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Illustration: Aïda Amer/Axios
The booming economy isn't touching all corners of the country, and farmers in particular are facing a very different economic reality than the strong growth and low unemployment rate that's often touted, Axios' Courtenay Brown reports.
The deterioration of rural fortunes can be seen most acutely in Wisconsin, where dairy farms closed at a rate of 2 per day last year. The state's dairy industry accounts for half of the state's "critical agricultural sector ... generates $43.4 billion a year in economic activity ... and supports 413,500 jobs or 11.9% of the state's employment," according to the Wisconsin Policy Forum.
Downturns in farming are normal and almost expected. The worst in recent history was the farm credit crisis in the 1980s, with low commodity prices and sky-high interest rates. At the height of that crisis, there were almost 6,000 farmers who filed for bankruptcy. There were 498 in 2018.
What's different this time is farmers have seen declining commodity prices for years. And the trade war, which caused less demand for commodities from foreign buyers, has made it more painful (despite $7.7 billion so far in aid from the Trump administration). Extreme weather conditions, like the record flooding seen in the Midwest, have added another layer of uncertainty.
By the numbers: Farm profitability was $63 billion last year, the second lowest in the past 10 years, according to the American Farm Bureau Federation.
"When [farmers] go to the banks, they are leery and hesitant to lend," Deller, the professor, says. "If farmers are at the end of their rope, [banks] make loans but they make loans at rates that are unfavorable to the farmer."
Currency traders are having trouble deciding which of the world's major Western economies is in the worst shape. They have been selling the U.S. dollar, euro and British pound intermittently as various central banks signal their next steps.
However, none of the moves have stuck. Sterling reversed most of its more than 1% loss from Thursday overnight after news of the EU's Brexit extension.
What's next? Analysts tell Axios they largely expect the dollar to reap the benefit of uncertainty as the U.S. has higher interest rates than most major economies, which means traders benefit from the "carry trade" by holding it.
"The central banks, all their models are broken. All their models would suggest they would have done so much more in terms of interest rate hikes by now, but in fact they’re seeing that we’re not getting the inflation.
"We're operating in an environment that is spectacularly indebted and the main feature that has come out of that, along with the aging demographic, is a very, very, very, very low neutral interest rate.
"That's why Japan's at zero, Sweden's negative, the euro zone is at zero, Australia, New Zealand are at 1–2% with their high population rate and all these countries are decelerating [in growth]. There's a massive amount of debt and that may be contributing to an incredibly low neutral level of interest rates."— Robert Tipp, chief investment strategist and head of global bonds for PGIM Fixed Income
President Trump is considering conservative pundit Stephen Moore and former Godfather's Pizza CEO Herman Cain for the two vacant seats on the Federal Reserve's board, Bloomberg's Saleha Mohsin and Jennifer Jacobs report.
Moore is the founder of the conservative Club for Growth and previously served on the Journal's editorial board. He was an adviser on Trump's campaign and "helped write its economic agenda."
Cain ran for president in 2012 but ended his campaign after multiple allegations of sexual assault and harassment, and has also been a vocal advocate for Trump.
Brazilian President Jair Bolsonaro attends a joint news conference with President Trump at the White House. Photo: Chris Kleponis-Pool/Getty Images
Brazil's last 3 presidents have not fared well.
Driving the news: Brazil's benchmark Bovespa stock index fell by nearly 4% following news of Temer's arrest, but ended the day just 1.34% lower. The country’s 10-year bond yield rose 4 basis points to 8.76% and the real currency ended little changed at 3.79 per dollar.
Why it matters: The country's stock market has largely shaken off political turmoil as investors continue to believe in a widely unpopular pension reform current President Jair Bolsonaro has backed in an effort to repair Brazil's highly overleveraged and underfunded budget.
Yes, but: Investors' faith is being tested as Bolsonaro, a fascist, is fast losing popularity. The president's approval rating has declined significantly since he took office in January, falling most recently to just 34%, according to a poll by Ibope.