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Intriguing Predictions On Trump’s Plan For Federal Reserve

Via Birch Gold Group,

Donald Trump is preparing for his entrance to the White House, and a big part of that process involves selecting individuals to fill top-level appointments in his administration. Trump’s picks so far are already garnering a lot of attention, but his choices for appointments relating to the economy could cause the biggest stir of all.

As Trump and his new appointments rise to power, the Federal Reserve could be targeted for overdue changes and reforms. Let’s take a look at how the Trump administration may change the Fed.

Stripping the Fed’s Independence

With the exception of a couple isolated periods in U.S. history, the Federal Reserve has operated as an independent entity, with practically zero accountability to any branch of the U.S. Government. As a result, the Fed maintains the ability to manage and manipulate the economy without the fear of political repercussions or punishment from government officials.

If you’re wondering whether or not that kind of autonomy is a good thing, just take a look at the treacherous boom-and-bust cycle our economy is currently stuck in.

But there’s one loophole that could rain on the Fed’s party. According to Narayana Kocherlakota, there’s no law on the books that protects the Fed’s independence; the broad freedom assumed by the Fed over the past several decades relies solely on the president’s discretion.

It’s no secret that Trump has a bone to pick with the Fed, so he could be the first president in years to strip away its independence.

Plus, it speaks volumes that just days before the election, Fed chair Janet Yellen started to publicly argue the importance of an independent Fed.

Two Crucial Seats on the Fed’s Board of Governors

For over a year, two seats on the Federal Reserve’s Board of Governors have remained empty. Discord between Obama and federal legislators kept them unfilled. But with Republicans now holding control of both legislative branches as well as the White House, we can expect those appointments to finally be made.

Trump’s picks for those seats will most likely be significantly different than Obama’s, potentially changing the dynamic of the Fed drastically.

The board members, though not as heavily publicized as the Fed’s chair and vice chair, still wield a great deal of power over financial policy in the U.S. Furthermore, the two new board members appointed by Trump will likely share his pro-growth agenda and give him even more control and influence over the Fed’s actions.

Trump’s 2018 Fed Chair and Vice-Chair Appointments

In just two short years, Trump will have the chance to make one massive change to the Fed by appointing a new chair and vice chair. And if Republicans maintain control through the 2018 election, he’ll have an unprecedented chance to appoint his candidates of choice with minimal opposition.

The lasting impact of this event alone could be one of the biggest hallmarks of Trump’s presidency.

The Outlook for Gold…

Without a doubt, Trump’s administration is set to make big changes to the Federal Reserve and how it operates. Trump himself has even toyed with the idea of putting America back on the gold standard.

All these changes might cause a few bumps along the way, but they could be very advantageous for the economy’s long-term viability.

One thing’s for sure though: the volatility that may be caused by these big power shifts make it ever more important for you to ensure that you’ve backed at least some of your savings with gold.

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Chicago’s New Bag Tax Will Generate $13 Million, Won’t Save Environment

A new tax on paper and plastic bags in Chicago will generate an estimated $12.9 million annually for the city’s coffers but is unlikely to reduce the number of bags used by Chicagoans.

The 7 cent per bag tax was included in the new city budget approved on Nov. 16 and will go into effect on Jan. 1, but analysts say the fee is probably too low to change the behavior of Chicago residents or businesses. After the tax is collected, most of the revenue will flow directly to the city’s budget and will not be used for environmental restoration or pollution clean-up—as is the case in other places where similar taxes have been imposed for supposedly environmental reasons.

The city will get 5 cents of the tax from every bag, while retailers will be allowed to keep the other 2 pennies per bag. An analysis by the Better Government Association, an Illinois-based civil action organization, found that retailers could pocket as much as $3.7 million next year because of the tax.

While the city and retailers will be able to get more money from shoppers, the bag tax probably won’t do much to change behavior.

“The Chicago tax, which will apply to paper as well as plastic, is far lower than the 30-cent a bag charge that successfully curbed behavior in Ireland, raising questions about whether shoppers at grocery and retail outlets will view it more as an annoying trifle than a penalty to actively avoid,” the Better Government Association concludes.

Bag taxes seem to split progressives between two camps: those who believe the taxes are worth it (necessary, even) to stop pollution and nudge shoppers towards reusable bags, and those who see the taxes as regressive and bad for the poor.

Both perspectives miss the reality of what has happened in places with taxes similar to what has passed in Chicago.

A 2015 audit of a 5 cent per bag tax in Washington, D.C., found that it did little to change consumers’ behavior. Of the $10 million generated over the first five years that the tax was in place, most of it was used to pay for city workers and to cover the cost of field trips for school students, not for the environmental repair work promised by advocates of the tax.

In other places, taxes have created a temporary decline in bag usage. John Halstead, professor of environmental and resource economics at the University of New Hampshire, told the Chicago Tribune that convenience ultimately wins out as consumers rationalize paying a few extra pennies for their bags. “Basically there was one year of decreased bag usage and then people just opted to pay the fee,” Halstead said.

The real reason taxes like this are enacted is to pad government budgets. Chicago already has a similarly surreptitious tax on bottled water (also passed in the name of being green). If you prefer to get you water from the tap, you’ll pay a tax on that too—in August, the city instituted a new tax on water and sewage in order to plug a massive public pension deficit.

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Multiple Jobholders Hit New All Time High As Part-Time Jobs Soar

While today’s headline jobs number was essentially Goldilocks, with the payrolls print missing the expected print of 180K by just 2,000 jobs, it was accompanied by a plunge in the unemployment rate to 9 year lows as a result of a jump in the number of people leaving the labor force, and rising to a new all time high of over 95 million. But while the quantitative headline aspect is open to interpretation, the qualitative component of the November jobs print was – just like in the case of October – quite clear: it was ugly, again.

Recall that in October, the Household Survey revealed that the number of full-time workers tumbled by 103,000 as part-time workers jumped by 90,000. The trend continued in November, when another 118,000 part-time jobs were added, paired with a far more modest 9,000 increase in full -time jobs.

The divergence is even uglier when looking at the non-seasonally adjusted jobs, i.e., real change: here we see a drop of 628,000 full-time jobs in November, offset by a surge in 678,000 part-time, mostly retail jobs.

Going back to the seasonally adjusted number, we find a troubling trend: as noted above, it was not just November: in the past three months, full-time jobs have declined by 99,000 while part-time jobs have surged by 638,000, which more than anything should explain the unexpected slide in the average hourly earnings, which as noted previously, dropped by -0.1%, the worst monthly change since 2014.

But perhaps even more troubling than the breakdown in November job quality, was another seldom-touted series: the number of Multiple jobholders, or people who are forced to hold more than one job due to insufficient wages or for other reasons. It was here that the red flashing light came on because while on a seasonally adjusted basis, the series rose once again by 61,000 to 7.8 million; when looked on an actual, unadjusted basis, the number of multiple jobholders increased again, rising by 57, and hitting 8,107 million, the highest number this century.

The again begs the question: how many of the 178K headline jobs “added” in November were double counted as a result of the ongoing rise in the number of multiple jobholders.

So yes: overall job growth continues to chug along – even if unconfirmed by the troubling drop in wages – if at a modestly disappointing pace at least in October, but the quality of the added jobs remains woeful.

Source: BLS

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It’s 2016 and School Districts are Still Pulling To Kill a Mockingbird and Huckleberry Finn From Libraries

How do we sleep while our books are burning?Mark Twain’s The Adventures of Huckleberry Finn was first published in 1884 and first banned in 1885 by authorities in Concord, Mass., who called it “trash and suitable only for the slums.”

Harper Lee’s To Kill a Mockingbird was first published in 1960 and first pulled from shelves in 1966, when the Hanover, Va. school board, still struggling with the concept of racially integrated schools, objected to the use of rape as a plot device.

In 2016, both classics—long staples of school curriculuums—are one again too hot for youthful consumption, at least in one school Virginia school district.

Accomack County Public Schools have temporarily pulled both novels from their libraries in accordance with the school district’s policy after a parent files a formal complaint using a “Request for Reconsideration of Learning Resources” form. In this case, one parent objected to both books’ combined 250 uses of a racial slur, according to WTVR-TV.

Delmarva Daily Times reports Marie Rothstein-Williams, a white parent of a biracial high school student first raised objections to the books’ presence in school libraries and classrooms at a school board meeting last month, saying:

I keep hearing ‘This is a classic, this is a classic.’ I understand this is a literature classic but at some point I feel the children will not or do not truly get the classic part, the literature part — which I’m not disputing this is great literature — but there is so much racial slurs in there and offensive wording that you can’t get past that.

WTVR also quotes Rothstein-Williams as saying, “Right now, we are a nation divided as it is.” Another Accomack County parent reportedly worried that because the slur can be found at a book in their school, students will “feel that they are able to say that to anybody” and thus the books should be removed.

Once a formal complaint is lodged, the review process convenes as follows:

A review committee consisting of the principal, the library media specialist, the classroom teacher (if involved), a parent and/or student, and the complainant will convene. Materials cited in the complaint will be temporarily suspended for use pending determination by the committee.

No date has been set to begin the review. In the meantime, Accomack County students will not be subjected to reading two books containing language deliberately meant to provoke strong feelings in readers by challenging the racial oppression of their times, and thus unable to engage in the critical thinking great literature demands.

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Mitt Romney Is Now Heavy Favorite For Secretary Of State

After several key positions in the Trump cabinet were filled this week, the key open position remains the Secretary of State seat.  Several names have been tossed around, but according to the online Irish bookie, Paddy Power, Mitt Romney is the heavy favorite. 

Of the top five names that have been rumored to be at the top of the list, David Patraeus is next in line behind Romney while Giuliani has fallen to the back of the line.  Meanwhile, Hillary Clinton and Joe Biden made the board as long shots for those really looking to gamble.

 

The only other market for Trump positions is Homeland Security, which Paddy Power says will likely go to Kris Korbach, the current Secretary of State of Kansas and counsel with the Immigration Law Reform Institute.

Homeland Security

 

Place your bets!

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Americans Not In The Labor Force Soar To Record 95.1 Million: Jump By 446,000 In One Month

So much for that much anticipated rebound in the participation rate.

After it had managed to post a modest increase in the early part of the year, hitting the highest level in one year in March at 63%, the disenchantment with working has returned, and the labor force participation rate had flatlined for the next few month, ultimately dropping in November to 62.7%, just shy of its 35 year low of 62.4% hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 446,000 in November, hitting an all time high of 95.1 million.

As a result of this the US labor force shrank by 226,000 to 159,486K, down from 159,712K a month ago, and helped the unemployment rate tumble to 4.6%, the lowest level since August 2007.

Adding the number of unemployed workers to the people not in the labor force, there are now over 102.5 million Americans who are either unemployment or no longer looking for work.

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‘Hashtag He’s Your President’ Says Conway, White House Wants Women to Register for Draft, Congress to Spend $1.5 Million Investigating Planned Parenthood: A.M. Links

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Payrolls Rise 178K As Unemployment Rate Tumbles To 4.6% But Average Hourly Earnings Worst Since 2014

While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today’s report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month’s 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.

The change in total nonfarm payroll employment for September was revised up from +191,000 to +208,000, but the change for October was revised down from +161,000 to +142,000. With these revisions, employment gains in September and October combined were 2,000 less than previously reported. Over the past 3 months, job gains have averaged 176,000 per month.

One red flag in the report was the 4,000 drop in manufacturing workers, worse than the -3,000 expected, and following last month’s -5,000 print. Also of note, workers unable to work due to bad weather according to the BLS were 19K in Nov. The historical average for Nov. is 72k employees cannot work due to poor weather conditions.  Another 113k workers who usually work full-time could only work part-time due to the weather last month.

 

The reason for the steep drop in the unemployment rate is that while the number of employed rose from 151,925K to 152,085K, coupled with a decline in the number of unemployed by 387K, the number of people not in the labor force soared to 95.055 million, a new all time high, which in turn pressured the labor force participation rate to 62.7%, the lowest since June and just shy of the 30 year low.

But as noted above, the biggest surprise was the negative print in the average hourly earnings which declined by 0.1%, the first negative print in 2016 and the wrst print since 2014.

More details from the report:

Total nonfarm payroll employment rose by 178,000 in November. Thus far in 2016, employment growth has averaged 180,000 per month, compared with an average monthly increase of 229,000 in 2015. In November, employment gains occurred in professional and business services and in health care. 

 

Employment in professional and business services rose by 63,000 in November and has risen by 571,000 over the year. Over the month, accounting and bookkeeping services added 18,000 jobs. Employment continued to trend up in administrative and support services (+36,000), computer systems design and related services (+5,000), and management and technical consulting services (+4,000).

 

Health care employment rose by 28,000 in November. Within the industry, employment growth occurred in ambulatory health care services (+22,000). Over the past 12 months, health  care has added 407,000 jobs.

 

Employment in construction continued on its recent upward trend in November (+19,000), with a gain in residential specialty trade contractors (+15,000). Over the past 3 months, construction has added 59,000 jobs, largely in residential construction.

 

Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month.

 

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the workweek declined by 0.2 hour to 40.6 hours, while overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. 

 

In November, average hourly earnings for all employees on private nonfarm payrolls  declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees edged up by 2 cents to $21.73 in November.

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“A Watershed Month” – November Sees Greatest “Asset Rotation” Since 2013

The final November fund flow numbers are in, and as BofA’s Michael Hartnett puts it, November, it was a “watershed” month for fund flows with the largest 5-week
bond outflows in three and a half years at $10 billion…

… the largest 3-week precious metals outflows
in 3.5 years…

… and the largest 5-week equity inflows since October 2013 at $34.5 billion.

Focusing on just the last week, the “Trumpflation rotation” out of bonds and into stocks continued, with $4.4 billion in bond outflows, $0.6 billion precious metals outflows vs $1.2 billion in  equity
inflows according to Bank of America, which writes that investor flows have stabilized following violent post-US election flows; In fact, a mini revulsion may already be forming with the first TIPS outflows in 6 months, first EM equity inflows in 5 weeks, first HY bond inflows in 5 weeks and first utilities inflows in 5 weeks.

Some further observations from Hartnett who notes that while November was “Fast & Furious” there was no Euphoria: despite the strongest 4-week equity inflows in 2 years, a sharp drop in FMS cash to 5.0% and a big US equity rally, our sentiment signals have actually shifted in a more contrarian bullish direction in recent weeks. In fact, our BofAML Bull & Bear Indicator has fallen to 3.0, the lowest reading in 4 months, on the back of big redemptions from high-beta EM equity funds, EM debt funds & HY bond funds.

Broken down by asset class shows that the trend of flows out of active managed funds and into ETFs continued:

  • Equities: small $1.2bn inflows (note $6.3bn ETF inflows vs $5.2bn outflows from mutual funds)
  • Bonds: $4.4bn outflows (5 straight weeks = longest streak in 14 months)
  • Precious metals: $0.6bn outflows (3 straight weeks)

Looking only at Equity Flows:

  • Europe: $2.0bn outflows (largest in 11 weeks)
  • US: $4.4bn inflows (4 straight weeks)
  • EM: ekes out first inflows in 5 weeks (albeit small $0.1bn)
  • Japan: small $0.1bn inflows
  • By sector: 10 straight weeks of financials inflows ($0.6bn); 4 straight weeks of REITs outflows ($0.1bn)

And then fixed income, which saw 5 straight weeks of outflows from muni bond funds ($1.6bn)

  • 4 straight weeks of outflows from IG bond funds ($2.4bn)
  • 4 straight weeks of outflows from EM debt funds (albeit small $0.1bn)
  • 3 straight weeks of outflows from govt bond funds ($0.7bn)
  • First TIPS outflows in 25 weeks ($0.3bn)
  • First HY bond inflows in 5 weeks ($0.6bn)
  • Inflows to bank loan funds in 20 of past 22 weeks ($0.6bn)

However, it may all go just as fast as it came: according to Bloomberg, U.S. global-focused ETFs saw a net $742.5m of capital outflows on Dec. 1 – the funds have shrunk a net $1.5b in the past five days. Investors have put a net $23.3b into the funds in 2016. Should the risk-off sentiment persist, more outflows are likely.

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