Latest news with #RobertRubin
New York Times
08-07-2025
- Business
- New York Times
Lawrence Summers: This Law Made Me Ashamed of My Country
Last week, Robert Rubin and I warned of the many macroeconomic risks created by the domestic policy bill President Trump signed into law on Friday. I stand by our judgment that it will most likely slow growth, risk a financial crisis, exacerbate trade deficits and undermine national security by exhausting the government's borrowing capacity. This is more than ample reason to regret its passage. I want to return to the topic after conversations with health professionals, including my daughters, who practice medicine and social work in rural New Hampshire. They made me realize that a focus on macroeconomics, while valid, misses the human brutality that I now see as the most problematic aspect of the legislation. I don't remember on any past Fourth of July being so ashamed of an action my country had just taken. Over the holiday weekend, while the president was celebrating tax cuts that over 10 years will deliver an average of more than $1 million to families in the top 0.1 percent of the income distribution, medical professionals were considering questions like these: What should they say to seriously disabled patients, who can live at home only because Medicaid pays for rides to their medical appointments, now that those people could lose that coverage? What should they recommend to the relatives caring for poor patients at home, who will no longer be able to work when payments for home-health aides are no longer be available? How should they advise the hospital to handle patients who can't afford rehab or nursing facilities and can't live at home, but who currently occupy rooms desperately needed by acutely ill patients? Should they still feel proud of and committed to the work of giving comfort to the lonely, poor and elderly, when their country's leaders has decided that more money for the most fortunate is a higher priority? How can they face patients who will be evicted from the hospital with perhaps as little as a cab voucher when their stays end? After we talked about these questions, it occurred to me to think about precedents in American history — other moments when the social safety net was cut — to see what followed. Did the feared consequences materialize? Were errors corrected? I am plenty negative about this president and this moment. Even I was unpleasantly surprised by what I learned. This round of budget cuts in Medicaid far exceeds any other cut the United States has made in its social safety net. The approximately $1 trillion reduction, over 10 years, represents about 0.3 percent of gross domestic product. Previously, the most draconian cuts came with President Ronald Reagan's 1981 tax law. But they were far smaller — $12 billion over 10 years and 0.03 percent of G.D.P. The Trump law will remove more than 11 million people from the rolls, compared with about three million under the Reagan cuts. Other noteworthy reductions to the social safety net, such as the Clinton-era welfare reform, were even smaller. Because Medicaid is a state-level program and varies widely across the country, economists can evaluate the impact of alternative policies. A number of studies suggest that removing one million people from the rolls for one year could result in about 1,000 additional deaths. It follows that removing more than 11 million people for a decade would likely result in more than 100,000 deaths. Because this figure fails to take account of the degradation of service to those who remain eligible — fewer rides to the hospital, less social support — it could well be an underestimate. Want all of The Times? Subscribe.
CNBC
07-07-2025
- Business
- CNBC
America's Deficit Reckoning: How the U.S. debt spiral could spark a crisis
Independent analyses – ranging from Yale University to the Wharton School to the Congressional Budget Office – have each said that President Donald Trump's budget plan will add trillions of dollars to the U.S. deficit over the next 10 years. What's at stake if the deficit continues on its upward trajectory? This year, the U.S. deficit is exceeding 6% of GDP, a level roughly 63% higher than the average in the past five decades. And unlike past spikes, the current one isn't driven by war or economic crisis, leading many to raise concerns about why America might be playing with fire when it comes to its fiscal health. CNBC's "America's Deficit Reckoning" explores the consequences – not how to solve the budget deficit, but what's at stake if we don't. Watch the video to learn more. Through interviews with more than a dozen top officials, economists, and investors, including Former Treasury Secretary Robert Rubin, macro investor Ray Dalio, and Former Chairman of the Joint Chiefs of Staff Mike Mullen, CNBC homes in on three potential areas of fallout: the markets, the economy, and international relations. Markets at Risk: Persistent deficits have many prominent investors on high alert. Dalio says that the U.S. is showing "classic signs" of a late-stage debt cycle, ascribing a 50% chance of trauma in the next three years. PIMCO's Chief Investment Officer Dan Ivascyn was a bit more sanguine – saying that he thinks a crisis of investor confidence is unlikely in the U.S., but has been diversifying away from Treasuries. That mirrors some recent activity in the bond market, which hasn't been overtly reacting to the new budget plan. Still, the bond vigilantes will police the deficit when they feel it's necessary: Ed Yardeni, who coined the term in the early '80s, says they're more powerful than ever. Economic Strain: If Americans benefit from policies like tax cuts and higher spending, why should they care about the longer-term implications of wider deficits? The most apparent risk to the economy is inflation, which would keep interest rates higher and "crowd out" private investment. Additionally, when interest payments become a higher proportion of Federal outlays, they drain resources that would otherwise go to other budget line items, says Maya MacGuineas of the Committee for a Responsible Federal Budget. And it hinders the government's ability to respond in the event of an emergency. But some of the worst economic effects will be felt by future generations, who, according to one GenZ'er interviewed by CNBC, are already concerned the deficit will impede their ability to collect social services. International Implications: Admiral Michael Mullen, former chairman of the Joint Chiefs of Staff, once called the national debt the "greatest threat to national security." His concern was that as debt levels increase and rates remain higher, that it could squeeze discretionary defense spending. As historian Niall Ferguson warns: a great power that spends more on interest payments than defense breaches a threshold that historically has preceded a decline. The U.S. crossed that red line last year. There's also a significant interdependence between the U.S. and its foreign creditors – especially China and Japan, so if global investors begin to truly question America's fiscal health, the ripple effects could extend beyond the bond markets. The Clock Is Ticking: Experts at the Penn Wharton Budget Model estimate the U.S. has less than 20 years to fix its fiscal trajectory. After that, even aggressive tax hikes or spending cuts may not be enough to stave off default — implicit or otherwise. While the U.S. can technically print its way out of debt, doing so risks runaway inflation, economic contraction, and geopolitical fallout. As former Treasury Secretary Rubin puts it, we may be entering uncharted territory. The time to prepare is now—before markets force our hand.
Yahoo
10-06-2025
- Business
- Yahoo
Financial Stocks Have Topped the Charts for the Past Year
June 9, 2025 (Maple Hill Syndicate) - The best performing sector in the stock market for the past year has been the unsung financial sector. Its 24% return through May 31 was nearly double the return on the market as a whole. Unlike technology or biotech, financial stocks don't get people very excited. There's no tantalizing hint of instant riches from investing in banks, insurance companies, credit-card companies and the like. Where's the glamor? Yet many financial stocks, in their unobtrusive way, have been excellent investments over the years. In the past decade, Mastercard Inc. (NYSE:MA) has returned 577%, Visa Inc. (NYSE:V) 481%, J.P. Morgan Chase & Co. (NYSE:JPM) 419%, American Express Co. (NYSE:AXP) 341%, and Goldman Sachs Group Inc. (NYSE:GS) 257%. For comparison, the Standard & Poor's 500 Total Return index has returned 243%, including dividends. Here are five financial stocks that I think are promising investments now. Goldman Sachs It's no coincidence that three U.S Secretaries of the Treasury Robert Rubin, Henry Paulson and Steven Mnuchin were Goldman Sachs (NYSE:GS) alumni. Goldman in my opinion is the most prestigious investment banking firm in the country, though Morgan Stanley would dispute that. In the past ten years, Goldman has grown its revenue by an average of 9% a year, and its profits by an average of 14%. Analysts are divided on the stock, with 13 recommending it and 10 giving it a tepid hold. I notice, however, that some analysts for whom I have considerable respect are in the buy camp. That includes Kian Abouhossein of J.P. Morgan and Mike Mayo of Wells Fargo. J.P Morgan I've done business with J.P. Morgan (NYSE:JPM) for about 17 years (it is the custodial broker for my hedge fund), so I may not be completely objective. But I find the value compelling here. The company posted a strong return on equity, 17%, in the past four quarters. Yet the stock is fairly cheap, at 13 times earnings. In addition to running a large brokerage and investment banking operation, the company owns Chase Bank, one of the largest commercial banks in the U.S. Jamie Dimon, the CEO since 2006, plans to retire within several years, but in the meantime, I view him as a big plus. In the past 30 years, J.P. Morgan has been profitable every year, even in the Great Recession of 2008. The U.S. government has turned to it to take over troubled firms such as Bear Stearns in 2008 and First Republic Bank in 2023. Progressive Boasting a sparkling 34% return on equity in the past year, Progressive Corp. (NYSE:PGR) is an auto and home insurer based in Mayfield Village, Ohio. You may know it from its quirky TV commercials, featuring wry humor and a woman named Flo. In auto-insurance market share, Progressive has been gaining on rival State Farm and has moved well ahead of Allstate. In home insurance, Progressive has also gained market share, but I worry that it has heavy exposure to hurricane-plagued Florida. The company stopped issuing new home insurance policies in Florida in 2022, and has said that it won't renew certain existing policies there. The stock is up 935% over the past decade. East West Based in Pasadena, California East West Bancorp. (NASDAQ:EWBC) does some business in China and serves the Chinese-American population in many U.S. cities. Despite a terrible relationship between the U.S. and China, East West's stock has climbed 33% in the past year. If that relationship ever thaws out, I would expect East West to benefit. Meanwhile, East West has posted a respectable return on equity in the past year, above 15%. The stock seems modestly priced to me at about 11 times earnings. The bank's executive team, led by Dominic Ng as chief executive officer, is well aware of the touchy state of U.S.-China relations. The word China does not appear once in the bank's 2024 annual report. Main Street Main Street Capital Corp. (NYSE:MAIN), from Houston, Texas, invests in, and lends to, medium-sized and small private businesses. Its web site lists more than 100 companies with which it has done business. The firm has been profitable 19 years in a row, and has been publicly traded since 2007. Analysts disdain it (five hold ratings and only one buy), partly because they believe it may have to cut its dividend. It so, the cut will come from a rich starting point. The dividend yield right now is 7.2%. Disclosure: I own J.P. Morgan shares personally and for most of my clients. I own Goldman Sachs and Progressive for some clients. My wife, who is a portfolio manager at my firm, owns Progressive personally and for clients. John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. He or his clients may own or trade securities discussed in this column. He can be reached at jdorfman@ This article first appeared on GuruFocus. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Zawya
16-04-2025
- Business
- Zawya
US 'strong dollar' policy rings increasingly hollow: McGeever
(The opinions expressed here are those of the author, a columnist for Reuters.) ORLANDO, Florida - U.S. Treasury Secretary Scott Bessent on Monday repeated the mantra we've heard from his nine predecessors: "We have a strong dollar policy." While the words are familiar, the conviction behind them may have softened. It was former Treasury Secretary Robert Rubin who, 30 years ago in early 1995, declared that "a strong dollar is in our national interest," articulating what has become one of the fundamental tenets of the modern global financial system. The 'strong dollar' policy has always been about more than just the exchange rate, although a more expensive currency can help keep inflation and interest rates low. This policy has represented the world's trust in the U.S., and, consequently, the greenback's role as the lynchpin of the global economy. But times have changed since 1995. A lot. The world today is losing faith in the dollar, losing trust in the government institutions backing it, and losing confidence in America's role as leader of the 'free world'. Back then, the North American Free Trade Agreement was in its infancy, China was about to emerge as an economic force, globalization was accelerating, trade and regulatory barriers were being torn down, and global capital flows were exploding. The dollar was pivotal to all that and it soared for the next seven years, right up until the dotcom crash. The dollar slumped around 40% in the following seven years to the Global Financial Crisis and then drifted for several more years after its post-Lehman surge. But this didn't stop central banks from growing their dollar FX reserves to $4.5 trillion in 2015 from around $1 trillion in 2001. That was a strong dollar, the world's reserve currency in its prime. PRESSURE AT THE LONG END The dollar has remained dominant by any measure. Central banks' dollar holdings have largely flat-lined for the past decade, but private sector buyers have increased their exposure significantly. The greenback is still the most dominant currency in FX reserves, global trade and financial market trading. But as Steven B. Kamin, senior fellow at the American Enterprise Institute, and Mark Sobel, U.S. chairman at the Official Monetary and Financial Institutions Forum, have written, future dollar dominance rests on three factors: "preserving the underpinnings of the dollar's global role; maintaining trust in the U.S. as a reliable partner; and avoiding overuse or abuse of financial sanctions." Doubt now hangs over all three as the Trump administration's 'America First' agenda has caused foreign investors to look at the dollar in a new light. Last November, before his confirmation as Chair of the U.S. Council of Economic Advisers, Stephen Miran published a paper, 'A User's Guide to Restructuring the Global Trading System', in which he argued that the dollar, from a trade perspective, is "persistently over-valued in large part because dollar assets function as the world's reserve currency." Perhaps more importantly, he also noted that while Trump supports the dollar's reserve status, he had floated "substantial changes" to dollar policy. "Sweeping tariffs and a shift away from strong dollar policy can have some of the broadest ramifications of any policies in decades, fundamentally reshaping the global trade and financial systems." This will be achieved by a range of policies aimed at getting the rest of the world to share more of the "cost" America bears for providing the reserve currency, Miran argues, rather than replacing the dollar. Tariffs are clearly Trump's policy of choice. The dollar will fluctuate in value and its dominance as the world's sole reserve currency may continue to slowly diminish. The Treasury Secretary will probably always pay lip service to the "strong dollar" policy - they have a duty, after all, to help keep borrowing costs low. "It can be wheeled out in times of need and when the Treasury Secretary worries about the long end of the curve," says Steve Englander, head of global G10 FX Research at Standard Chartered. Bessent's reaffirmation this week of Washington's 30-year-old stance, therefore, was perhaps no surprise. But it probably fell on deaf ears. (The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Nia Williams)
Reuters
15-04-2025
- Business
- Reuters
US 'strong dollar' policy rings increasingly hollow: McGeever
ORLANDO, Florida, April 15 (Reuters) - U.S. Treasury Secretary Scott Bessent on Monday repeated the mantra we've heard from his nine predecessors: "We have a strong dollar policy." While the words are familiar, the conviction behind them may have softened. It was former Treasury Secretary Robert Rubin who, 30 years ago in early 1995, declared that "a strong dollar is in our national interest," articulating what has become one of the fundamental tenets of the modern global financial system. The 'strong dollar' policy has always been about more than just the exchange rate, although a more expensive currency can help keep inflation and interest rates low. This policy has represented the world's trust in the U.S., and, consequently, the greenback's role as the lynchpin of the global economy. But times have changed since 1995. A lot. The world today is losing faith in the dollar, losing trust in the government institutions backing it, and losing confidence in America's role as leader of the 'free world'. Back then, the North American Free Trade Agreement was in its infancy, China was about to emerge as an economic force, globalization was accelerating, trade and regulatory barriers were being torn down, and global capital flows were exploding. The dollar was pivotal to all that and it soared for the next seven years, right up until the dotcom crash. The dollar slumped around 40% in the following seven years to the Global Financial Crisis and then drifted for several more years after its post-Lehman surge. But this didn't stop central banks from growing their dollar FX reserves to $4.5 trillion in 2015 from around $1 trillion in 2001. That was a strong dollar, the world's reserve currency in its prime. PRESSURE AT THE LONG END The dollar has remained dominant by any measure. Central banks' dollar holdings have largely flat-lined for the past decade, but private sector buyers have increased their exposure significantly. The greenback is still the most dominant currency in FX reserves, global trade and financial market trading. But as Steven B. Kamin, senior fellow at the American Enterprise Institute, and Mark Sobel, U.S. chairman at the Official Monetary and Financial Institutions Forum, have written, future dollar dominance rests on three factors: "preserving the underpinnings of the dollar's global role; maintaining trust in the U.S. as a reliable partner; and avoiding overuse or abuse of financial sanctions." Doubt now hangs over all three as the Trump administration's 'America First' agenda has caused foreign investors to look at the dollar in a new light. Last November, before his confirmation as Chair of the U.S. Council of Economic Advisers, Stephen Miran published a paper, 'A User's Guide to Restructuring the Global Trading System', in which he argued that the dollar, from a trade perspective, is "persistently over-valued in large part because dollar assets function as the world's reserve currency." Perhaps more importantly, he also noted that while Trump supports the dollar's reserve status, he had floated "substantial changes" to dollar policy. "Sweeping tariffs and a shift away from strong dollar policy can have some of the broadest ramifications of any policies in decades, fundamentally reshaping the global trade and financial systems." This will be achieved by a range of policies aimed at getting the rest of the world to share more of the "cost" America bears for providing the reserve currency, Miran argues, rather than replacing the dollar. Tariffs are clearly Trump's policy of choice. The dollar will fluctuate in value and its dominance as the world's sole reserve currency may continue to slowly diminish. The Treasury Secretary will probably always pay lip service to the "strong dollar" policy - they have a duty, after all, to help keep borrowing costs low. "It can be wheeled out in times of need and when the Treasury Secretary worries about the long end of the curve," says Steve Englander, head of global G10 FX Research at Standard Chartered. Bessent's reaffirmation this week of Washington's 30-year-old stance, therefore, was perhaps no surprise. But it probably fell on deaf ears. (The opinions expressed here are those of the author, a columnist for Reuters.) By Jamie McGeever; Editing by Nia Williams Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
