US Treasury to Borrow $1 Trillion More, Maybe $2 Trillion

The following is Monday’s status check of developments in the US that can influence economic, health and political outcomes, collated by Mace News:

  • Phase 4 or otherwise known as the next coronavirus relief legislation is slowly – very slowly – coming together on Capitol Hill, with two and a half hours of talks Monday ending with some statements of minor progress and warnings there is no overall deal in sight. The unusual talks – without Senate Republicans represented, just the White House and congressional Democrats – are still widely expected to conclude in a few days, expectations that if dashed will cause a sudden recalibration increasing fears of a more severe balance of the year.

President Trump again Monday ruled out aid to states beyond pandemic expenses, saying Democrats want to bail them out despite past fiscal sins, but Trump’s has not repeated his objection to adding more than $200 to unemployment benefits which up until Friday had included an extra $600 a week and his current position is not clear. The Senate has set Saturday as the start of an August recess vital as campaign time in a presidential election year. At stake is the extent to which already long lines at food pantries and the demand for public emergency shelter will increase, while courts begin to process hundreds of thousands of eviction notices as temporary broad and individual moratoriums expire. Congressional Republicans are a non-factor in the talks because they are split internally of how much to spend – if anything – and so it is Democratic votes that will be crucial to passage.

  • Meanwhile, at the Treasury Department this week is when preliminary terms are set for refinancing of the national debt, as happens four times a year, with the credit markets told the amount of US debt instruments will be available to dealers. Except this time no one knows how much Treasury will need because the aforementioned negotiations haven’t reached a conclusion. Even placeholder amounts are staggering, with third quarter borrowing seen at $947 billion, $270 billion more than estimated in May, anticipating an $800 billion cash balance at the end of the quarter. A senior Treasury official, answering questions from Mace News, said to consider any of the numbers to be highly tentative. If Democrats and the White House just split the difference between their current demands, the estimates could be $1 trillion or more too low.
  • The virus itself continues to widen its breadth of attack across the country. While some previously hard-hit states are showing some signs of stabilisation, many additional hot spots are popping up and the ultimate metric, mortality, keeps increasing in the aggregate. The latest day’s US toll improved considerably, to 421, from days of above 1,000 but weekend counting is the least reliable and may be revised. Total deaths reached 155,800 (NYT Tracker) which was in jarring juxtaposition to President Trump’s statement in his evening briefing that, “I think we’re doing very well.” He also said that he told the same to his Virus Task Force Coordinator Deborah Birx, not the other way around. In a morning tweet he labelled Birx’s comments on CNN that the virus is “extraordinarily widespread” and that schools in hotpots should not have students in school “pathetic” but in the evening said he has “a lot of respect for her.”

Asked about plans to distribute any eventually approved vaccine, Trump said he might intervene in distribution plans but that would have nothing to do with politics. Military logistics experts are ready with hundreds of millions of doses of vaccines, he said, one of which would hopefully be approved “well in advance of the end of the year.” The Covid19 Tracking Project Monday said nationwide virus tests declined for the fifth day.

  • One hundred CEOs, some from America’s largest firms, sent a letter released Monday to members of Congress warning of catastrophic consequences in domino-like business closings and job losses if small business isn’t salvaged by Labor Day. Separately, Lord & Taylor, the nation’s oldest department store, said it would continue operations under the protection of bankruptcy court. Ditto for Tailored Brands, parent of Jos. A. Bank.
  • In a reference to a non-virus topic in his briefing, the sale of the super-popular social media app TikTok to a US buyer by its Chinese owner, Trump doubled down on his assertion that the US Treasury should benefit from the deal. He said that was like a real estate transaction in which the leaseholder is compensated for a transaction by a tenant. No one could recall any such precedent. Trump said Microsoft was not the only possible buyer but whoever saves TicTok US operations, they have 45 days to complete the deal. Some analysts wondered if China would retaliate, forcing divestment of some US property. Many US Internet-based firms are already banned in China.
  • President Trump returned to his favourite topic of late, his claim that mail-in ballots will ruin election day with fraud and delay. In his Monday briefing he said the Postal Service will be unable to handle the load of additional mail, saying Amazon and other on-line retailers are already overloading the mail service with packages they are not adequately compensating the postal service for delivering. He ignored the Postal Service assurances they are up to the job.
  • St. Louis Federal Reserve Bank President Jim Bullard and Chicago Fed President Charles Evans spoke Monday, not straying in any major way from the current Fed talking points, that a slowdown is under way and that the path to economic recovery is through control of the virus via the wearing of masks and social distancing.
  • President Trump Monday signed an executive order further restricting the kind of visas granted foreign technology workers, and in the process struck a blow at the highest paid government employee, someone about whom he has complained in the past is overpaid. In addition to limiting any government employment of foreign nationals the president’s order removed two board members overseeing the federally chartered Tennessee Valley Authority, telling them to remove its president who is paid $8 million a year but who is outside Trump’s authority. Trump originally got the idea of the visa restrictions after seeing a TV ad purchased by some TVA IT workers who said their jobs were being taken by foreigners. TVA indicated it would change policy and retain the workers.
  • The Global Times editor viewed as the mouthpiece of China authorities, Hu Xijin, says 60 China journalists will be expelled from the US Thursday and that “China will retaliate.”
  • The New York City prosecutor added more specificity in detailing its probe of the Trump Organisation, saying it is looking into “extensive and protracted criminal conduct.” Trump, in his evening briefing, dismissed the report as another among futile efforts of Democrats to damage him.
  • Isaias regained hurricane status just before heading into the Carolinas Monday night threatening a five-foot storm surge on the coast and possible tornadoes inland.
  • In Monday’s stock markets, another record high set by the Nasdaq which finished the day’s session up 1.42% or 157.52, its fourth straight winning session. FAANG stocks reasserted their leadership. Apple rose 2.5%, Amazon rose 1,7%, Netflix was up 1.99%, Facebook ended down 0,67%. For six months the Nasdaq is up 43.7% while the Dow is down 6.1%, a divergence that sees pandemic stay-at-home stocks pulling away from main-line industrial giants.

Colin Lambert

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