Recently in February 2024, the search engine giant Google encountered an icy cold reception from the public for their Gemini (formerly Bard) Artificial Intelligence (AI) image generation engine. When the chat bot was prompted for images of people like the Founding Fathers, the Pope, Nazi soldiers, the generated images were mostly multicultural people in the appropriate uniforms, but none of them were white. In fact the image engine refused to generate images of white people, and insisted on generating white historical figures as non-white.

As a person of color and an immigrant, I have experienced discrimination in America in various forms, some direct, some indirect. However, I do not agree with changing the images of white historical figures to be shown as non-white or multicultural. In the first place, that does nothing to correct discrimination. Secondly those images are historically inaccurate. 

It is actually the opposite of white washing history. It seems that Google wants to colorize what is historically white. Fortunately, Google CEO Sundar Pichai has acknowledged the mistake, calling it “completely unacceptable” and has vowed to correct it [https://www.reuters.com/technology/google-working-fix-gemini-ai-ceo-calls-some-responses-unacceptable-2024-02-28/]. 

Similarly, their corporate communications group made the same admission [https://twitter.com/Google_Comms/status/1760603321944121506] by saying:

@Google_Comms

We’re already working to address recent issues with Gemini’s image generation feature. While we do this, we’re going to pause the image generation of people and will re-release an improved version soon.

It makes one wonder though, how that error made its way through Google’s various engineering and management reviews prior to release. Most likely it is a corporate culture bias gone haywire.

If the searcher needs historically accurate figures, then the effort to render these images as a means to correct a social injustice not only fails, but also fails to meet the needs of the user. 

This attempt to push social agendas using a company’s dominance in a particular sector seems to be happening often these days. 

Take for example Bud Light’s disastrous marketing attempt to use trans influencer Dylan Mulvaney as a spokesperson and beer can model to increase the brand’s reach to the LGBT community. Almost overnight, the traditional customer base of Bud Light went up in arms to destroy the brand. Some grocers like Walmart had to basically almost give away the beer at bargain basement prices. The brand has not totally recovered yet, as the misguided marketing attempt violated one of the sacred precepts of marketing – that is, do not offend your loyal customers [https://www.reuters.com/business/retail-consumer/bud-light-loses-top-us-beer-spot-after-mulvaney-ad-boycott-2023-06-14/].

America is a free country. Anyone can try anything as long as it is not illegal and immoral. But using business to push social agendas that alienate a traditional customer base just to gain market share with another is probably an ill-conceived notion at the very least.

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After all was said and done, the 2024 Superbowl LVIII ended with the Kansas City Chiefs beating the San Francisco 49ers in a great game [https://www.foxsports.com/nfl/super-bowl]. Of course there was the halftime show with Grammy award winning singer Usher, and the side spectacles led by Taylor Swift, whose boyfriend Travis Kelce played for the Chiefs.

America is a divided country. We have red states and blue states, and sometimes the discussions have become so vitriolic. Worst we have seen the ugly spectacle of the January 6, 2021 mob insurrection at the Capitol. 

Despite the efforts of some sectors to remove physical education from schools, America’s love affair with sports cannot be denied. We have basketball, football, and baseball, and many of our heroes are sports heroes. While the infatuation by some diehard fans may go overboard, and players salaries may have risen to the point where these may look obscene to some, sports has a role to play in our society.

Sports emphasizes our virtues of teamwork, hard work, sacrifice, creativity, fair play, sportsmanship, and other positive factors that benefit us. Granted we sometimes see some negative role models who go overboard, and sometimes even afoul of morals and the law, as a whole the influence of sports is positive.

Some may say for example that the goal is to win elections at all costs to “save the country.” Perhaps we should reexamine that attitude. That in trying to advance an agenda, the proponents use unfair means, maybe they should ask themselves if they are really improving society. Maybe it does not rise to the point of being criminal, but winning at all costs has a negative impact on our society that sometimes takes years, even decades to recover from.

There is the law for example. Then there is also the law we twist to suit our own agenda. Are we fooling ourselves that the policies and agendas we push are really good for America? Or are these simply good for us?

Ask yourself for example, if your political candidate is being hindered by a particular law that you want overturned but in the next election you find that the law actually helps you, will you switch sides in terms of your position on that law? In that case you might be helping your candidate win, but are you being honest with yourself or adjusting your principles to win?

It is good we still have these sports games that bring us together. Maybe our team loses, but we manage to celebrate or gloat with our friends and family if we win or lose. We humbly accept the game results for how these turn out and move on.

That is good for us. That is, and will always be, good for America.

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Before I migrated to the United States, I always admired it as a strong nation. When we think of strong nations, we sometimes equate it with military might. Granted that strong nations need military might, but America goes beyond that. It has the majesty of the rule of law, strong institutions, a tradition of democracy, of hard work, of equality and fairness.

In recent years however some of that success has gone to our head. I am now a naturalized citizen of this country, but as a former outsider I see many of its flaws and not just its strengths.

One of those flaws is that we are now a nation that is divided. It shows up in the kinds of elections we have, in the politics we experience.

There are many points of divisiveness, but let me concentrate on one that causes us to become weak. We are now undermining the rule of law and fairness, not just in the laws Congress enacts, but in the way we approach many things.

Take immigration for example. Millions of Americans who took the same path I took had to wait many years before their legal status changed to become green card holders, and eventually citizens. But right now, south of our border, we are seeing thousands of foreigners take the short cut. They simply cross unabated and go ahead of the others, who like me, waited and still wait patiently in line.

This will become our undoing. When we change the rules of the game to suit a particular outcome. Maybe it is being done to affect the demographics of the voting population in certain areas. Maybe. That is another discussion for another setting. All I know is we are using two rules now. One for the people who cross illegally into this country, and another for those who wait patiently in line to be called and interviewed. 

Now even Governor Gavin Newsom of California has said that even illegal immigrants in his state will be given health care coverage. Notwithstanding the fact that his state is running a large deficit and cannot even solve issues with homelessness and crime. 

America became great not just because of military might. Many countries with dictatorships have that. We became great because we demanded a lot of ourselves, we follow one set of rules, and try our damndest to succeed. 

Many Third World countries do not have strong laws and traditions. People advance because of who they know and how they game the system. There are wolves and the rest are just sheep. That is not the America I admired before I came here, but that seems to be what we want to be. 

A step backward.

Bending the rules of the game for certain people will make us weak. America is strong because we all agree to play by the rules, not just the whims and caprices of kings and dictators.

The post Why America is strong appeared first on The Zain Jaffer Foundation.

As a naturalized citizen, I am proud of my journey from newly arrived migrant to the act of swearing allegiance to these United States of America. The line is long, and the steps are many, but if you do the necessary steps and are patient, eventually a prospective legal migrant will be one of millions who take that oath.

Unfortunately these past four years we have taken shortcuts. We have let illegal immigrants jump the line and go ahead of those who have been patiently waiting for years to be allowed into this country. Our southern border with Mexico has become a joke. Instead of being a border, it is now a vaguely defined line. Instead of waiting in turn we have allowed people to simply walk over and add to the chaos.

Our cities during these past four years have seen a breakdown in law and order due to police defunding. We have allowed the homeless to camp in our city streets. Shoplifting is now merely a misdemeanor with hardly any penalties, so we have gangs who roam and steal with impunity even in our high end retail stores. 

Our cities have turned from being showcases of American pride and greatness, to showcases of squalor and neglect. Crime, drugs, prostitution, violence amidst office and retail space vacancy signs. It is as if life has been sucked out of our beautiful American cities.

Into this sorry state comes illegal immigrants from the porous southern border, being bussed into our major cities. To have shelter the cities have displaced students from schools, and most city social services are simply too overwhelmed to cope. 

California’s Governor Gavin Newsom even wants to extend health benefits even to illegal immigrants, even if his state is already running large deficits. How is he going to pay for all this? 

Clearly the objective is to win the November 2024 presidential elections by changing the nature of the American voter. Technically speaking if you are not an American citizen you cannot vote, but if polling places will be lax with ID requirements, who knows what can happen?

If the liberals really want to help the unions, the poor, the oppressed, then this is not the way to do it. Already America has a $34T debt that we may no longer be able to pay if revenues are less than our spending, but still we add more spending. 

We have to remember that we are facing a recession and are still experiencing high inflation despite the increase in interest rates. Tax revenues may even go down some more if more companies close or operate in a reduced mode because of harder times. Adding more mouths to feed, clothe and shelter who are not productively working will strain our system even more. 

We can no longer print more dollars to pay for these expenses, else our currency will hyperinflate like 1939 pre Nazi Germany and present day Argentina.

Logic has gone out the window. We simply need to close our borders, and remember that resources, budgets, jobs, social services, housing, and other requirements are not infinite. 

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No one has a crystal ball, including me. But I think there are some things we can assume to probably be true.

One is that the Democrats and the Biden administration wants to win a second term and control the next Congress. However there are many political issues working against them that are discussed in many news reports and discussion groups like the Afghanistan withdrawal, the border with Mexico, the situation with crime and homelessness in many major cities, Ukraine aid, and others need to be improved in their favor before the November 2024 elections.

One major issue that they need to deal with is the impact of high interest rates on the economy.

Although the Fed is an independent body that should act independently of what the White House wants, we should probably assume that Fed Chairman Jerome Powell feels some heat for the high interest rates that have affected everything from mortgage rates, car loans, credit card bills, treasury bond rates, even the stock market.

It is speculation to say if he caved in, but Powell did say in his mid December 2023 press conference that the tightening of monetary policy is likely over as inflation falls faster than expected and with a discussion of cuts in borrowing costs coming into view [See https://www.reuters.com/markets/us/fed-likely-hold-rates-steady-signal-couple-cuts-2024-2023-12-13/]. This was a sudden turnaround from his more hawkish pronouncement that talk of cutting rates was premature just two weeks earlier.

However we are probably not looking at rates near zero similar to what we had in 2021. Those good old days of cheap debt are probably over, else inflation may come roaring back. The cup half full advocates probably wish for that to be true, but the realistic view is to probably assume that there will no longer be more rate hikes, but any cuts may be slow and tempered.

In any case, any interest rate cuts in 2024, even if not to the level of going back to 2021, will still result in a resurgence of money going back to the stock and crypto markets. It will likely lead to more people going ahead with their home purchase plans, and discretionary spending plans, assuming they have the money and income. No one knows if that is good enough to bring us out of a possible economic slowdown, but the Democrats and the White House just needs to show that the economy has improved under their watch in 2024 prior to the elections.

FOR BUSINESSES AND INVESTORS
Although lower interest rates coupled with more quantitative easing (expansion of the Fed balance sheet) will lead to more liquidity or money into the economy, the actual impact will depend on how much the Fed cuts and eases.

However companies and entrepreneurs will definitely welcome cheaper debt. Real estate developers for example are unable to continue with many projects that need to be renegotiated at high interest rates and are hoping for a rate cut. Lower mortgage rates, car loans, credit card bills, may improve household and individual discretionary spending budgets, which will be good for companies that make products that are more desirable than necessary like Apple iPhones.

Lower rates will make fixed income instruments and money markets less attractive and may bring back money into the stock markets, thus giving companies access to equity capital.

Coupled with cheaper debt and more equity buyers, companies and businesses may be able to position and expand as consumers are able to spend more.

NONPROFIT FINANCING
At the end of the day, what does that all mean for nonprofit financing?

Generally speaking when business is good, and corporations are reaping good profits, they are more inclined to support charitable contributions and nonprofit “save the world” type of work. There are tax breaks that accrue from being generous donors, aside from the public relations benefit it brings.

However in bad years, when there is barely any revenue to be had, and income statements are bleeding in red, there is no tax to save on. Corporate donations and contributions may go down.

What does this mean? It means that nonprofits have to tighten their belts and be more creative in reaching out to their typical donors, particularly corporate ones.

Again it really depends on whether the Fed acts to make 2024 a better economic year for the Democrats and the White House. We can only all hope for the best.

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Twenty eight years after the first climate Conference of Parties (COP) in Berlin, Germany in April 1995, just before the end of the 28th COP (COP-28) in Dubai, UAE, the talks almost deadlocked on the wording of their communique. Since COP-28 was being held in Dubai, the presence of the fossil fuel friendly government officials and policy makers were significant. 

At issue prior to the conclusion of COP28 was the inclusion of a phrase that would agree to phase out fossil fuels, mainly from the Organization of Petroleum Exporting Countries [OPEC see https://www.msn.com/en-us/money/markets/countries-push-for-cop28-deal-on-fossil-fuels-as-talks-spill-into-overtime/ar-AA1lpBqW]. Initially the OPEC delegates pushed hard against it, but in the final few hours the key wording of the controversial portion read as “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner … so as to achieve net zero by 2050 in keeping with the science.”

The arguments have not really changed in almost three decades. The burning of fossil fuels extracted from the ground, whether coal, oil, or gas, releases greenhouse gases (GHG) that traps sunlight, and as the name implies, creates a greenhouse heating effect that causes global temperatures to rise and impact climate and weather patterns. 

However, despite inroads of energy efficiency efforts and renewables into energy production and electric vehicles (EV) into national transport systems, the bulk of the world’s energy and transportation systems are still fueled by fossil fuels. 

Plus the extraction, trade, and distribution of fossil fuels is a big global commercial activity, with countries like Saudi Arabia extracting most of their GDP from it, and companies like Shell and Exxon still being some of the largest companies in the world in terms of reach and revenue. Alternative non fossil fuel energy and distribution is still miniscule, albeit growing.

Then you have the Global South (the poor countries) who want to charge the developed countries like the Group of Seven (G7) that include the US, UK, France, Germany, Italy, Canada, and Japan and other rich countries like the OPEC countries and Russia and China, to pay for their climate adaptation and mitigation needs. 

Mitigation means helping these poor countries pay for expensive renewable energy systems like wind and solar, while adaptation means developing ways to counter the destructive impacts of climate change. Some examples of adaptation include climate resistant flood control, irrigation, salt resistant crop varieties, increased wind and rain capabilities for shelters, and the like. 

The saying “It is difficult to get a man to understand something, when his salary depends upon his not understanding it” [See https://quoteinvestigator.com/2017/11/30/salary/] is quite applicable in this situation. Obviously phasing out fossil fuels will impact the GDP and economies of fossil fuel producing countries and companies, and it is in their interests to delay any progress in this regard.

After 28 years of COP negotiations, with high profile delegates and politicians burning fossil fuels in private jets to go there, it is perhaps time to conclude that what we really need are technology breakthroughs that will make renewable and carbon free energy cheaper compared to fossil fuel energy, and not the charade of negotiations that look good on paper, but are hardly achieving anything significant.

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News videos prior to the mid November 2023 Asia Pacific Economic Cooperation (APEC) Forum in San Francisco showed a cleaned up city. No drugs, homeless tents, cardboard boxes, blight, and trash. Graffiti had been covered by painted art. The APEC Summit is a gathering of twenty one of the national leaders of countries that are part of this region. 

It turns out political will was all it takes.

In a press conference, California Governor Gavin Newsom said, “I know folks are saying, ‘Oh, they’re just cleaning up this place because all those fancy leaders are coming to town..That’s true, because it’s true — but it’s also true for months and months and months prior to APEC, we’ve been having conversations.”

One important side meeting that took place during the Forum was between China’s Xi Jinping and US President Joe Biden. Both sides had much at stake, including a possible war in the South China Sea, the Taiwan issue, trade issues such as the ban on Chinese made telco equipment like Huawei in the US and exports of advanced semiconductors to China, the ban on the use of Apple products by Chinese government officials, and the Fentanyl issue. 

Understandably the US government wanted to set the mood for a good meeting between the two heads of state by putting San Francisco in its best light. From a historical context, San Francisco was the entry port for many Chinese laborers in the mid 1800s and also hosts the oldest Chinatown in North America. 

What left a bad taste in the mouth for many of San Francisco’s residents, businesses, and tourists was the fact that the problem of urban blight, homelessness, open drug use, street crimes, and other issues were allowed to fester when in fact Governor Newsom and Mayor London Breed had shown that it can be cleared up if they really wanted to.

The past few years have seen a decline in retail and office occupancy, tourism in the downtown areas, and retail and other related businesses. Union Square is currently a pitiful shadow of its old glorious self. The glamorous storefronts have been replaced by vacant for lease signs beside homeless encampments and trash in the streets.

The City’s economy from commercial real estate, while heavily impacted by Work from Home and other factors, was also deeply impacted by the amount of open homelessness, drug use, and crime. Many companies and retailers like Nordstrom and Gap have left, and to see that something could have been done long ago will pain many.

The damage to retail businesses by widely reported incidents of shoplifting has led to many famous retail stores closing their flagship branches. In turn, tourists are now disappointed and stay away from what are otherwise beautiful parts. Visitors from other parts of the world wonder why American stores need to put their merchandise under lock and key.

It is not too late. San Francisco remains one of America’s most beautiful cities with a rich history and heritage. While we need to treat homelessness, drugs, and poverty with compassion and understanding, it is also not an excuse to let go of basic disciplines such as catching and punishing those who violate the law with impunity so that others will not follow the same path.

It is time for a San Francisco renaissance. We have shown it can work. Let’s make it happen now and not go back to the situation we have allowed to fester.

SOURCES

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A Wharton School / University of Pennsylvania budget model predicts that the global financial markets can no longer function properly if the US debt deficit continues on its present course of growth for the next twenty years. Key to this is the fact that US debt, in the form of short term bills and long term ten, twenty, and thirty year bonds, are globally held as fixed income instruments.

Unfortunately the attitude in the US Congress, despite the attempts of many politicians to balance the budget, is to kick the can down the road to future elected officials. Some even believe that Modern Monetary Policy (MMP), the belief that the government can simply run its currency printing press as much as it wants, is valid. 

According to the study, “forward-looking financial markets are, therefore, effectively betting that future fiscal policy will provide substantial corrective measures ahead of time. If financial markets started to believe otherwise, debt dynamics would “unravel” and become unsustainable much sooner.” Actually this is already partially true as the BRICS countries are already shedding much of their holdings of US treasuries. So many of the current buyers now are foreign allies, corporate treasuries, banks, but much of it was bought by the Fed during the periods it did Quantitative Easing (QE).

The US debt clock states that the current US Debt to GDP ratio as of mid-November 2023 was almost 125%, at a total debt of $33.7T. In 1960, that ratio was around 52.2%, and as late as 2000 was around 55.5%. The current debt is loaded with entitlements such as Social Security and Medicare, and defense spending. But increasingly the largest part of the debt are the interest payments on the debt itself, the yields promised to treasury bill and bond holders.

Wharton/UPenn believes that the US cannot exceed a 200 percent ratio of Debt to GDP even under favorable market conditions. In its study, they do not include the $6.8T that the US owes itself and use a figure of $26.3T for their calculations. It also said that larger Debt to GDP ratios in countries like Japan, are not relevant because those countries have a much larger household saving rate. US consumers on the other hand prefer to buy on credit instead of cash, while other countries only purchase what they can afford.

The study said that after twenty years of no policy changes, any future tax increases or spending cuts would no longer prevent a debt default. Unlike technical defaults where payments are merely delayed, this default would be much larger and would truly shake up the global economy.

The twenty-year timeframe is the “best case” scenario for the United States, if global markets believe that the US will truly change its course. If however countries start to lose faith en masse that the US can truly pay back its huge debt, then as the attitude of the BRICS has shown, the US will then lose the status and prestige it has and be replaced by other alternatives.

Think of someone who has been running a long unpaid bar tab, and still wants to order meal and drinks. At some point, even if the bar owner is a friend, the customer will be asked to settle the running total first before being allowed to order more.

Personally as an immigrant who was raised in a family that was careful about spending only what we had saved, and avoiding the excessive use of credit, it is time for Americans to learn how to tighten their belts and not carry that attitude with them when they get elected into office and spend taxpayer dollars they have not collected yet.

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Inflation is a silent tax that affects everyone, but the greatest negative impact is to the poor. For the rich, it may mean cutting back on vacations abroad. But for the poor, it may mean not being able to pay rent, buy groceries, or other basic necessities. 

Given the impact of the Fed rate hikes vis a vis its goal of two percent inflation to help it in its mandate of price stability and maximum employment, perhaps it is instructive to delve into how they compute inflation.

What is inflation anyway? It is the general increase in the average prices of all the goods and services in the economy.

Generally the Fed has two tools at its disposal. Raising or lowering the interest rates used by banks for debt affects mortgages, car loans, credit card, and other consumer debt. Yields on bonds on both short and long term bonds affect the demand, and market value of these bonds vis a vis the appetite for risk assets like stocks and risky projects like expensive real estate projects. 

The second tool is to either quantitatively ease or tighten. If they ease, this means that they will buy the bonds and mortgage backed securities from banks, hold it in their books, and release cash to the banks so they have the liquidity to lend money out. If they tighten, it is the opposite. They won’t buy bonds or MBS, so the banks have less money to lend out.

The Fed monitors several different price indexes. Each price index measures a different group of goods and services, which are all computed differently. Therefore, various indexes can send diverse signals about inflation. For example, housing could be impacted by the price of lumber and other construction materials. Energy would of course include the price per gallon of gasoline. For food, most households would probably be buying milk and eggs, and so forth.

The Fed has also decided that a two percent annual target increase in the Department of Commerce’s Personal Consumption Expenditures (PCE) index is optimal for their mandate for maximum employment and price stability. The Fed FOMC uses the PCE price index as it covers a wide range of household spending. However, the Fed also monitors the Department of Labor’s Consumer Price Index (CPI) and Producer Price Index (PPI).

In addition, the Fed also considers the following. Because inflation can go up and down monthly, they generally prefer to average out over longer periods of time, from a few months or longer.

Also they regularly check the behavior of the components of a particular price index to help determine if the rise in inflation is driven by price increases (or decreases) of certain items which are likely to be temporary or unique events. For example, if there is a dockworkers strike that impact the prices of components for automobiles but it is projected to last only a month, then the impact of those may smoothen out over time as the port operations stabilize. The price of natural gas during winter increases but decreases during the summer months. Inflation due to more energy for heating will not last when the warmer months come. 

The Fed tries to measure only core inflation to help it identify inflation trends. This means they avoid items that have large volatile swings in prices. Although food and energy are an important part of most household budgets, these are not used for core inflation measurements.

The Fed can only change monetary policy to fix the economy using the two tools at its disposal, namely interest rates and quantitative tightening or easing. It cannot control the fiscal spending of Congress, which has a huge effect on inflation. 

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