Is a Soft Landing Possible?

Welcome to This Week’s Leyendecker View

Persons who lack curiosity about life, who find minimal joy in existence, are all too willing to, subconsciously, to cooperate with—and attract—disease, accident and violence.
– Dr. Wiggs Dannyboy in Jitterbug Perfume

THINKING OUT LOUD

Is a Soft Landing Possible?

Reading the tea leaves seems to suggest a soft landing could be possible. Let’s take a gander…

The Federal Reserve (Fed) has various tools to stimulate the economy. The most obvious to most people and the quickest to combat economic weakness is to lower interest rates. On Wednesday, the Fed reduced interest rates by 50 basis points, or a half of a percent. This is referred to as monetary stimulus.

Normally, when the Fed reduces interest rates, it is in response to economic weakness. The fear is recession could naturally lead to job contraction, which could lead to further economic weakness, which could lead to further job contraction, and on and on. This is how an economic contraction feeds off itself, which is why the Fed steps in with monetary stimulus.

It may not be obvious that our economy is struggling, but looking under the hood tells us vulnerabilities are spreading, particularly with the consumer. And consumption is responsible for 70% of our economic output.

Consumer spending has been reasonably strong, with recent retail sales exceeding expectations, but a large amount of consumption today is financed via higher consumer debt. Credit card debt rose at an annual 9% pace in July. But credit card delinquencies have also been rising for several months. In addition, consumer savings has plummeted post Covid. And with the job market weakening, there is a risk of a consumer slow down. 

So the Fed may be acting cautious about consumer behavior. Lower rates should help consumer spending and help mitigate the possibility of an economic slowdown feeding off itself. But there is another major influence that suggests the US economy may have reasonable resilience.

Another stimulus tool Washington possesses is referred to as fiscal stimulus, which is when the federal government spends more than it takes in from taxes. The government does this to help jump-start a slowing economy. What’s interesting is that fiscal stimulus has actually been in overdrive during Biden’s presidency.

After Trump won the 2016 election, with his “Make America Great Again” slogan, it became obvious that the US needed to focus more on its domestic economy. After Covid hit, it became extremely obvious that the US needed to invest in itself to increase our economic sustainability. It shouldn’t surprise then that Biden ran with a MAGA-derivative slogan, “Build Back Better.”

Biden’s term has produced a great amount of fiscal stimulus via the Infrastructure Investment and Job Act, the CHIPS and Science Act and the Inflation Reduction Act.

The Infrastructure Investment and Job Act’s investment in domestic infrastructure and a few favorite pork recipients is supposed to amount to $1.2 trillion.

The CHIPS and Science Act’s investment in a larger domestic computer chip industry is supposed to amount to $280 billion.

The Inflation Reduction Act’s investment in domestic clean technologies is supposed to amount to $500 billion.

All totaled, these fiscal stimulus efforts equal almost $2 trillion of domestic investment that purportedly will stimulate the economy.

What’s interesting is that these fiscal stimulus measures are still working their way through the economy, and will likely support our domestic economy for several more years.

The question we should all have is whether these stimulus bills will actually influence economic growth and resiliency down the road.

We certainly need these domestic investments to improve our economic output, as total federal debt has jumped from $22 trillion in 2019 to $33 trillion at the end of 2023. But for the near term, the lag effect of the Biden years’ fiscal stimulus added to the monetary stimulus of lower interest rates could possibly get us to that soft landing most everyone hopes for.

The Fed is trying to thread the needle in hopes of getting the US economy to a soft landing rather than a recession. This would be a great accomplishment. If successful, it could possibly make current Fed Chairman Jerome Powell the most revered US central banker since Paul Volker whipped inflation in the 1970s.

THE ECONOMIC VIEW

Retail sales are still strong
Yet Americans fall further behind on bills
The Fed must thread the needle.

US steel demand is faltering
As factory activity slows.

The US needs a new supply-side effort
With tweaks to match current differences.

INFLATION, DEFLATION OR BOTH?

China is risking a deflationary spiral
Look out, world!
US sends group to caution China

A drought in Brazil
Is driving up orange juice prices

THE LABOR VIEW

Tech jobs are drying up.
And not coming back soon

Amazon wants workers in the office.
Five days a week!

What, me? Retire?
Just because I’m 80?

MEANWHILE IN EUROPE

What will it be, Europe?
Welfare or war?

Europe needs a new economic model
More free money, please.
German expectations darken

Europe’s high-cost economy not competitive
They need some smarter bureaucrats.

THE GLOBAL GAME

Is North Korea building a nuke arsenal?
Who is going to stop this nonsense?

Iran’s new president wants to talk
What’s that old quote about insanity?

Mexico needs to elect 7,000 judges
Good luck getting that right.

THE UKRAINE FIRE

Putin plans to grow military
More bodies to throw at the drones.
Russian birth rate is already at 25-year low

Russia using crypto for import payments
Skirting their way around sanctions.

Ukraine and Russia’s war casualty count
Has now eclipsed 1MM people

THE GAZA FIRE

Looks like a Gaza cease-fire is out of reach
Surely there’s a kumbaya opportunity!
UN orders Israel to leave Palestine

A bunch of Hezbollah pagers exploded
Then handheld radios exploded
How the ingenious attack was staged
Israel launches airstrike offensive

Israel to build Jordan border fence
To reduce arms smuggling.

THE SLIPPERY SLOPE

China navy shipbuilding eclipses US
US needs help from friends to catch up

Sleepwalking into WWIII
Will complacency lead to disaster?

Syria’s Assad meets with Russians
Teams aligning for the future what?

FINANCE

US lowers interest rates
Japan keeps them steady
The UK stays steady as well

A clean jet fuel is winning over Wall Street
Can Wall Street make money from it?

JPM wants to replace Goldman
As Apple’s credit card partner.
Break-up could cost Goldman $1B

REAL ESTATE

America’s most expensive towns
Are on the coasts of course.

The world’s most secret house
A video tour of living bliss.

IS TECH A WRECK?

Is Apple innovation dead?
Its “new” Vision Pro innovation is dead
AirPods could become hearing aids

BlackRock and Microsoft team up
To blanket the world with data centers.

Control Amazon’s Alexa with your mind
But will it one day control your mind?

THE CHAT ON AI

Meta criticizes the EU
New rules could stifle the AI explosion

Top VC makes a prediction
AI will replace 50% of jobs by 2027

The world is tight on copper.
AI will only make it worse

OpenAI’s new reasoning model
Could help create bioweapons

OUR GOOD FRIEND, FAILURE

Obama had government buy student loans
Now few borrowers are paying them back

Americans are draining stock portfolios
And putting them into sports betting

$3,600 worth of ingredients
Can make you $3MM of fentanyl

THE NEXT NORMAL

Drug overdose deaths are plunging
But we have 100,000 drug deaths a year.

The surveillance state is just around the corner
So suggests Oracle founder and CEO.

The United States of Algorithms
They almost already run our lives.

THE WAR ON CARBON

Oil patch jobs and pay are falling
Companies are using more technology.

AI to keep oil prices lower
By making it cheaper to find and produce.
US upstream consolidation continues

EPA supports big carbon storage project
When will this storage be operational?

THE ENERGY TRANSITION

Three Mile Island nuclear plant to reopen
To power Microsoft servers.

US power demand to keep setting records
Big tech’s carbon footprint
Is way way bigger than we know

BP wants out of US wind business
It’s up for sale.

THE EV DREAM—OR DELUSION

China is way ahead in EV race
Admits Ford CEO.

Schlumberger has lithium mining breakthrough
Big oil turns its sights on renewables.

THE CHINA SYNDROME

Entrepreneurship is dead in China
Expanding autocracy has likely killed it.
Dreams of a generation are crushed
The upwardly mobile are in crisis

China makes chip equipment breakthrough
Western sanctions aren’t holding them back.

Giant typhoon slams Shanghai
Largest since the 1949 climate change.

THE WASHING-TONE

House votes down spending bill
Government may need to shut down.

TikTok ban support stumbles
It’s just too much fun!

Washington races to dole out billions
Who wants some free money?

THE ELECTION DISTRACTION

Trump has a plan to save education
You can bet the teachers union is opposed.

The federal debt is soaring
Neither Trump nor Harris seems to care.

Another assassination attempt on Trump
Hey media, look at the hate you created.

MAKING A BETTER YOU

What actually makes us happy?
The role of “psychological ownership”

How to recover from burnout
Can we just transition to an AI life?

Sleep better at every age
Some good pointers here.

HOW ABOUT A BREAK

8 epic fall road trips
Start packing!!!

Could you pass this citizenship test?
Hmmm…what if you couldn’t?

Ocean photographs of the year
Drone photographs of the year
Our world’s amazing beauty.

MUSIC BOX

MJ Lenderman
Is he bringing back indie rock?
“She’s Leaving You”
“Hangover Game”
If these are your problems, then why not…
“You Have Bought Yourself a Boat”
Lyrics can be poetry, ya know.

What do the Liverpool folks listen to?
Could it be Florrie Radio?

CASTING AROUND THE PODS

Is the center-left going to lead us forward?
Undercurrent’s Emily Jashinsky interviews journalist James Pogue.

After affirmative action
Glenn Loury and John McWhorter discuss.

Life after near-death
What can Sebastian Junger’s experience teach us?

VIDEOS OF THE WEEK

The greatest day in baseball history
Shohei Ohtani goes 6 for 6 and more.

My Old Ass trailer.
Coming-of-age brilliance.

How volcanoes froze the earth, twice
Humans can control earth’s climate, right?

FROM THE HEADHUNTER’S KITCHEN

The perfect boiled potato
I’ve been waiting to know!

Foolproof scrambled eggs
The best scramble for scrambled.

The CDC calls it the healthiest vegetable
Get some watercress before it’s gone.

THE RANDOMS

Does the Fed’s 50-basis-point rate cut tell us the economy is worse off than we might think?

Let’s remember that the Fed will ease rates as our economy slows. That means lower interest rates for borrowers might also come with lower economic activity and possibly lower sales for many companies.

Does the capital gains tax influence new innovation, or does the land of opportunity influence new innovation? Do immigrants in search of the land of opportunity come to the US because of the capital gains tax break?

Would Steve Jobs and Apple not have happened if there wasn’t a capital gains tax incentive? How about Bill Gates and Microsoft? How about Elon Musk and everything he’s created? None of that would have happened without capital gains, right? 

The innate desire to create something new and wonderful wouldn’t have happened without the capital gains incentive, right?

If taxes are cut, then the government won’t have enough money to pay for its expenses. But if taxes are cut, the extra money in consumer hands could be spent on stuff. That spending would boost the economy, which might even raise tax receipts.

If taxes are raised, then the government will have more money to spend. Well, not really since they already spend almost $2T a year more than they bring in. So maybe if taxes are raised, our deficit spending will subside and we’ll start paying back some of our debt. You believe that, right?

The greater dependence we have on electronic conversations with thousands rather than human conversations with a few, the higher the probability of mass psychosis and autocratic control.

IN CASE YOU MISSED IT

It’s Not My Fault
September 13, 2024

We’re Just Too Busy
September 6, 2024