Biden's High Interest Rates Have Caused Bank Lending To Stall

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Unleash Prosperity Hotline
Issue #840
08/22/2023
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1) Biden's High Interest Rates Have Caused Bank Lending To Stall
This chart forwarded to us by our friend and colleague John Catsimatidis of Red Apple Group shows a dangerous trend for the economy. Bank lending has slowed considerably this year (see red line) in the wake of the Fed’s 11 Interest rate hikes and the Silicon Valley Bank failure.

Meanwhile, the Fed reports that banks are tightening their lending standards as rates go higher.

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Business conditions are good right now, so this may be just a blip. Or it could be the start of a trend that will choke off access to credit for small businesses as they try to expand.

One thing is for certain: this is the worst possible time for the Fed’s to be raising bank capital requirements, which would further constrain lending – so, naturally, that’s what the FDIC wants to do.

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2) China the Land of EV Graveyards – Will the U.S. Be Next?
Bloomberg has published a series of photos of vast fields of abandoned electric vehicles parked tightly together and being overgrown by vegetation. These are apparently being found in cities all over China:

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The photographer helpfully explains:

"The shared bikes and EV graveyards are a result of unconstrained capitalism," Wu said. "The waste of resources, the damage to the environment, the vanishing wealth, it’s a natural consequence."

Yeah right -- nothing says capitalism like massive subsidies, bans on internal combustion vehicles, and all of the other tools of central planning communist China used to force EVs to be produced. That’s exactly the command and control strategy Biden is attempting here in the United States.

As the WSJ ed board correctly notes today:

The U.S. is seeking to imitate China’s economic model at the moment that its industrial policy fractures. Look no further than its collapsing electric-vehicle bubble, which is a lesson in how industries built by government often also fail because of government...

Chinese government support inflated EV investment and misallocated capital that could have been put to more productive uses. Now comes the destruction that invariably follows the government creation, which may be a harbinger for the U.S. as the Biden Administration emulates China’s EV industrial policy.

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3) The $1 Trillion Capital Flight From California and New York
We’ve been reporting the accelerating trend of financial services companies abandoning New York and California for new homes in Texas, Tennessee, and Florida – all states without a state income tax.

Elliott Management pulled up stakes for West Palm Beach. AllianceBernstein moved to Nashville. Charles Schwab moved to Dallas.

But we’ve had only anecdotal evidence of how big the impact has been. Until now. Bloomberg News has examined 17,000 corporate filings since late 2019 and concluded that California and New York have lost firms that managed close to $1 trillion of assets. They also took with them thousands of high-paying jobs and left many high-end office buildings empty.

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Taxes are a major factor in these relocations. Fisher Investment, which manages $211 billion in assets, abandoned green Washington state for suburban Dallas when that state’s Supreme Court recently outrageously declared the state could impose an income tax – a clear violation of the state’s Constitution.

When will the Blue State pols learn they are committing economic Suicide with their current policies? Instead of cutting their income taxes – which exceed 13% in California and New York – they are seeking a new federal tax break to offset their high state-local tax burdens.

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4) Catholic School Enrollment Way up in Florida Thanks to School Choice
This headline from the Catholic Archdiocese of Miami brought a smile to our faces.

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Tuesday, August 15, 2023

MIAMI - “Thanks to Step Up [Florida’s universal school choice program], archdiocesan schools are seeing enrollment increases and even waiting lists for the 2023-24 school year.
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According to the 2022-23 statistics from the Florida Conference of Catholic Bishops, 200,000 students are currently enrolled in Florida scholarship programs that are income-based or based on special need, including around 41,500 in Catholic schools throughout the state. In the Archdiocese of Miami, the number is around 12,000, with 59 of the Catholic schools here participating in at least one of the programs.”

Why is this good news whether you are Catholic or not? Because a rule of thumb throughout the country is that children get a better education at half the cost in Catholic schools.

One of many reasons for that is better discipline inside the classroom. Take a look at this photo of the teachers and administrators from the Miami Diocese. Can you imagine misbehaving in a class run by this Nun? She’d rip your knuckles with a ruler til they were bloody.

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5) Quote of the Day
From the late great economist Julian Simon’s Masterpiece “The Ultimate Resource” and a useful reminder that people create resources, they don’t destroy them (unless they are socialists).

“Both humans and chicken hawks eat chickens. But the more chicken hawks there are, the fewer the number of chickens. The more human beings the larger the population of chickens.”

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6) It's a Simple Lifestyle

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