The People’s Bank of China (PBoC) is instituting 30 stimulus measures to contain economic fallout from the Wuhan coronavirus that has killed more than 800 people worldwide and infected 24,000 others. It is widely anticipated that the outbreak is going to hurt the world’s second-largest economy – potentially into the summer – and experts project Beijing could suffer to the tune of approximately $60 billion. The central bank is employing monetary policy tools to limit the damage.
Liberty Nation reported that the PBoC injected more than $200 billion in liquidity into cozy stocks and that appears to have provided some short-term relief to global financial markets. Pan Gongsheng, deputy head of the PBoC, recently revealed that slashing the reserve requirement ratio (RRR) for the second time in a month could be the next weapon in its arsenal.
Quarantative Easing in China?
The RRR is the minimum amount of reserves commercial banks are mandated to hold. Over the last 18 months, the central bank has cut the ratio more than a dozen times to spur lending and stimulate growth. What happens if financial institutions do not possess enough reserves to cut withdrawals?
Over the last several months, there have been many incidents of bank runs throughout the country. It has become a swelling problem and the authorities are beginning to worry as depositors fear their banks are on the cusp of collapse. What if these concerns become more widespread and customers demand their capital back? If these banks are holding fewer reserves and lending more, how would they cover the withdrawals? Would these institutions become the next George Bailey? The government’s damage control could be to bail them out or force larger banks to absorb them.
The decision to again cut the RRR might provide some remedy to the economic downturn plaguing China right now, but eventually, the house of cards will crumble and the financial crisis will be huge.
AOC Can’t Econ
United States Rep. Alexandria Ocasio-Cortez (D-NY) recently proved that she is comedy gold and should stick around in politics even if she loses her November re-election bid. She recently went on a tirade against a well-known metaphor used to encourage people to succeed by their abilities, efforts, and wits. AOC was having none of it, telling a committee: “It’s a physical impossibility to lift yourself up by a bootstrap, by your shoelaces. It’s physically impossible!”
Many of her critics on social media either applied their palms to their foreheads or mocked her remarks. One of them was Ben Shapiro, who tweeted: “In other news, cats don’t actually have people’s tongues, nor do pots have the ability to call kettles black.”
If you watched her entire statement, the freshman congresswoman was ostensibly handwringing about income mobility, arguing that it is a myth. But is it? The data suggest income mobility is alive and well in America today. One of the premier studies from just a couple of years ago examined this economic concept and came across some interesting numbers regarding income distribution over 44 years. What did Washington University professor of social welfare Mark Rank and Thomas A. Hirschl of Cornell University find?
- 73% were in the top 20% for at least one year.
- 56% were in the top 10% for at least one year.
- 39% were in the top 5% for at least one year.
- 12% were in the top 1% for at least one year.
- 6% were in the top 1% for ten consecutive years.
And the death of the middle class? That is not the full story. According to the Census Bureau, middle-income households are moving into higher income categories. The percentage of workers making between $31,000 and $100,000 per year fell from 53.2% in 1967 to 42.1% in 2016, but the percentage of Americans earning $100,000 or more a year tripled from 8.1% to 27.7% (constant dollars). This is income mobility in action.
Ocasio-Cortez, herself, is an example of someone who may have had an annual salary of $26,000 (national average) as a bartender a few years ago but is now receiving a handsome six-figure salary. Incomes and people are not static, as some politicians apparently believe.
The Rich Are Illinnoyed
Illinois’ depressing fiscal situation has been well documented over the years, as has the state’s efforts to keep its head above water. One tactic employed in the Land of Lincoln is to target the rich. Has it been successful? Illinois is learning, like every other state, that you cannot tax the rich because they will flee.
Wirepoints is out with an update to a 2019 study that looked at the state’s tax situation and it found that even more of the affluent are heading for the exit. Using new Internal Revenue Service (IRS) data, the researchers found that tax filers with incomes topping $200,000 accounted for 11% of all filers who left the state. The interesting part? They represented more than half of the income lost to the exodus.
It is the same pattern as the previous year: Every month, Illinois is losing more tax filers than it gains – and a vast sum of cash is leaving with them. It seems some folks are in denial about this fact, including Chicago Magazine. The publication claimed the lost income is only due to the emigration of poor residents and not the wealthy.
If you have the resources to pick up your things and leave, wouldn’t you do so? This is something that many jurisdictions, whether it is Connecticut or Maryland, have failed from the beginning to understand. Other states will establish a tax-friendly infrastructure to compete for capital and attract taxpayers – both high- and middle-income. If you are a wealthy household, you will not bother staying behind and getting kicked around by politicians. The same reasoning applies at the national level: You can always leave the country and move to one that will give you the red-carpet treatment.
Read more from Andrew Moran.