Getting the Job Done

The economy of every nation has two basic jobs. The first is to produce enough goods and services to adequately feed, cloth, and shelter all its citizens. The second is to ensure that everyone has enough money to pay for the goods and services they need.

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Q2 2020 hedge fund letters, conferences and more

Worst Economic Performance Since The Great Depression

From 2009 through 2019, we did a pretty decent job producing and distributing those goods and services. But our economic performance during the April to June quarter was perhaps our worst since the Great Depression.

Volatility

Volatility“Surreal doesn’t even begin to describe this moment,” Seth Klarman noted in his second-quarter letter to the Baupost Group investors.  Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More

Our output of goods and services on an annual basis fell by almost one third, but a much more relevant figure would be the eight or nine percent drop in output since the first quarter. What saved us was the trillions of dollars that the federal government and the Federal Reeved poured into the economy, placing a massive floor under the American consumer’s purchasing power.

But now, Congress is dragging its feet on providing another massive infusion of funding for consumers – especially to the families of the thirty million people who are receiving unemployment insurance checks, and the millions of others without jobs who are unable to collect benefits.

Trump’s Economic Stimulus Recommendations

President Donald Trump, who has been largely AWOL with respect to providing leadership during the COVID-19 epidemic has reprised that role by coming up with just two of his own economic stimulus recommendations.

The first is to cut, or even eliminate, the payroll tax, which finances Social Security and Medicare benefits. These cuts would provide relatively little bang for our buck, since it would help only those who are employed. His other suggestion is to  spend one and a half billion to build a new FBI headquarters next to the Trump International Hotel in Washington. And whom would that help?

Very possibly, later this week Congress will manage to pass an economic stimulus bill that will total somewhere between the three trillion that the Democrats already voted to spend, and the one trillion that the Republicans favor.

The main impetus for passing this woefully inadequate bill is that our public servants are anxious to enjoy their next five weeks off. But this will leave tens of millions of Americans – nearly all of them unemployed – wondering how they will be able to put food on the table and a roof over their heads.

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