ts. Think Responsibly

The Continuing Cost Of Covid - How The...

David Reavill

August 13 2024 at 04:04 pm

Doctors operating on a Covid-19 patient. Those first few months of 2020 were dire times. A new, “novel” virus had been discovered in China months before; on January 20, 2020, the CDC confirmed that a strain of this “Novel Coronavirus” had been detected in Washington State. From there, things began to explode. Daily, the mortality rate among the Chinese began to climb while, at the same time, the number of newly infected here in the United States also accelerated. For months, no one seemed to know how to handle this increasing pandemic. Eventually, state and local officials would utilize the most draconian methods ever employed in peacetime, mandating mask-wearing and social distancing, and they would also shut down all “non-essential” businesses. The economic impact of all this was devastating, with many unsure where or when their next paycheck would come. Under President Donald Trump, the concept was initiated to send a “stimulus” check to all taxpayers. Labeled “Economic Impact Payments,” $1,200 in checks and bank deposits were made to each account, with slightly more for families with children. After the election of 2020, President Joe Biden continued the stimulus program by sending $600 and later an additional $1,400 to all taxpayers. Nearly 500 million checks and deposits were made to Americans nationwide, totaling almost $1 Billion. The good news: it worked! There can be no doubt that the “Stimulus” Program saved the country from an economic catastrophe. That dreadful second quarter of 2020 saw the economy (GDP) drop further and faster than at any time in our history, including even the Great Depression of the 1930s. Without Stimulus, we would have been in a world of hurt. But, as anyone familiar with finance will tell you, there’s no “free lunch,” to quote Milton Friedman. Unfortunately, no one will tell you that Stimulus created a debt that should be paid off someday. It’s become a game in Washington to see how our Government can cover up the debt created by Stimulus. Isn’t it ironic that the same Government that passed the “Federal Consumer Credit Protection Act” and created the “Consumer Protection Bureau” fails to inform us, the taxpayers, of our legal obligation to pay back the Stimulus? If a commercial bank, credit union, or other lending institution implied that any loan didn’t have to be repaid, they’d find themselves shut down in a hurry. Yet, that’s how the Stimulus Program is being portrayed. Look at any of the .gov websites, and you’ll find endless repetitions of how to get your check, but there is no notice that those checks came as a loan. Three ways Stimulus Impacts Us Today: Before we launch this part of our discussion, here is a caution. I’m not suggesting that the Stimulus was wholly wrong — far from it. It was a necessary part of our eventual recovery. (While I disagree with some policies that led to our economic woes). Now, let’s discuss where we are financially and how we can achieve a better financial future for our country. Here are three significant results of the Stimulus and how they impact us now. Dollar Devaluation The first and most obvious impact of the Stimulus was to devalue the dollar. M2, one of the most common measures of the supply of dollars, exploded after those Stimulus Checks hit everyone’s bank account. M2 is one of the economists’ favorite measures of the dollar. The M2 float (number of dollars in the economy) went from $15.6 Trillion (at the end of Q1 2020) to $21.7 Trillion (at the end of Q2 2022). That’s a 39% increase in money supply in just two years. The dollar would have declined by nearly 39% in a static economy with no growth. Fortunately, the United States economy entered a recovery mode, and that dire consequence did not happen. Nonetheless, the dollar exhibited the worst bout of devaluation we’ve experienced in 40 years. You undoubtedly read about it in the headlines and felt it in your wallet. Oh yes, what economists call dollar devaluation, you and I call inflation. (Things cost more because the dollars we use to purchase them are worth less.) Cash Flow The first thing that any credit counselor looks at is “cash flow,” which refers to the ability to pay your bills and maintain your standard of living. Today, America is not meeting that standard; we are borrowing money just to pay our bills. It is a red flag, and the Stimulus pushed us over that line. In Q1 2020, our national debt per person was $91K; today, it’s $104K, an increase of $13K for each of us. Not too bad, our growing economy reduced the impact of that Stimulus Package. However, we’re getting killed on the interest payments. Are you listening to the Federal Reserve Board? During these same four years, the Fed raised interest from a mere fraction to the current 5 1/2%, the most significant percentage hike in the Fed’s history. (The Fed has hiked to a much higher level, but never from near zero to 5.5%.) When computed for each of us, this means that our national interest expense has gone from $6.8K to $18.0K per year, which is nearly triple the interest expense of four years ago. As anyone who’s tried to pay off a high-interest credit card will tell you, it is this interest expense that is the most critical and difficult to surmount. As interest rates have increased, the interest on our national debt is now nearing $1 Trillion per year. While that’s good news for US Treasury Bondholders, it’s terrible news if we, as a country, want to get out of debt. These high-interest rates should bring an entirely new dimension to our national discussion on interest rates. Dependency Finally, we come to the saddest of all the measures of life after Covid: dependency. Dependency is admittedly a problematic measure to get your arms around. It includes a broad range of programs, including Social Security, Medicare, and Food Supplement (SNAP Program). This category also contains specific Unemployment Insurance. However, despite their amorphous nature, these social programs represent the largest expense for the Federal Government and are increasing dramatically. Government Transfer Payments have seen a 40% increase in the four years since Covid began. Of course, much of this increase is due to the Boomers’ retirement and social security payments. This post-World War II generation has created a demographic surge throughout their lives, and retirement will be no different. But beyond the Boomers is a generation of people who have been regretably affected by the changing economy brought about by COVID-19, and specifically the lockdown that accompanied it. Its the “non-essential” small businesses that shortsighted politicians shut down. Remember, small businesses hire more new employees than any other sector of the economy. Covid also created the new Work From Home (WFH) trend today. Meanwhile, while the WHF might have welcomed staying home to work via the internet, it left a gaping hole for the service workers who toil at the local coffee shop, cleaned the high-rise buildings, provided security, or drove the taxis and busses to transport those stay at home employees. In considerable measure, these less skilled workers are being forced onto government subsidies. If current trends continue, we will pay nearly $4 trillion in total Government-funded transfer payments next year. Conclusion We are a far different country than we were just four short years ago. The quicker we recognize that reality, the easier our transformation into this new economy will be. The first step is to recognize that “Stimulus” was not free. That its the private sector, not the government, that has made this country the strongest economy in the world. And it is free enterprise that will lead us back to prosperity. Epilogue Reading today’s financial press is like watching a debate between pessimists and optimists. To the pessimist, the glass is half empty, and the US Economy is about ready to fail. To the optimist, the glass is not only half full but nearly overflowing, with nothing but good times ahead. So who’s right? The answer is both. If we continue on the path we’re on now, the pessimist is likely to prevail. Endless free-spending by anyone, even America, is not sustainable. On the other hand, with just a few adjustments, we could be back on track as the world’s economic leader. To our political leaders, we say: stop this nonsense that all innovation must come from Washington. Reduce regulation and taxes, and let our native free-enterprise system flourish. Undoubtedly, America can retain its promise of prosperity for all, but economic freedom is critical. ** Follow me here at ThinkSpot for more stories from the ValueSide.

The Strange Ritual of the Federal Reserve ...

David Reavill

August 25 2024 at 02:46 pm

Hubert Horatio Humphrey This past Friday afternoon, Chairman of the Federal Reserve, Jerome Powell, took to the podium to deliver his annual address from the Jackson Hole, Wyoming Symposium. This, along with his biannual testimony before the US Congress, is one of his three or four most important speeches of the year. In what has become a ritual, the Chairman once again repeated his often-stated sentiment that: “Our objective has been to restore price stability while maintaining a strong labor market…” https://www.federalreserve.gov/newsevents/speech/powell20240823a.htm Just 14 words long, this preface will likely be skipped over by most people. Indeed, Wall Street is waiting to hear what Powell said concerning the direction of future interest rates, so they brush through this and move on to later in the speech. Spoiler alert: Powell indicates, at least according to Street’s thinking, that lower rates are ahead, perhaps as soon as their September meeting. But while traders and portfolio managers were anxious to set their next positions based on Powell’s remark, and so they’ve likely left our discussion, I encourage the rest of us to linger a moment on these 14 words because they hold the key to understanding not only the Federal Reserve but also the exercise of power in our federal system. Although he has spent almost all of his career in finance, Jerome Powell is a lawyer, having graduated from Georgetown University Law Center in 1979. True to form, Powell lays out almost all of his public addresses like a legal brief, first outlining the legal principles/precedence for his argument, then detailing the Fed’s actions in compliance with those principles, and finally ending with whether their actions were successful. On Friday, as he does almost ritualistically, Powell unveils the Fed’s “Dual Mandate” of stable prices and a strong labor market. It is no off-the-cuff comment by Powell but instead a careful recitation of the Federal Reserve’s primary responsibility as established by law. Just which law and how we got there is a fascinating story, one that reveals an ongoing conflict between the country’s elites and the general populace. The 1970s The origin of this ritually repeated statement (the Dual Mandate) began in the 1970s. It is a time that is most often compared to our current era. It was in the 70s that the term “Stagflation” was invented by economists to explain that dreadful combination of high unemployment and high inflation, something that economists did not believe could exist. Before the 70s, most economists thought that high unemployment, with its concomitant slow economist, would naturally lead to low, not high, inflation. But, as anyone who lived through that decade will attest, in the 70s, we achieved that dubious “goal.” Stagflation hit the heartland of America hard; stores and businesses declared bankruptcy, farms were foreclosed, and workers were laid off. Every day, Americans looked for someone to blame, and, at the time, a prime target was those “North East Elites,” a term I heard frequently. After all, the Northeast, New York, Boston, and Philadelphia held most of the banks and nearly all of the investment firms in the country. And it was those same financial houses that were foreclosing on the farms, calling the loans, and perceived as driving down the stock market (the decade of the 1970s saw one of the worst bear markets of all time). Wall Street wasn’t the only place crowded with elites; Washington had its fair share. Over in the Diplomatic Corps was one of the bluest of blue bloods, Henry Cabot Lodge. He was an heir to two of the most prominent New England families, the Cabots and the Lodges. He was the Grandson of a US Senator and the Great-Grandson of a Secretary of State. Lodge defined the political elite in America. You may be familiar with the famous joke, “The Cabots only speak to the Lodges, and the Lodges only speak to God.” At the same time Ambassador Lodge was serving in the State Department, the Vice President of the United States was none other than Nelson Rockefeller, grandson of the one-time richest man in American History, John D. Rockefeller. The elites had a lock on politics and finance in the 1970s. Hubert Horatio Humphrey On the other side of the political and financial spectrum came a populist politician with the euphonious name of Hubert Horatio Humphrey. As cheery and upbeat as his name, here was a true populist, a “man of the people.” In fact, he founded a party whose name encapsulated his constituents: the Democratic-Labor-Farmers Party of Minnesota. Although he began his career with all the fervor of a Washington outsider, three decades in Washington left their mark. As Vice President to Lyndon Johnson, Humphrey was a full-throated supporter of the increasingly unpopular Vietnam War. By the late 1970s, the old warhorse was ready to reestablish his populist credentials. Along with California Congressman August Hawkins, Humphrey proposed that the US Government should aim to provide for full employment and balanced economic growth. For over 30 years, the Government had been operating under the goals of the Employment Act of 1946. An act which, although it promoted full employment, said nothing about balanced growth. Humphrey proposed that the country's principal economic objective should be to slay the twin financial dragons of the 1970s: high unemployment and high inflation. Since its passage by the 95th Congress and signed into law by President Jimmy Carter on October 27, 1979, the Full Employment and Balanced Growth Act has been the law of the land. It applies not just to the Federal Reserve but to all Departments and Agencies of the US Government. From the US Treasury to the Internal Revenue Service to the Environmental Protection Agency, it aims to promote employment and stable prices. https://www.govtrack.us/congress/bills/95/hr50 Unfortunately, our elected representatives rarely speak about their responsibilities to uphold these twin goals. To his credit, Chairman Jerome Powell recites his responsibility with nearly every speech he delivers. It’s a ritual worth keeping. PS In a future article, we will explore the positives and limitations of the Full Employment and Balanced Growth Law. **Follow me here on ThinkSpot for more stories from the ValueSide.**

Revolutionizing Financial Operations: The Best...

creditcoopsoftware

September 05 2024 at 10:22 am

The credit cooperative sector in India has long been an essential pillar of the country's financial ecosystem, providing vital services to communities that are underserved by traditional banks. As the demand for seamless, efficient, and transparent operations in credit cooperatives increases, the role of cutting-edge software solutions becomes crucial. The Best Credit Cooperative Software Company in India is leading the charge in this technological revolution, helping cooperatives manage their operations with precision and agility. The Importance of Credit Cooperative Software Credit cooperative societies differ from traditional financial institutions in their structure and mission. They are designed to serve their members' financial needs through mutual cooperation, offering savings, loans, and other services that improve financial access. However, the manual or outdated systems that many cooperatives rely on can lead to inefficiencies, errors, and missed opportunities for growth. This is where the Latest Credit Cooperative Software plays a transformative role. Advanced software systems streamline every aspect of a cooperative’s operation—from managing member accounts to handling loans, generating reports, and maintaining regulatory compliance. With user-friendly interfaces and automation tools, the latest software ensures that cooperatives can focus more on serving their members rather than being bogged down by administrative burdens. Features of the Latest Credit Cooperative Software The Latest Credit Cooperative Software solutions in India come equipped with an array of innovative features that make them indispensable for modern cooperatives. These solutions not only optimize workflow but also enhance transparency, security, and efficiency. Some of the key features include: 1. Automated Loan Management: Efficient loan management is critical for credit cooperatives. The software enables the automation of the entire loan lifecycle, from application and approval to disbursement and repayment tracking. This reduces the risk of human error and ensures timely management of funds. 2. Advanced Member Management: Managing member information can be complex, especially in large cooperatives. The latest software offers comprehensive member management tools, allowing cooperatives to maintain accurate records, track contributions, and communicate effectively with members. 3. Secure Transaction Management: Security is paramount when dealing with financial transactions. The software incorporates robust security measures such as data encryption, multi-factor authentication, and regular backups to safeguard sensitive information. This ensures the integrity of financial transactions and protects against potential fraud. 4. Regulatory Compliance: Compliance with regulatory requirements is a top concern for cooperatives. The best credit cooperative software solutions come pre-built with compliance features that align with Indian financial regulations. This simplifies the auditing process and ensures that cooperatives remain compliant with local laws. 5. Real-time Reporting and Analytics: Financial reporting is essential for understanding the performance of a cooperative. With built-in reporting tools, the latest software generates real-time reports on key financial indicators, such as loan delinquency rates, cash flow, and member savings trends. These insights are vital for informed decision-making. 6. Cloud-Based Accessibility: The latest credit cooperative software offers cloud-based access, allowing cooperative employees and members to access data securely from anywhere. This feature is particularly valuable for organizations with multiple branches or remote operations, ensuring consistency and accuracy across locations. 7. Customizable Modules: No two credit cooperatives are the same, which is why the best software offers customizable modules. Whether a cooperative requires specific loan products, member types, or savings schemes, the software can be tailored to meet those needs, providing a more personalized experience. How the Best Credit Cooperative Software Company in India Stands Out The Best Credit Cooperative Software Company in India isn’t just about providing cutting-edge technology—it’s about understanding the unique challenges faced by credit cooperatives and delivering solutions that address those challenges head-on. Here are some of the reasons why this company stands out: 1. Proven Expertise: With years of experience in the financial software industry, this company has developed a deep understanding of the credit cooperative model. Their solutions are built to meet the specific needs of cooperatives, ensuring seamless integration and a smooth transition from outdated systems. 2. Innovative Solutions: As the financial landscape evolves, so does the technology offered by this company. Their focus on continuous innovation means that cooperatives are always equipped with the latest tools and features that improve operational efficiency and member satisfaction. 3. Dedicated Customer Support: Implementing new software can be a challenge, but the best software company provides excellent customer support. Their dedicated team of professionals offers comprehensive training, troubleshooting, and ongoing assistance to ensure that cooperatives maximize the benefits of the software. 4. Affordability and Scalability: For many cooperatives, budget constraints can be a concern when adopting new technology. The best software company offers affordable solutions that are scalable, meaning that cooperatives can start with the basics and expand functionality as needed without incurring excessive costs. 5. Client-Centric Approach: The company takes a client-first approach, ensuring that the software is tailored to the specific operational needs of each cooperative. From large urban cooperatives to smaller rural societies, the software can be customized to fit the scope and scale of the organization. The Impact of the Latest Credit Cooperative Software on Financial Inclusion Credit cooperatives are instrumental in promoting financial inclusion in India. By providing financial services to underserved communities, they enable individuals and small businesses to save, borrow, and invest in ways that improve their livelihoods. The Latest Credit Cooperative Software plays a crucial role in expanding this mission. With automation, secure transactions, and mobile accessibility, the software reduces the operational barriers that cooperatives face. This, in turn, allows them to focus on expanding their reach, providing more affordable loans, and empowering members to achieve financial stability. For cooperatives operating in rural or underserved areas, cloud-based solutions and mobile-friendly interfaces make it easier for them to engage with members who may not have easy access to a physical branch. Conclusion In a world where technology is driving transformation across industries, the credit cooperative sector in India cannot afford to be left behind. The Best Credit Cooperative Software Company in India offers the tools and solutions that cooperatives need to streamline their operations, improve member satisfaction, and contribute to the broader goal of financial inclusion. By adopting the Latest Credit Cooperative Software(https://creditcooperativesoftware.com/), cooperatives can enhance their operational efficiency, ensure compliance, and ultimately serve their members better. As technology continues to evolve, credit cooperatives equipped with the right software solutions will be at the forefront of driving positive change in India's financial landscape.

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