July 20, 2019

Fact-Checking Trump’s Tweet About Too-High Interest Rates

President Trump has made a regular habit of criticizing the Federal Reserve, and on Friday he tweeted that the central bank’s “faulty” decision-making was causing Americans to pay higher interest rates than other nations.

The Federal Reserve is supposed to keep the economy growing at a steady pace. Mr. Trump nominated its chair, Jerome H. Powell, and three of its other four sitting governors, but those leaders are confirmed by the Senate and operate independently of the White House. And Mr. Trump has no tie to the 12 Fed district bank presidents, who are selected by regional representatives. The Fed is insulated from politics by design so that it can make good long-term decisions rather than responding to election cycles.

The lack of control seems to rub at the president. He regularly blasts Fed policy, blames Mr. Powell and his colleagues for weakening the economy, and points out that President Xi Jinping of China has far more control over his own central bank. He has even reportedly looked into firing or demoting Mr. Powell, though he has since said such a move is not under consideration — and it’s not clear that it would be legal.

Here’s a fact check on his latest comments.

What Mr. Trump Said

“Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries, when they should be lower. Correct!”
on Twitter on Friday

This is misleading

It is true that the Federal Reserve has raised interest rates nine times since 2015, leaving the federal funds rate, its main policy tool, at 2.25 to 2.5 percent. That is, indeed, far higher than rates in advanced economies, including the eurozone and Japan, where some policy rates remain in negative territory.

Article source: https://www.nytimes.com/2019/07/19/business/economy/trump-interest-rates.html?emc=rss&partner=rss

Foreign-Owned Banks’ Results Could Sweeten Further Under Tax Law

Those banks received what many analysts saw as a break from Treasury in December, when it issued preliminary regulations governing the BEAT, which is part of the tax law’s overhaul of how the United States taxes companies that operate in more than one country. That overhaul has taken a political and public-opinion back seat to the corporate rate cut and changes in individual taxes, but it has drawn intense activity from business lobbyists seeking to shape the new rules to minimize their tax bills.

The BEAT is meant to curb a practice known as “earnings stripping,” in which multinationals avoid American taxes by shifting profits to other branches of the company operating in lower-tax countries overseas — often in the form of interest payments.

It is a sort of minimum tax, forcing companies that send their profits offshore to pay at least some American tax on them.

But in its December regulations, which provided nearly 46,000 words of details on how the provision applies to companies, Treasury essentially said certain interest payments made by foreign-owned banks are not subject to the calculations that determine that minimum tax. The move alarmed some former congressional aides who were involved in the tax effort. They said the exemption ran afoul of lawmakers’ intent in passing the tax overhaul.

The law’s authors tried to balance the international provisions to favor neither American-based companies nor foreign-owned ones. Throughout its drafting, they repeatedly asked the congressional Joint Tax Committee to run tax models to simulate the effects on both types of companies, eventually finding a near-50-50 balance. The Treasury regulations, which included the exemption that foreign banks had pushed for, could upset that balance.

Foreign banks received the regulations warmly but asked Treasury to go even further, in the name of fairness. The Institute of International Bankers, an industry lobbying group, told Treasury officials in a letter that it “wishes to express its appreciation for the strides made by the proposed regulations.”

The institute went on in the letter to push Treasury for further tweaks, in final regulations, that would reduce potential bank liability under the tax even more. Those highly technical changes would, if adopted, essentially exclude an even broader set of payments between banks and their foreign affiliates from the minimum tax calculations.

Article source: https://www.nytimes.com/2019/07/19/business/banks-tax-cuts-deficit.html?emc=rss&partner=rss

Sanctions did not change Russian policy but hurt German businesses – Bundestag member

“There is no effect of these sanctions. We have had them for five years and there is no change in Russian policy,” he said in an interview with German news radio Deutschlandfunk.

“If you prescribe a medicine and you notice that the effect of this medicine is missing, and on the contrary, it is rather harmful, including for the German companies, then you have to think at some point that maybe it’s the wrong medicine,” he explained.

Also on rt.com Sanctions on Russia can be lifted ‘at any time’ – French PM

The German politician pointed out that, as a result of the sanctions, Russia had reoriented towards China, with the two countries significantly improving their trade relations.

Meanwhile, trade between Germany and Russia has decreased, and “that’s the real problem.” The consequences of the economic sanctions are felt more clearly in the eastern German states than in the west, said Ernst.

“[Russia is] trying to replace Europe with China,” the politician said, adding: “A strong Europe is simply not possible without Russia, I repeat, not possible.”

Ernst noted that Russia and the European Union “have to get more cooperation.”

Also on rt.com Sanctions cost European economies $240 billion while Russia lost $50 billion – Putin

Relations between Russia and Western countries have declined dramatically over the past five years, after economic penalties imposed by Washington were supported by Brussels.

Politicians from the European countries have been repeatedly calling for the cancelation of punitive measures as they have become a major hurdle for businesses and economic growth.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/464572-sanctions-russia-german-companies/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The Economy Looks Solid, but the Fed Plans to Cut Rates Anyway. Here’s Why.

At times in the last several years, traditional measures of the American economy suggested that it was reaching full health and that interest rate increases might be justified to prevent inflation. But when the Fed’s policies diverge too much from those of its counterparts around the world, it causes the dollar to rise, financial conditions to seize up and overseas economies to slow, in turn endangering the United States economy.

This happened to varying degrees in 2013, when the Fed under Ben Bernanke sought to “taper” its quantitative easing program, and again in late 2015 and early 2016, when the Fed first raised interest rates under Janet Yellen, and again at the end of 2018 under Mr. Powell.

“Pursuing our domestic mandates in this new world requires that we understand the anticipated effects of these interconnections and incorporate them into our policy decision making,” Mr. Powell said in Paris. In practical terms, that can be viewed as part of the rationale for the imminent interest rate cut.

In his congressional testimony last week, Mr. Powell was uncommonly blunt in discussing the potential for the job market to get better, and the apparent failure of the Fed’s traditional models in which low unemployment is expected to fuel inflation.

None of this necessarily means that cutting interest rates right now, against the backdrop of a solid economy, is the right move. It could fuel financial bubbles that eventually put the expansion at risk, much as precautionary Fed interest rate increases in 1998, triggered by international turbulence, helped fuel a stock market bubble that popped in 2001.

But by owning up to the ways in which the intellectual framework behind the Fed’s push to raise rates over the last few years isn’t holding up to scrutiny, Mr. Powell is sending an important message: As long as he is running the show, the Fed will aim to react quickly to the world as it is, not as the models say it ought to be.

Article source: https://www.nytimes.com/2019/07/19/upshot/economy-fed-powell-rate-cuts-analysis.html?emc=rss&partner=rss

Grounding of 737 MAX after two deadly crashes will cost Boeing $5 billion to date

That will be the biggest quarterly loss in Boeing’s history when it reports its financial results next week.

According to the company, lost sales, reduced production and the compensation payments it was expecting to hand over to date would cost the plane maker $6.6 billion.

The sum does not include any provision for lawsuits expected to be filed by the families of the victims.

Also on rt.com Airbus to become world’s biggest plane maker as Boeing’s deliveries plunge over 737 MAX disaster

Average estimates of analysts compiled by Refinitiv suggested Boeing would book a per-share profit of $1.80 for the second quarter. The charge, which comes to $8.74 a share, will wipe out the aviation giant’s profits. It would reduce revenue and pre-tax earnings by $5.6 billion in the quarter, Boeing said.

Many global airlines have grounded their fleets of 737 MAX aircraft since mid-March, following crashes in Ethiopia and Indonesia that killed 346 people.

Boeing Chief Executive Dennis Muilenburg wrote on Twitter that the company remained focused on safely returning the 737 MAX to service.

“The MAX grounding presents significant challenges for our customers, company and supply chain,” he tweeted.

The US-based airplane manufacturer said it assumes the 737 MAX will return to service in the United States and other countries in autumn. Boeing also said that it had been forced to cut future services because of uncertainty over the timing of deliveries of 737 MAX planes.

An investigation into MAX crashes has revealed the majority of Boeing 737s had a non-working alert for faulty sensor data. The company scheduled the problem to be fixed three years after discovering it and didn’t inform the FAA until one of the planes crashed.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/464563-boeing-compensation-max-crashes/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Sanctions-hit Iran becoming ‘heaven’ for bitcoin mining, says govt official

The crypto craze has raised concerns from authorities that the energy-hungry process of “mining” bitcoin is abusing Iran’s system of subsidized electricity. Currently at half-a-cent per kilowatt, the subsidized electricity rates have fueled the country’s thriving crypto-mining community. Iran’s Electrical Industry Syndicate has recently revealed its intention to hike prices to seven cents per kilowatt.

Iran’s Minister for Information and Communications Technology Mohammad Javad Azari Jahromi said that the country has become “a heaven for miners.”

Also on rt.com Gold rush: Iran turns to precious metals as US sanctions bite

“The business of ‘mining’ is not forbidden by law but the government and the Central Bank have ordered the Customs Bureau to ban the import of [mining machines] until new regulations are introduced,” he told the Associated Press.

About 1,000 units of mining hardware have been confiscated from the country’s two now-defunct factories. Authorities have also cut off power to crypto miners ahead of the planned energy price hike.

The ban resulted in some miners taking refuge in the country’s mosques, which the government provides with free energy.

Iran is struggling with hyperinflation due to the toughened US sanctions. Statistics showed oil export revenues plunged by almost 90 percent, unemployment is close to 20 percent, with millions working below national poverty-line estimates.

Also on rt.com Iran exceeds uranium enrichment level set by nuclear deal as Europe fails to resist US sanctions

Last year, the head of the Iranian parliament’s economic commission, Mohammad Reza Pour-Ebrahimi, revealed that roughly $2.5 billion had been channeled out of Iran via cryptocurrencies.

The digital currencies have even caught the attention of the ayatollahs, debating that bitcoin is either problematic or definitively forbidden (haram under Islamic law).

“Some of our top clerics have issued fatwas (a ruling on a point of Islamic law given by a recognized authority) that say bitcoin is money without a reserve that it is rejected by Islam and cybercurrencies are haram. When we explain to them this is not a currency but an asset, they change their mind,” Jahromi said.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/464546-iran-bitcoin-mining-heaven/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Trump to Nominate Eugene Scalia for Labor Secretary Job

Mr. Scalia, 55, was nominated by Mr. Bush in 2001 to serve as solicitor of the department, but was never confirmed by the Senate, which was controlled by Democrats at the time. Much of the fear about Mr. Scalia’s nomination was based on his opposition to a Clinton administration regulation that would have protected workers from repetitive stress injuries, which became known as the ergonomics rule. Mr. Scalia had weighed in frequently against the rule, deriding the rationale for it as “unreliable science.”

Mr. Bush eventually used a recess appointment to install Mr. Scalia in the position, effectively bypassing the Senate. He left the department in 2003 and returned to private practice.

A former subordinate of Mr. Scalia’s in the solicitor’s office, Ann Rosenthal, said she was appalled when he was nominated to the position after observing his opposition to the ergonomics rule. But she was pleasantly surprised to find him reasonable and relatively committed to protecting workers. Ms. Rosenthal, who has since retired, recalled telling Mr. Scalia that he had far exceeded her expectations. “I have a different client now,” he responded.

Mr. Scalia represented a variety of corporate clients at Gibson, Dunn Crutcher. In 2006, he helped Walmart triumph in a prominent fight against a Maryland law that would have required companies with more than 10,000 workers to either spend at least 8 percent of their payroll costs on health care, or pay into a state Medicaid fund.

He argued that allowing individual states to establish health care mandates would create chaos and that the federal government should address the issue of rising health care costs.

Mr. Scalia also defended Boeing in a politically charged case. A union representing the company’s workers in Washington State argued that Boeing had violated labor law by threatening to open another assembly plant in South Carolina unless the union agreed to a no-strike clause in its contract.

The general counsel of the National Labor Relations Board under President Barack Obama brought a case against the company, which the union ultimately abandoned when it reached a deal to raise wages and expand its presence in Washington. But the case set off an intense backlash against the labor board among Republicans in Congress. The company and its Republican defenders derided the case as frivolous.

Article source: https://www.nytimes.com/2019/07/18/us/politics/eugene-scalia-labor-secretary.html?emc=rss&partner=rss

Huawei dominates global race to 5G, inking over 50 contracts despite US crackdown

Despite pressure from Washington on its allies to ban Huawei technology, Chen said that 28 contracts were signed in Europe.

In June, Huawei helped to launch the 5G commercial network in Saudi Arabia. The company – which was barred from building fifth-generation networks by the US, Canada, and New Zealand – has also stepped into the Russian market. Huawei announced an agreement with one of Russia’s leading internet and mobile providers, MTS, to develop 5G networks. It has also contacted several Russian tech firms to create joint ventures and use their technology.

Also on rt.com Huawei looking to Russia for technology to cut reliance on US tech

The world’s leading telecommunications solution provider Huawei made the first global 5G call and launched the first 5G terminal device in 2018. Since then, the Shenzhen-based firm has faced pressure from the United States. Washington has accused the company of spying for the Chinese government, a charge both Beijing and Huawei have denied. Huawei was barred from doing business with American companies that supply it with necessary parts and technology.

READ MORE: More US allies defying Trump moving forward with Huawei’s 5G network – Boom Bust

The Trump administration has also been pressing allies to ban Huawei from 5G rollouts. Some countries like Australia and Japan have barred Huawei, while others, including India, are yet to decide whether to permit its 5G rollouts. The UK and Spain have already launched 5G commercial networks powered by Huawei base stations. This week, Brazil said it will not stop the Chinese technology company from operating within its borders.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/464481-huawei-china-5g-contracts/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

China to boost imports of Russian soybeans, cutting out US crop exports

Commerce Minister Zhong Shan met with Russian Minister for Economic Development Maxim Oreshkin this week. They agreed to “deepen trade in soybeans” as China looks to diversify supplies away from the United States.

Also on rt.com No US, no problem! Russia-China trade set to double reach $200 billion soon

The agreement follows Russian President Vladimir Putin’s announcement last year that Russia will increase its production and export of soybeans to China. Putin explained that Russia will fill China’s gap in the market, which was left by the protracted trade war between Beijing and Washington.

China has halted the import of soybeans from its biggest supplier, the United States, after imposing 25 percent tariffs on soybean imports. The levy came in retaliation to American tariffs on Chinese goods.

According to the US Department of Agriculture (USDA), “for 2018/19, sales and shipments of US soybeans to China are drastically low, but they are taking place.”

Also on rt.com Russia to replace US soybean exports to China amid escalating trade war

Meanwhile, trade between the neighboring countries, Russia and China, has been growing. In terms of agricultural products and food, the volume of trade rose by nearly 30 percent last year to more than $5 billion. The overall trade turnover between the two countries has seen historic growth to reach $108 billion, beating all forecasts.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/464476-russia-china-soybeans-us/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Netflix Stock Tumbles as U.S. Subscribers Decrease After Price Increases

Globally, Netflix is most likely the largest streaming business, with more than 151 million subscribers. Its future growth will largely come outside the United States, with India representing its best opportunity. Netflix has given up on entering the Chinese market after difficulties with regulators there.

The company’s dominance has prompted more established media giants to embark on streaming services of their own. ATT, which acquired HBO and Turner Broadcasting as part of its $85.4 billion purchase of Time Warner last year, announced plans this month for a streaming service — HBO Max — that will start next year.

The Walt Disney Company will also go big on streaming, with plans to fill an expansive new streaming product, Disney Plus, with franchises like “The Avengers” and “Star Wars.” It will also offer the many television shows and films it picked up when it bought the bulk of Rupert Murdoch’s 21st Century Fox entertainment empire for $71.3 billion in a deal that closed in March.

Adding to the competition, Apple is shifting away from its focus on hardware to spend more than $1 billion on Hollywood talent as it enters into the entertainment business with Apple TV Plus. That streaming service, with new content from a roster of talent that includes Oprah Winfrey, Steven Spielberg and Reese Witherspoon, is scheduled for a fall debut.

“It’s not a zero-sum competition,” Mr. Hastings said on Wednesday. “People will subscribe to multiple shows. I’d wager that most Netflix employees are HBO subscribers.”

As part of its effort to ramp up its original offerings last year, Netflix signed Ryan Murphy, the prolific producer behind “Glee” and the anthology series “American Crime Story,” to a five-year deal said to be worth nearly $300 million. After wooing him away from 21st Century Fox, the company signed another name producer, Shonda Rhimes, the creator of ABC’s “Grey’s Anatomy,” giving her a nine-figure deal.

Netflix released its second-quarter report a little more than a week after the news that it would lose the North American rights to “Friends,” the NBC sitcom that has had a highly remunerative afterlife in syndication and online.

Article source: https://www.nytimes.com/2019/07/17/business/media/netflix-earnings-subscribers.html?emc=rss&partner=rss