Conversation and Matt Williams, Senior Breaking News and International Editor, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By George Prior

The US economy and the nation’s credibility have already been damaged by the debt ceiling crisis even if a deal is struck next week, and “reform is now urgently required”, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

Nigel Green of deVere is speaking out following reports that Republican and White House officials are edging closer to an agreement to raise the debt limit and cap federal spending for two years.

He comments: “Tuesday is being reported as the likely day for a House vote on raising the US debt ceiling.

“Although this is not definite, and it might come right down to the wire and happen just hours before Treasury Secretary Janet Yellen says her department could run out of money.”

Regardless of whether a deal is done, and a default is avoided, which is the hope, the “US economy and the nation’s credibility have already been damaged,” says Nigel Green.

“This is evidenced by Fitch, a credit rating agency, late Wednesday putting the US government’s AAA debt rating on ‘negative watch’ as a result of the political brinkmanship between the White House and Congress over raising the debt ceiling.”

He continues: “Using the country’s debt as a political weapon, undermines confidence of investors in the US government amid concerns about the government’s ability to properly manage its finances.

“This loss of confidence will mean that it becomes more difficult for the US government to borrow money in the future, which could lead to higher interest rates and weaker economic growth.

“The debt ceiling drama also erodes some of the current global reserve currency’s credibility and reputation as a ‘safety asset’, which could have far-reaching repercussions for the US.”

The deVere CEO also recently argued that the debt ceiling crisis was the “ultimate gift” for America’s major geopolitical rival, China, which is seeking to promote the internationalisation of its own currency and to position itself as a more stable and attractive investment option, in order to attract more international investment and capital inflows.

“Whatever happens in debt ceiling talks this week between Democrats and Republicans, China’s massive PR machine is already spinning the narrative that the US is a declining power,” he noted.

With talks on a knife edge to contain this crisis, Nigel Green says that should this current situation be resolved, reform is “urgently required.”

He says: “I’m in favour of debt ceiling reforms that take away the threat of a US government default and all the implications of that, and reforms that make lawmakers in Washington truly accountable by automatically triggering spending cuts should the ceiling be reached.”

The deVere CEO and founder concludes: “We hope and expect a deal to be done to avoid a default. But it should never have got to this stage in the first place, as damage has already been done to US economic credibility.

“This must serve as a catalyst for reform.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By George Prior 

The rising cost of living, economic uncertainty, and geopolitical issues have driven-up demand for financial advice by 21.2% over the last year, according to one of the world’s largest independent financial advisory, asset management and fintech organizations.

As the figures from deVere Group, which are based on enquiries from new and existing clients, are released, the company’s Regional Director shares questions you should ask when seeking a financial advisor.

Of the jump in demand, James Green comments: “As these findings underscore, more and more people are recognising the value of independent advice to secure their long-term financial goals.

“The overwhelming majority of new enquiries, our consultants report, are fuelled by concerns over the rising cost of living, economic uncertainty, and/or geopolitical issues.”

He continues: “Although it now seems to be easing somewhat, the cost-of-living is still rising.

“Last year’s cost-of-living crisis brought into sharp focus the need for people to manage their finances effectively.

“With a growing number struggling to successfully balance their income with expenses, save for goals such as homeownership, education, investments or retirement, or deal with rising debt burdens, they sensibly sought professional advice.”

Economic uncertainties have also acted as a catalyst. “Volatility in and disparities between stock markets and bond markets, the looming threats of a recession, longer-term inflation issues, and interest rate agendas, have prompted a growing number of individuals to better understand the market conditions, evaluate their investment portfolios, and make informed decisions about their personal financial situation,” notes James Green.

In addition, geopolitical issues, such as the US debt ceiling and possible default crisis, Brexit, the war in Ukraine, and rising tensions between China and the US, among others, have played their part.

“Major geopolitical matters such as these both directly and indirectly affect investment portfolios. As such they can knock you off track, financially.  It’s critical to consistently review and, where necessary, adapt financial strategies to the changing economic landscape.”

The deVere Director also says that technology is a likely contributing factor to the significant surge in demand for financial advice as it becomes more accessible to a broader audience.

“Fintech apps, online platforms, and other financial planning tools have made it easier for individuals to connect with advisors and receive guidance remotely. We believe this increased accessibility has contributed to the growing demand for financial advice over the last year.”

With demand jumping by almost a quarter in just 12 months, James Green says there are certain questions you should ask when looking to work with a new financial advisor.

Here’s what you should ask:

Is your company authorised to give financial advice by the appropriate regulatory authority?

“All advice should be completed by a company and an individual registered with the jurisdiction’s appropriate authority. This can be checked immediately on that body’s website.”

Does your company have a global presence?

“It makes sense to work with a company that’s located worldwide to make sure you receive continuity of service should you ever relocate. If long term service is required be sure to check the company has offices in your potential future destinations. The company should also be regulated in all the markets in which it operates where required.”

Do you have more than one option for the financial advice given?

“An independent advisory firm should be able to offer a range of trust services, product services and investment options. Ask them to show you several different options to give you peace of mind when agreeing to the advice.”

How long has your company been in operation?

“You should choose a company that has been operating in the marketplace for more than five years. This will provide a more accurate, longer-term gauge of the firm’s quality of advice, service and compliance history.

What is the total value of your company’s assets under management?

“Assets under management that total in excess of $10bn would suggest some degree of critical mass in the industry, a significant share of the market, longevity in the industry and a robust organisational structure.”

Do you offer full disclosure?

“All negotiations should be upfront and transparent from the start. Any agreements you enter into should disclose how charges are made, how much will be charged, service expectations and levels of protection.”

He adds that you must also be able to “build rapport and trust to successfully forge a long-term relationship with your advisor.”

James Green concludes: “Soaring demand for advice must be championed across the board as it helps people to make better financial decisions, improves their financial literacy, and gives them the best chance of achieving their goals and building a more secure financial future.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.