Winnipeg Free Press

Winnipeg Free Press (Newspaper) - August 13, 2024, Winnipeg, Manitoba WINNIPEGFREEPRESS.COM ● B7 BUSINESS TUESDAY, AUGUST 13, 2024 View runs counter to decades of economic research Vance backs Trump’s call for presidential ‘say’ on Federal Reserve’s interest rate policy W ASHINGTON — JD Vance has endorsed former president Donald Trump’s call for the White House to have “a say” over the Federal Reserve’s interest rate policies — a view that runs counter to decades of economic research suggesting that politically independent central banks are essential to controlling inflation and maintaining confidence in the global financial system. “President Trump is saying, I think, something that’s really important and actually profound, which is that the pol- itical leadership of this country should have more say over the monetary policy of this country,” the Republican vice-presidential nominee said in an interview over the weekend. “I agree with him.” Last week, during a news conference, Trump responded to a question about the Fed by saying, “I feel the president should have at least a say in there, yeah, I feel that strongly.” Economists have long stressed that a Fed that is legally independent from elected officials is vital because polit- icians would almost always prefer for the central bank to keep interest rates low to juice the economy — even at the risk of igniting inflation. “The independence of the Fed is something that not just economists, or investors, but citizens should place a high value on,” said Carl Tannenbaum, chief economist at Northern Trust, a wealth management firm. Tannenbaum pointed to the recent experience of Turkey, where the auto- cratic President Recep Tayyip Erdogan forced the nation’s central bank to cut rates in response to inflation, with “hor- rible results.” Inflation spiked above 65 per cent before Erdogan appointed dif- ferent leaders to the central bank, who have since raised its key rate to 50 per cent — nearly ten times the Fed’s cur- rent rate of 5.3 per cent. By adjusting its short-term interest rate, the Fed influences borrowing costs for consumers and businesses, including for mortgages, auto loans and credit card borrowing. It can raise its rate, as it did aggressively in 2022 and 2023, to cool spending and slow infla- tion. The Fed also often cuts its rate to encourage borrowing, spending and growth. At the outset of the pandemic, it cut its rate to near zero. On Saturday, Vice-President Kamala Harris said she couldn’t “disagree more strongly” with Trump’s view. “The Fed is an independent en- tity, and, as president, I would never interfere in the decisions that the Fed makes,” she said. President Richard Nixon’s pressure on Fed Chair Arthur Burns to keep rates low leading up to the 1972 presi- dential election has been widely blamed for accelerating rampant inflation that wasn’t fully controlled until the early 1980s, under Chair Paul Volcker. Tannenbaum warned of potentially serious consequences if the Trump- Vance proposal for the White House to have some role in Fed policymaking were to take effect. “If it does carry through to proposed legislation … that’s when I think you would begin to see the market reaction that would be very negative,” he said. “If we ignore the history around monet- ary policy independence, then we may be doomed to repeat it.” Trump has a combative history with the Fed’s current chair, Jerome Pow- ell, whom Trump appointed in 2018. As Powell oversaw a series of modest in- terest rate hikes in 2018, Trump began attacking him, calling Powell “my biggest threat” that October after the stock market fell sharply. In 2019, the Fed began to cut rates amid a slowdown in manufacturing and uncertainty over the impact of Trump’s trade fight with China. In August that year, he asked on social media wheth- er Powell was a greater enemy than China’s president Xi Jinping. He later ridiculed Fed officials as “boneheads.” As COVID ravaged the economy in 2020, Trump attacked Powell for not cutting rates fast enough, and said he could fire Powell, though his legal power to do so is unclear. “I used to have it out with him, I had it out with him a couple of times very strongly,” Trump said last week. “I fought him very hard. We get along fine.” Historically, it has been common for many presidents, from Harry Truman through Ronald Reagan, to press Fed chairs to cut rates or to refrain from hiking them, though they typically did so in private meetings. Starting with President Bill Clinton in 1993, however, for about a quar- ter-century until Trump, presidents took a hands-off approach, said Sarah Binder, a political scientist at George Washington University and author of a book on Fed independence. “Presidents really restrained them- selves,” she said. “They didn’t talk about monetary policy. They didn’t talk about interest rates. They were convinced that maybe if they just kept their mouth shut, the Fed would do the right thing.” When Trump attacked Powell in 2018 and 2019, the Fed chair received public and private support from members of Congress, including Republicans. But that was partly because the economy was doing well, Binder noted. When the economy struggles, she said, criticism of the Fed is often more widespread. Should Trump win re-elec- tion and the economy were to sour, it’s hard to know whether members of Con- gress would defend Powell again. “If the economy is much worse off, the question is, who comes to the Fed’s defence?” Binder asked. “And I think that’s really financial markets. They’re really the ones that are going to react in real time to what Trump is threatening to do.” — The Associated Press CHRISTOPHER RUGABER ALEX BRANDON / THE ASSOCIATED PRESS FILES Republican vice-presidential nominee JD Vance: ‘President Trump is saying, I think, something that’s really important and actually profound.’ SpaceX announces new private mission on first human polar orbit spaceflight SPACEX has lined up more business for its human spaceflight program with a private launch from Florida that will take its passengers on a polar orbit for the first time. The mission called Fram2 that could launch from the Space Coast before the end of 2024 is headed up Chun Wang of Malta, according to a post on the SpaceX website. Wang is an entrepre- neur who made a fortune in cryptocur- rency and an avid adventurer. Along for the ride will be fellow adventurers Eric Philips of Australia, Jannicke Mik- kelsen of Norway and Rabea Rogge of Germany. Mikkelsen will take the role of mission commander and Philips the role of pilot. SpaceX has flown 13 missions and 50 humans so far on its fleet of four Crew Dragon capsules, and was working on a fifth. It’s unclear if Fram2 will fly on the new Crew Dragon, but it will fea- ture a cupola attachment as opposed to the docking apparatus needed for when Crew Dragon spacecraft fly to the International Space Station. The Crew Dragon Resilience flew with such an attachment, allowing for better views of space and Earth, when it took up billionaire Jared Isaacman for the first time on the Inspiration4 mission in 2021. That three-day flight was also an all-private crew that or- bited the Earth. He’s set to fly again on Resilience as early as Aug. 26 on a launch from Kennedy Space Center on the Polaris Dawn mission, also an orbit- al flight, but without the cupola, and in- stead a hatch that will allow for the first commercial tethered spacewalk. Fram2 is named after a ship Fram, built in Norway that was used to help explorers such as Roald Amundsen get to the Arctic and Antarctica in the late 1800s and early 1900s. When it launches, Fram2 “will be the first human spaceflight mission to ex- plore Earth from a polar orbit and fly over the Earth’s polar regions for the first time,” according to SpaceX. “Wang aims to use the mission to highlight the crew’s explorational spir- it, bring a sense of wonder and curios- ity to the larger public, and highlight how technology can help push the boundaries of exploration of Earth and through the mission’s research,” SpaceX posted. Most of SpaceX Crew Dragon flights go to the ISS, and most for NASA. The first Crew Dragon mission with hu- mans came in May 2020 on the Demo- 2 mission. SpaceX has since flown up eight more crew rotation missions with the Crew-8 astronauts currently on board the ISS. Crew-9 is slated to fly up as early as Sept. 24 to relieve them. SpaceX has also been contracted by Axiom Space for its three private mis- sions so far to the ISS, and is slated to fly a fourth as early as November. With Axiom Space’s private missions and the two so far with Isaacman, Fram2 could be the seventh private astronaut mission on SpaceX’s mani- fest. It could launch from either KSC or Cape Canaveral Space Force Station’s Space Launch Complex 40, which will use the Crew-9 mission as its first hu- man spaceflight after SpaceX installed a crew access arm at the pad. Fram2 will last three to five days and venture to an altitude of between 264 to 279 miles “leveraging insight from space physicists and citizen scientists to study unusual light emissions resem- bling auroras,” SpaceX posted. The plan is to study the green and mauve thermal emissions and conduct other research to study the effects of spaceflight on the human body, includ- ing taking the first human x-ray images in space. — Orlando Sentinel RICHARD TRIBOU COURTESY SPACEX / TNS The private crew of the SpaceX Crew Dragon mission Fram2 will include, from left, Eric Philips, Jannicke Mikkelsen, Chun Wang and Rabea Rogge. U.S. consumers’ delinquency fears rise to highest level since 2020 U.S. consumers are increasingly con- cerned about falling behind on their bills, with delinquency expectations rising to the highest level since the onset of the pandemic. The average likelihood that consum- ers would miss a minimum debt pay- ment in the next three months rose to 13.3 per cent, the highest level since April 2020, according to a Federal Re- serve Bank of New York survey re- leased Monday. That stress increased the most for people earning less than $50,000 a year and for those with a high school degree or less. Perceptions of credit access com- pared to a year ago also deteriorated, the survey showed, and expectations of household spending growth fell to the lowest level in more than three years. Workers’ views on the labour market were more mixed. While Americans are less fearful of losing their jobs and of higher unemployment over the next year, consumers said they expect it will be harder to find a job after becoming unemployed. The findings line up with broader economic data that show the labour market is weakening and more con- sumers are falling behind on debt pay- ments. Hiring slowed in July and the unemployment rate rose unexpectedly to 4.3 per cent, the highest level in near- ly three years. A separate New York Fed report on household debt and credit published last week showed that the share of auto loan balances and credit card debt becoming newly delinquent were the highest in at least a decade. Fed officials are putting more focus on employment now that inflation has cooled substantially and the labour market is softening. Policymakers have held their benchmark rate at a two-dec- ade high for more than a year, but have signalled they’ll start to cut borrowing costs as soon as September if inflation continues to decline. The Survey of Consumer Expect- ations released Monday showed that short-term and long-term inflation expectations remained stable, with the median one-year inflation outlook holding at 3 per cent and the five-year forecast unchanged at 2.8 per cent. Ex- pectations for what inflation will be in three years, however, dropped by a 0.6 percentage point to 2.3 per cent, the lowest since the survey began in 2013. — Bloomberg News JONNELLE MARTE Universal Music inks licensing deal expansion with Meta UNIVERSAL Music Group has signed a major expansion of its licensing deal with social media giant Meta, parent of Facebook and Instagram, which for the first time will allow users to share li- censed tunes from the label’s artists on messaging service WhatsApp. The companies Monday said the re- newed deal will also boost commer- cial opportunities for Universal Music Group performers and songwriters on platforms including Facebook, In- stagram, Messenger, Horizon and Threads. “This partnership builds on the rec- ognition that music can help connect us and bring fans, artists, and song- writers closer together, not only on established platforms such as Insta- gram and Facebook, but also in new ways on WhatsApp, and more,” said Tamara Hrivnak, Meta’s vice president of music and content business develop- ment, in a statement. Universal Music first licensed songs to Facebook in 2017 in a landmark pact that allowed users to share videos con- taining music on the social media plat- form. Since then, music has become only more important on social media, powering viral posts on apps such as Instagram and TikTok. “Since our landmark 2017 agreement, Meta has consistently demonstrated its commitment to artists and songwriters by helping to amplify the importance music holds across its global network of engaged communities and plat- forms, creating new opportunities and applications where music amplifies and leads engagement and conversations,” said Michael Nash, chief digital officer and executive vice president of Univer- sal Music Group in a statement. While UMG was able to reach an agreement with Meta, its negotiations with TikTok were not as smooth. In January, the two sides had a fierce public dispute, with UMG alleging TikTok was not paying “fair value for the music” and TikTok accusing UMG of putting “their own greed above the interests of their artists and songwrit- ers.” During the disagreement, songs from popular UMG artists including Billie Eilish and Olivia Rodrigo van- ished from TikTok. The companies eventually resolved their issues, an- nouncing a deal in May. — Los Angeles Times ;