Hello everyone, welcome to today’s “Finance Extraordinaire”.
Today’s focus: Shocking: Study Suggests Cheap Goods Policy Will Lead to More Poverty! Trump Signals Deregulation, Federal Reserve Vice Chairman Resigns! Jack Defends Freedom of Speech, Silicon Valley Tycoons Shift Right! US December ADP Employment Data Unexpectedly Slows Significantly!
Relaxing regulations on businesses is one of Trump’s key economic policies, and deregulation is not only about easing regulations on various private enterprises, but also on the Federal Reserve.
On the eve of Trump’s inauguration, the Federal Reserve announced that Vice Chairman Michael Barr, in charge of finance, will resign shortly after Trump takes office.
On Monday, January 6, the Federal Reserve posted a statement on its official website, stating that Barr will step down from his position as Vice Chairman in charge of supervision, effective from February 28, 2025. However, Barr will continue to serve as a member of the Federal Reserve.
Barr has been serving as Vice Chairman of the Federal Reserve in charge of financial regulation since July 2022, a year and a half after Biden took office as president. According to the Federal Reserve’s statement, he has submitted his resignation to President Biden. Barr hinted in his resignation that he is stepping down to avoid potential legal disputes with the Trump administration.
The Wall Street Journal reported that the Trump team has criticized the Federal Reserve’s radical position on supervising banks. Barr has been a key supporter of strengthening regulation, and the differences between the two sides have led to speculation that Barr is likely to be dismissed after Trump takes office. Therefore, Barr’s early resignation does not imply that Federal Reserve Chairman Powell will also step down early.
Barr’s resignation also means that Trump can nominate a new candidate to be responsible for financial supervision at the Federal Reserve, giving him influence over the Fed’s financial oversight.
It is widely believed that Powell’s eventual outcome may also choose to resign voluntarily, as the Federal Reserve’s role in Trump’s future policies is crucial, and Trump will certainly try to appoint a Federal Reserve Chairman who shares his views.
Just before the release of the US December non-farm employment data, the “ADP Employment Data,” also known as the “small non-farm,” was released, showing that employment in the US unexpectedly slowed significantly in December, reaching the lowest level since August of this year, indicating that there are still many uncertainties in the US labor market.
On January 8, data released by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab showed that US employment increased by 122,000 in December, below the expected 140,000, with the previous value being 146,000.
ADP’s chief economist Nela Richardson said: The labor market ended 2024 with more modest growth, with hiring and wage increases slowing.
Analysis believes that the ADP data indicates that the US labor market gradually weakened in 2024 and continued to do so until the end of the year. When Federal Reserve officials decide on the interest rate path for 2025, they must balance this trend with concerns about a new round of inflation.
After the data was released, the US dollar index showed little short-term volatility, currently at 109.2. US stock futures also showed little fluctuation, with around a 0.1% decline in the Nasdaq 100 index futures, the 10-year Treasury bond yield at 4.722%, and the spot gold price at $2657.24 per ounce.
The report shows mixed employment growth across industries. The largest increase was seen in education and health services, construction, and leisure and hospitality. The number of employees in manufacturing, natural resources and mining, and professional and business services decreased.
In terms of regions, the western region saw the largest increase in employment growth, with the vast majority coming from companies with over 500 employees.
Prior to the release of the ADP data, Federal Reserve Governor Christopher Waller stated his support for further rate cuts, noting that the pace of rate cuts depends on the progress of inflation and the job market.
Waller said: The labor market is now close to the Fed’s maximum employment goal, and there is no sign that the job market will significantly weaken soon. Tariffs are not expected to have a significant impact on inflation. If the outlook meets expectations, he supports further rate cuts in 2025.
The long-established left-wing US media “The Washington Post” suddenly shifted to the right in the 2024 US election year, resulting in the loss of nearly 250,000 readers, leading to a significant decline in subscriptions, signaling financial distress. The “Washington Post” announced layoffs of nearly a hundred employees this week, but the wealthy boss Bezos is not concerned about it.
On Tuesday, “The Washington Post” laid off about 100 employees from its business department, the latest sign of financial difficulties at the long-established newspaper. A spokesperson for The Washington Post said the number of layoffs accounts for about 4% of the total staff at the newspaper and will not affect the news editorial department.
Before the election last year, “The Washington Post,” at the direction of owner Bezos, abruptly broke its decades-long tradition of endorsing Democratic candidates, instead showing neutrality towards Trump, causing a huge stir in the media industry. This move also led to the loss of nearly 250,000 subscribers, accounting for 10% of the newspaper’s digital subscribers, resulting in a sudden financial red alert. Furthermore, “The Washington Post” has lost several well-known journalists and senior editors in the past few months. Coupled with these layoffs, many believe that “The Washington Post” may be suffering due to its political shift.
However, taking a broader perspective, the conclusion might differ. The reality is that “The Washington Post” has been facing financial difficulties not only recently, but as early as two years ago. Since then, it has been struggling with declining subscriptions and high costs, resulting in a $77 million loss in 2023. Therefore, Bezos’s abrupt change before the election might not have been a poison but a remedy for an aged and frail “Washington Post.”
So far, Bezos seems to be convinced that his decision to support Trump is correct and is not worried about the future of “The Washington Post” because money is not an issue. At the end of last year, he bluntly stated at the “Deals Peak Summit” in New York: The advantage I bring to “The Washington Post” is that when they need financial resources, I will be there at their service. In this regard, I am like an indulgent parent to a child. Well, indeed, money can be indulgent!
Bezos is not the only tech giant who has changed positions and is determined to support Trump. This week, Facebook’s parent company Meta’s founder Mark Zuckerberg once again demonstrated his true intentions through practical actions. He announced the cancellation of the speech review mechanism set up specifically for conservative supporters of Trump and emphasized his commitment to defend “freedom of speech.”
META CEO Mark Zuckerberg: “Hello, everyone. Today I want to talk about some important things, because it’s time to bring Facebook and Instagram back to the essence of freedom of speech.”
Zuckerberg admitted that in recent years, there have been increasing speech reviews by governments and traditional media, many of which are political.
META CEO Mark Zuckerberg: “We have therefore established many complex systems to review content, but the problem with complex systems is that they make mistakes, even if they accidentally ban 1% of posts, that’s millions of people, we’ve reached a point of too many mistakes and too many bans. The recent elections felt like a cultural turning point, prioritizing speech again. So we will return to our roots, focus on reducing errors, simplify policies, and restore free speech on our platform.”
He said that after Trump’s first election in 2016, some traditional media began to publish what are known as “false information harmful to democracy,” prompting Facebook to introduce fact-checking to review speech.
META CEO Mark Zuckerberg: “But these fact-checkers had too much political bias, they destroyed more trust than they created, especially in the US.”
Zuckerberg announced that in the coming months, Meta will make a series of adjustments, including canceling the fact-checking program, adjusting content filters, and modifying comment policies related to controversial topics such as immigration and gender.
This series of measures is the latest wave in Zuckerberg’s series of actions from opposing Trump to supporting him, indicating that Meta is moving towards a more conservative content control.
To demonstrate his determination, Zuckerberg further announced that Meta’s content moderation team will be relocated from the left-leaning hub in California to the Republican “fortress” in Texas.
META CEO Mark Zuckerberg: “We will move our trust and safety and content moderation team out of California. Our content moderation department in the US will be based in Texas. While we are working to promote free speech, this move will help us rebuild trust in a place where we don’t have to worry about biased teams.”
Facebook has billions of users worldwide and is undoubtedly a leader in global social media. By lifting speech restrictions against conservatives, Zuckerberg is not only fulfilling the wishes of Trump and his supporters but also reshaping the entire internet industry in a more MAGA-friendly way, which should not be underestimated in terms of influence.
The director of policy at the American Principles Project, Jon Schweppe, said: “This is a major victory for freedom of speech. Conservatives have been fighting for this for six years. Meta was one of the biggest violators of the large tech censorship system when it first started. The reality is, reviewing the 2020 election, one of the most prominent and infamous examples is that the New York Post’s reporting on Hunter Biden was censored by Facebook and Twitter, so this is a huge shift.”
Almost all observers believe that this is Meta’s biggest change in political content management in recent years, indicating Zuckerberg’s eagerness to repair relations with the new Trump administration. Restoring freedom of speech has become a global demand, and Zuckerberg’s actions are also in line with the prevailing trend.
Jullian York, the Director of International Free Speech at the Electronic Frontier Foundation, said: “I think there are some political motives here, but at the same time, there is a global push for this kind of change to occur.”
Jon Schweppe, the director of policy at the American Principles Project, a conservative organization, believes that social media should promote communication rather than limit dialogue, and should ease conflicts rather than strengthen divisions.
Jon Schweppe, the director of policy at the American Principles Project, said: “Overall, I think this is a positive thing for the country because when some extreme views are publicly rejected, people are less likely to continue holding those extreme views. So we need to communicate with each other, we need to have conversations, and this can have a natural soothing effect for both sides.”
However, although Meta’s closure of the “fact-check” mechanism has granted conservatives the speech freedom they deserve, some observers have raised concerns about false information and cybersecurity.
Jullian York, the Director of International Free Speech at the Electronic Frontier Foundation, said: “To some extent, this is a good thing. I think that Facebook and Meta have had problems with excessive censorship over the years, but at the same time, purposeful false information is still a threat, because one key application of global fact-checking is to verify information on geopolitical conflicts, war situations, and breaking news. I think in these situations, fact-checking is a very important function.”
While allowing more freedom of speech is widely praised, the implications of Meta’s actions, especially whether they would open up more avenues for regimes like the CCP and Russia that are accustomed to spreading false information and engaging in information warfare, will depend on how Zuckerberg responds to it.
Roger Karma, a columnist for The Atlantic, published an article at the end of last year titled “The Walmart Effect,” expressing a surprising research result: wherever Walmart goes, becomes poorer.
He said: No company in the US economy occupies such a significant position as Walmart, being the largest private employer in the US known for low wages and the largest retailer known for low prices. In this sense, Walmart’s dominance reflects an ideology that has dominated US policy-making for the past half-century: low consumer prices are the primary measure of economic health, more important than low unemployment rates and high wages.
Through his investigation, Roger found that Walmart not only leads to a decrease in average income in communities but also increases the unemployment rate within the community, costs that exceed the money saved by consumers on the so-called low-priced goods. Through his research, Roger concluded that overall, Walmart makes regions more impoverished.
In the 1990s, there was heated discussion about Walmart, with numerous documentaries and books such as “The Walmart Effect” and “How Walmart Is Destroying America,” among others.
However, with the surge of left-wing ideologies, support for Walmart in the economic community followed suit. In 2005, left-wing economist Jason Furman, who later became the chairman of Obama’s Economic Advisory Committee, published an article titled “Walmart: A Progressive Success Story,” arguing that while Walmart pays relatively lower wages to employees, the lower prices it offers outweigh the potential harm in comparison to the money saved for consumers. This viewpoint became the mainstream among many economists and policymakers over the next twenty years. But people seemed to overlook the long-term impact of this low-price model on society.
Research showed that Walmart’s entry into an area triggers a chain reaction in the local economy, leading to changes in consumer shopping habits, more job turnover among employees, the necessity for competitors to engage in price wars, and suppliers having to change their business models, among other consequences. Recent studies indicate that Walmart’s impact is not as optimistic as described in the “progressive success story.”
A research team composed of economists and sociologists tracked various economic data of 18,000 Americans since 1968. Through their research, they concluded that ten years after Walmart opened, the average household income in the surrounding community decreased by 6%, with low-income, younger, and less educated worker families suffering the most significant losses. Moreover, these losses in income far exceeded the money saved by shopping at Walmart.
So, what’s happening? Why does Walmart have such a widespread negative impact on income and wealth?
Scholars analyze that when Walmart enters a community, it defeats competitors with lower prices, becoming the dominant retailer in the area, forcing small local grocery stores and chain stores to cut costs, and sometimes even close down. As a result, local farmers, bakers, small artisans, and various manufacturers who supplied goods to these retailers are gradually replaced by international suppliers owned by Walmart. They either become unemployed, acquired, or forced to find alternative paths. It is estimated that 60%-80% of Walmart’s products are sourced from China. Therefore, within five years of Walmart entering an area, the total employment would decrease by roughly 3%.
Once Walmart becomes the area’s primary employer, it creates what economists call “buyer monopoly,” where a company pays lower wages because workers have hardly any other employment options, granting them more bargaining power. This explains why Walmart’s wage level has always been lower than its competitors, such as Target and Costco, and other regional chain supermarkets.
Additionally, due to Walmart’s massive scale, it naturally exercises significant influence over suppliers. It is well-known that Walmart is infamous for exploiting its suppliers, who almost have no choice but to comply because they fear losing the largest customer. To continue supplying goods at lower prices to Walmart, they must resort to lay off employees or cut wages to survive.
Moreover, there is a bleak fact: most people find it hard to understand the aforementioned economic research results, and many prefer being able to buy cheap goods rather than striving to change their circumstances. They are willing to remain impoverished, receiving welfare and subsidies from the government, and are not interested in seeing more competition, inflation, and job opportunities. To some extent, because lower prices make it easier to survive, they become lazier. This attitude from the public makes policymakers prioritize low prices and support companies that provide affordable goods, such as Walmart.
If Walmart’s case reveals anything, it is that in the long run, low prices themselves come with significant costs.
Alright, that’s all for today’s program. Thank you very much for watching. “Finance Extraordinaire,” see you next time.
Production Team of “Finance Extraordinaire”