USA finance and payments news summary | 16 June 2022
US Finance and Payments: Latest Updates
Headlines: 16 June 2022
- Federal Reserve announces plan to hike interest rates with historic speed to combat inflation
- Elon Musk sued for $258bn over Dogecoin "pyramid scheme"
- Biden considers removing Trump-era China trade tariffs in a bid to bring down prices
- Real wages fell 0.6 percent while inflation led to an average price increase of one percent across the market in May
- Bitcoin drops under $24,000
- 'Shrinkflation' reduces product sizes for consumers
Helpful links & Information
- Gas prices in US: Are gas prices more expensive in other countries?
- When will President Biden make a decision over student loan forgiveness.
- Do I have to pay taxes on Social Security benefits? How much?
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Congressional Republicans like to portray me as some sort of big spender, but let’s compare the facts.
Under my predecessor, the deficit exploded – rising every year.
Under my plan, we cut the deficit by $350 billion last year. And we’re cutting it by $1.6 trillion this year.
Porsche settles lawsuit claiming altered fuel efficiency data for $80 million
Porsche, along with parent company Volkswagen, have settled a class-action lawsuit against the German automaker to resolve claims it skewed emissions and fuel economy data on 500,000 Porsche vehicles in the United States. Eligible owners were awarded $80 million which will translate into payments of $250 to $1,109 per vehicle.
In 2015, Volkswagen disclosed it had used sophisticated software to evade emissions requirements in nearly 11 million diesel vehicles worldwide. The cheating scandal prompted criminal and civil actions in the US which the automaker settled by paying $20 billion.
Lego factory coming back to the US
Sixteen years after closing its factory in Connecticut, Lego has announced that it will invest over $1 billion to build a new factory, this time in Virginia. The company has plans for a 1.7-million square foot carbon-neutral plant, which when completed in 2025 will employ roughly 1,800 people.
The decision comes as the plastic brick toymaker has seen a surge in sales, jumping 27 percent last year, as families look for at home entertainment. By building the factory in one of its largets markets Lego can shorten the distance between where it makes its beloved plastic bricks and its customers avoiding supply chain issues.
SNAP, also known as food stamps, is a federally funded program which is administrated at a state level. Fortunately, back in April the Biden administration extended the national covid-19 public health emergency for a further 90 days, prolonging the additional Emergency Allotment benefits for states who request the aid.
However not all states have opted in to receive the additional support, meaning that not all Americans are eligible for the boosted payments. We take a look at the situation for Californians...
Biden promises to address supply chain issues
My administration is going to continue to do everything we can to lower the prices for the American people. And the Congress has to act, and they have been of late.
One of the key ways to fight inflation is by lowering the cost of moving goods through the supply chain.
When I first started talking about the supply chain, when I came here well over a year ago, the American people understandably wondered, “Supply chain — what…” — I mean, that’s not a usual part of their jargon every day. But they understand it fully now. They understand it.
Wall St slips further into a bear market
There's more bad news for investors as the S&P 500, a key barometer of strength of confidence in Wall Street, dropped further on Thursday, reaffirming the status of a bear market. Yesterday the Federal Reserve increased the interest rate by 0.75 percentage points, a huge increase, with the hope of addressing the high rate of inflation. However that effort is likely to affect confidence in the markets too.
Business Times explains: "The Dow Jones Industrial Average lost 741.5 points, ending down 2.4 per cent at 29,927.07 - its first close below 30,000 since January 2021."
The world’s richest man, Elon Musk, was sued for $258 billion on Thursday after a Dogecoin investor accused him of manipulating the price of the cryptocurrency and running a “pyramid scheme” to boost its value.
Plaintiff Keith Johnson filed the complaint in a federal court in Manhattan, accusing the Tesla CEO of racketeering. Johnson described himself as “an American citizen who was defrauded out of money by defendants’ Dogecoin Crypto Pyramid Scheme.”
Why has ELon Musk been sued for $256 billion?
Even for the world's richest man, a quarter of a trillion dollars is quite a lot of money. But that's how much the Tesla CEO has been sued for after a civil case was brought by someone who accused him of manipulating stocks of Dogecoin. The complaint claims that Dogecoin was little more than a pyramid scheme.
"Defendants were aware since 2019 that Dogecoin had no value yet promoted Dogecoin to profit from its trading," the complaint reads. "Musk used his pedestal as World's Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure and amusement."
US oil production has actually grown under Biden
Many of his political opponents have claimed that the current high price of gasoline is entirely President Biden's fault, but there are numerous factors contributing to the sharp increase. The United States has actually increase oil output under Biden's presidency, helped in part by the rush to return to a normal economy as the pandemic-era restrictions were lifted.
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The Social Security Administration (SSA) oversees the financial support programmes available to millions of Americans. Some receive disability support but the majority receive the retirement benefits. In February 2022 around 65 million people received some form of support from the SSA, of which more than 50 million claimed retirement benefits, 77.1 percent of the total.
Each year, the cost of living adjustment (COLA) adjusts the amount of money recipients of any of the support programmes receive. Usually this is close to the inflation rate during the three months preceding October. There was a 5.9 percent increase in benefits from 2021 to 2022 to reflect the high inflation at the end of 2021.
Biden wants fuel companies to up their production
The sky-high price of gasoline in the US is fueled by a number of factors, which have brought about a real scarcity in the product at a time when Americans have been returning to normal pre-pandemic routines. The sanctions on Russia-produced oil and contined supply chain disruption has made it more difficult to produce gasoline and diesel, but President Biden has called on companies to step up productions to meet the demand. He will hope that increased supply can bring down prices for Americans in the fairly near-term.
What is the average price of a gallon of gas today?
Finally slight respite for motorist in the United States after the average price of a gallon of gasoline falls slightly to $5.009, down from the figure of $5.014 recorded on Wednesday. This fractional fall will make very little difference for consumers but it may suggest that the continued increases are coming to an end.
The average price is calculated by AAA, who found that one year ago a gallon of gasoline cost just $3.075. Of course, across the country there is huge variation in the price that people are actually paying. In California, where fuel taxes are particularly high, the average is hovering around the $6.40 mark.
Why has the Federal Reserve upped interest rates?
In a bid to combat the sky-high rate of inflation, the Federal Reserve has announced that it will raise interest rates by three-quarters of a percentage point, the biggest increase since 1994. Fed Chair Jerome Powell is hoping that making borrowing more expensive will put the brakes on an economy that is growing incredibly fast, rising prices and making essentials too expensive for working Americans.
However interest rate hikes are a fairly blunt tool when attempting to address a problem as nuanced as inflation and there is concern that this move will simply curb economic growth without neccessarily bringing down prices.
The US is in the grips of serious supply chain disruption. You will have heard over the last weeks about the baby formula shortage and no doubt have been affected by the increasing price of fuel as many countries reduced their supply from Russia. Now, basic sanitary products are being threatened by shortages; tampons.
The 2022 Child Tax Credit is available to parents with dependents under the age of 17 at the end of the year, 31 December 2022, and who meet certain eligibility requirements. Under the enhanced credit, children aged 17 were eligible for the full amount of the much larger 2021 Child Tax Credit.
Little to no movement on student debt relief despite Biden pledges
The Washington Post published an article on May 27 detailing the Biden administration’s plan regarding student debt. According to three people familiar with the situation, there will be an upcoming announcement that the president will forgive $10,000 in debt for graduates earning under a certain limit.
But people are still waiting for an announcement, and payments are set to resume in September.
Could Biden be on his way out before the next election in 2024?
The New York Times reported Sunday that many Democratic lawmakers and party officials increasingly view Biden as “an anchor that should be cut loose in 2024,” citing interviews with 50 Democratic officials.
“There’s a lot of worry,” a senator told the Hill. “My focus is really on the midterms because we have to keep the Senate majority. If we don’t keep the Senate majority, the Biden presidency is gravely undermined and he may not be able to run again.”
Americans face record high gas prices
It's no secret that the price of gasoline has soared in 2022, fuelled by rampant high inflation and a serious supply chain issuethat is preventing producers from keeping up with demand. In recent days the average price of a gallon of gasoline has exceeded $5 for the first time in US history, while some states like California are recording prices above $6.
To understand how these price rises are affect normal families, and why it could be a key issue in the midterm elections, NBC News follows three families to see how their spending habits have changed.
Look, folks, today I’d like to speak about my top economic priority: fighting inflation. I understand Americans are anxious, and they’re anxious with good reason. I was raised in a household when the price of gasoline rose precipitously, it was the discussion at the table. It made a difference when food prices went up.
But we’ve never seen anything like Putin’s tax on both food and gas.
Americans should also understand our economy has unique strengths that we can build on. The job market is the strongest it’s been since World War Two, notwithstanding the inflation. We added another 390,000 jobs last month; 8,700,000 new jobs since I took office. An all-time record. Never that many jobs in that period of time. (Applause.)
Unemployment rate is near historic lows. Millions of Americans are moving up to better jobs and better pay.
Treasury Sec. Janet Yellen suggests that Biden may lift China tariffs
The topic of tariffs has been a crucial one for President Biden so far this year, leaving him to decide between economic stability and a desire not to fund oppositional regimes. Durnig his term in office, former President Trump introduced a raft of tariffs on Chinese-made products in a bid to support the US' domestic manufacturing sector. Speaking last week, Treasury Secretary Janet Yellen confirmed that Biden was considering a review of the tariffs but it has not yet been confirmed if he will be willing to take such a step, particularly ahead of the crucial November midterms.
Inflationary pressures are pushing up prices for Americans across the board; reducing their buying power and slashing household budgets in real terms. At the forefront of this inflation is the price of energy, which has surgednearly 35 percent since May 2021. The cost of many essential products has risen considerably in the past six months and the ban on Russian oil and gas has seen the price of gasoline rise even higher.
But it's not only in the United States that gasoline has soared to record prices and many countries around the world pay far higher amounts for a gallon of gas...
White House may look to address gas prices with windfall tax
One of the major frustrations for President Biden in recent months has been the willingness of oil companies in the US to take advantage of the volatile economic conditions to fatten their profit margins. While inflationary pressures and the sanctions on Russia-produced oil pushed up the price of fuels, a large part of the recent increase is thought to have come from some blatant profiteering on the behalf of some companies.
To address this, the White House is considering a windfall tax on companies' profits to disincentivise gasoline producers from pumping up the prices further. Senate Finance Chair Ron Wyden has called for a 21 percent surtax on oil company profits that are deemed excessive.
The maximum benefit one could receive in 2022 is $4,194 per month. However, this is only for people who retire at 70 beyond the full retirement age of 67. For the majority of Americans, the maximum retirement payment will be $3,345.
However, the 5.9 percent increase, while historic, has been proven to be measly in the face of continued increases in inflation in the first half of 2022. The most recent data shows a year-on-year inflation increase of 8.6 percent. With this number unlikely to fall significantly before October, expect an even greater COLA increase for 2023.
Fed to hike rates by the largest margin since 1994
In an effort to bring down inflation, the US Federal Reserve has announced it is to increase interest rates. Unlike previous plans, this increase will bump rates up by .75 percent, the largest single increase to interest rates since 1994.
So far markets are responding well to the news which aims to reduce the circulation of money through the economy to cool down prices.
In response to the news, Federal Reserve Chairmen Jerome Powell said “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common." This may provide some reassurance to investors who are concerned about their ability to access credit as the central bank works to reduce inflation.
Federal Reserve Chairmen Jerome Powell delivers remarks over historic interest rate increase
The Congressional mandate of the Federal Reserve is to create the conditions for maximum employment (ie. to have the maximum number of people who want a job to have one) and to price stability.
"Labor market is extremely tight and inflation is far too high," said Powell.
A rate increase of .75 percent has been announced and more increases, at a smaller scale are expected in the weeks and months ahead.
Overall, the economy saw a decrease in economic activity in the first quarter of 2022 as firms suffered from major fluctuations in supply leading to much uncertainty and b businesses began to plan.
Hello and welcome to AS USA
We'll bring you all the latest financial news from the United States as President Biden looks to address the high rate of inflation and nation-wide price rises.