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As household debt hits $14 trillion, economists say Fed solution for next recession insufficient

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“For most people, these policies will further increase in their cost of living, while their wages remain stagnant.”

On the heels of reports that U.S. household debt hit $14 trillion for the first time in history, Federal Reserve Chair Jerome Powell told lawmakers Wednesday that the central bank would use quantitative easing as the primary weapon to combat the next recession.

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With interest rates hovering around 1.50% and 1.74%, quantitative easing—injecting more cash into the economy through buying back government bonds—is the best solution available, said Powell.

“We will have less room to cut [rates,]” Powell told the Senate Banking Committee. “That means it is much more likely that we will have to turn to the tools that we used in the financial crisis when we hit the lower bound.”

As Market Watch reported:

In testimony before the Senate Banking Committee, Powell said the Fed had two recession-fighting tools; buying government bonds, known as QE, and communicating clearly with markets about interest-rate policy, routinely considered as “forward guidance.”

“We will use those tools—I believe we will use them aggressively should the need arise to do so,” Powell said.

Left economist Arash Kolahi took to Twitter to push back against the strategy, calling the tactic “basically upward wealth redistribution at the expense of the many.”

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“For most people, these policies will further increase in their cost of living, while their wages remain stagnant,” Kolahi explained. “In effect, it’s like taxing the many to further enrich the investor class.”

Powell’s testimony came a day after Bloomberg reported U.S. household debt topped $14 trillion in the last quarter, rising $601 billion in 2019.

According to Bloomberg, delinquencies have risen alongside total debt—a worrying sign for the future. Five percent of auto loans are delinquent and credit card delinquencies increased in 2019 to 8.36%.

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Student debt, a major source of worry for young people, grew as well:

Among student debt, one in nine borrowers were 90+ days delinquent or in default in 2019, and this figure may be understated. About half of student loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. Once these loans enter that cycle, delinquency rates are projected to be roughly twice as high, according to the Fed report.

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Economic observers fear that with the rise in quantitative easing, stocks are being overvalued and that the Federal Reserve is blocking the market from course correcting, possibly setting up a crash when the cash flow stops.

“The risk is what happens when the Fed stops increasing their balance sheet,” Peter Boockvar, chief investment officer with Bleakley Advisory Group, told Reuters in January. “What will stocks do when that liquidity spigot stops? We’ll have to see.”

 

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Trump busted for cynical reasons behind scheduling his COVID-19 press conferences at the same time everyday

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An MSNBC panel discussing the coronavirus task force's daily press briefing that have been hijacked by Donald Trump so he can be on television every day turned to explaining why they held at the same time every day.

With "Am Joy" host Joy Reid explaining that the nation's media is doing their best to try and "normalize" the president's behavior, she also called out the president for cynically scheduling the briefings to keep the public ignorant about how the coronavirus is devastating their own communities.

Noting that Trump has replaced traditional press briefings with a "hit TV show" in his eyes.

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Navy captain fired by Trump over coronavirus letter tests positive for COVID-19: report

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According to a report from the New York Times, the Navy captain relieved of his duties by the Trump administration over a letter drawing attention to dangerous health conditions on his aircraft carrier has tested positive for COVID-19.

The report states, "Capt. Brett E. Crozier, the Navy captain who was removed from command of the coronavirus-stricken aircraft carrier U.S.S. Theodore Roosevelt, has tested positive for Covid-19, according to two Naval Academy classmates of Crozier’s who are close to him and his family."

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Georgia GOP governor orders several beaches to reopen days after acknowledging he’s woefully uneducated on coronavirus spread

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The Atlanta Journal Constitution reported today that Kemp is reopening Tybee Island and other beaches along the Georgia coast.

Local officials in several of Georgia’s coastal communities reacted with fury on Saturday after Gov. Brian Kemp’s shelter-in-place order simultaneously reopened several of the state’s most popular beaches.

The stupidity and lack of regard of human life on display in Republican-run states is beyond criminal and inhumane. In fact, there are no words to describe this. Because the longer these so-called “leaders” make decisions that are in the best interests of, I don’t know who, the longer it will take to come out of this pandemic that is claiming so many thousands of lives.

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