Barely manageable consumer debt loads could trigger U.S. recession ,
AU.S. recession next year? David Rosenberg, one of America’s favourite Canadian economists, predicts a U.S. recession next year if the U.S. Federal Reserve Board raises the key lending rate as few as four times between now and this time next year.
If not alone, Rosenberg has little company among forecasters bearish on short-term U.S. economic growth. For instance, the International Monetary Fund’s latest forecast puts U.S. GDP growth at a healthy 2.3 per cent this year, and 2.5 per in 2018 — the best performance of any G7 country.
But Rosenberg’s warning is well taken.
Rosenberg, chief economist with Toronto institutional investor Gluskin Sheff, points to the 23 million Americans of working age, between ages 25 and 54, who are absent from the workforce. Actually, that disturbing number does not include additional millions of Americans officially classified as employed, but trapped in low-skill, low-pay jobs with no benefits or job security — what economists term “precarious” work.
Given the only barely manageable personal debt loads carried by this large portion of the U.S. population, a succession of even modest keyrate hikes by the Fed could indeed reduce consumer spending enough to flatline GDP growth or worse, making good on Rosenberg’s warning at a Orlando summit last week.
That a vast and growing portion of working-age Americans are unemployable in an increasingly automated economy that Rosenberg labels a “fourth Industrial Revolution” is a crisis to which scant heed is paid by mainstream U.S. economists. Which makes Rosenberg and kindred spirits Robert Reich, Joseph Stiglitz and Paul Krugman, who also study household-income and labour-market conditions more intently than the tax and immigration policy changes that preoccupy most economists, the savants to monitor. Zuckerberg for Congress? Mark Zuckerberg says he isn’t head- ed for a career in politics, rumours to the contrary.
But the Facebook Inc. cofounder’s lengthy musings on public-policy issues in Facebook postings suggests otherwise.
So does the amply financed Chan Zuckerberg Initiative, a family foundation cofounded by Zuckerberg, 33, and his wife, Priscilla Chan, that funds equal-opportunity projects.
So do Zuckerberg’s annual leaves of absence from Facebook to travel the U.S., meeting children in juvenile detention, opioid addicts, and once-proud factory workers laid off by automation.
Some of those contacts endure, like the undocumented immigrant student whom Zuckerberg is still mentoring.
Zuckerberg’s commencement address at his Harvard College alma mater last Thursday, studded with public policy prescriptions, also did nothing to squelch the speculation about a Zuckerberg in the public arena, though with a set of progressive ideas perhaps better suited to Canada than the current political climate of his homeland.
Zuckerberg focused on socialwelfare issues, including the need for affordable daycare; subsidized lifetime learning and retraining; fairer wealth distribution through tax reform; and experimenting with a universal basic income, as Ontario is doing this year in three pilot projects.
“Let’s face it, there is something wrong with our system when I can leave here (Harvard) and make billions of dollars in 10 years, while millions of students can’t afford to pay off their loans, let alone start a business,” Zuckerberg told the freshly minted Harvard grads.
“Giving everyone the freedom to pursue purpose isn’t free, of course. People like me should pay for it. Many of you will do well and you should too.”
“Zuck” even talked about “a new social contract” that his millennial generation should create, referring to a term coined in the 18th century.
A computer geek who knows his Jean-Jacques Rousseau — tough to fit on a lawn sign, but it would be interesting to see Zuck make a go of it. The short circuit at Tesla Faraday Future, the Gardena, Calif.based automaker once billed as a “Tesla killer,” has about two months to raise $1 billion (U.S.), or it will pass into memory by late summer.
Faraday lost its sole source of financing when Chinese billionaire Jia Yeuting’s LeEco conglomerate ran out of cash last year.
When Faraday buys the farm, watch for investors to wake up to the ill-fated Faraday-LeEco conglomerate’s similarity to Tesla Inc.
This year, Tesla’s eye-popping market cap of $54 billion eclipsed that of Ford Motor Co., General Motors Co., Honda Motor Co. Ltd. and Nissan Motor Co. Ltd.
But last November, Tesla cofounder Elon Musk made Tesla spend $2 billion it couldn’t really afford to buy Musk’s Solar City, a chronic moneyloser in the solar-panel business.
You can imagine a risk-resistant investor taking a chance on Tesla at its current price, but only if Tesla was a “pure play” in the future of automaking.
Instead, Tesla investors are betting on an automaker that by now is only as zealous in developing trail-blazing electric vehicles (EVs) as Tesla’s entrenched rivals, with their vastly greater mass-production, financing, marketing and distribution prowess.
And into the mix, the Tesla investor gets an installer of residential roof panels whose order book has been shrinking for years.
The end game for Tesla, which at best is expected turn out less than 3 per cent the number of vehicles that Ford does this year, is to be bought by one of the major automakers.
So, the question: Would Volkswagen AG or Toyota Motor Corp. pay $54 billion for Tesla, lock, stock and patent trove, when for the same amount it could buy GM without Solar City, whose “synergy” with Tesla exists mostly in Elon Musk’s head?
Facebook’s Mark Zuckerberg may have shown his hand when he talked public policy during a commencement speech at Harvard, David Olive writes.