U.S. Main Street Economic Indicators Remain Strong – Mortgage Demand Up 13% From Prior Year

The COVID shutdown was an exceptional event. The consequences from the shutdown do have ripple effects; however, the strength of the underlying economic foundation is now coming back into focus as the rebound starts taking shape.

Last week most economic analysts were stunned by the 2.5 million jobs added to the economy in May. As we shared earlier, the result wasn’t so surprising when you consider the framework of the Paycheck Protection Program (PPP) worked exactly like President Trump and Treasury Secretary Mnuching planned. The incentives within the PPP program did what they were intended to do; small and mid-sized businesses retained or rehired their employees.

Inside the foundation of the Trump Main Street economy, the cement that binds the America-First policy, are a series of pre-established economic policies that specifically targets middle-class workers. The foundation is made strong by net wage gains and earnings amid mid-tier workers; those wage gains are made more important by policies that keep inflation in check.

Blue-collar workers, on average, were fortunately positioned to ride-out the COVID shutdown. With the shutdown over; Main Street now quickly fires back into action.

The demand for mortgage applications rose five percent last week, resulting in year-over-year growth over 13 percent. Again, this result stuns the experts. Demand for home purchases remains high and people are confident in their income security to make big decisions on home financing. The visible strength of Main Street cuts against the naysayers and doomsayers who thought the COVID shutdown would collapse the economy. It didn’t.

It did not, because (a) the shutdown was an exceptional event; and (b) the underlying foundation is stronger than the blow it took from the COVID sledgehammer.

(Via CNBC) “The recovery in the purchase market continues to gain steam, with the seasonally adjusted index rising to its highest level since January,” said Joel Kan, an MBA economist. “Purchase activity increased for the eighth straight week.”

Pent-up demand from the spring market, along with low interest rates are fueling a surprisingly quick recovery in home buying. As local economies open up, so do open houses, but there is still a severe shortage of homes for sale. (read more)

President Trump’s Main Street policies are directly responsible for the strength in the middle-class. The media apoplexy over stunningly positive economic news is directly related to how much damage a positive economy does to the Antifa/BLM strategy to divide our nation through class warfare. A thriving Main Street economy is antithetical to the objective.

A thriving Main Street means an expanding U.S. middle-class. As the middle-class expands it becomes more difficult to organize outrage based on division.

The ruling elites deny this fundamental truth, but the rust-belt did not create itself.

The erosion of the U.S. manufacturing base -and Main Street- was an outcome of policy. Both Republicans and Democrats participated in this process.  Democrats claim, falsely, to be champions of the middle-class; but their narrative is refuted by the actual results of their policy.  Both parties are deep in the pockets of Wall St multinationals.

Many people call for a third party in politics without realizing President Trump represents the first second party DC has seen in decades.  That’s why he is opposed by both wings of the same legislative bird.

Through dependency the political elites begin their role to decide who gets what part of their limited and controlled economic pie.  Economic intervention, supported by both wings, in the spending process is what has allowed political interests to retain control.

Main Street and the freedom within the free market is a problem for command and control economic systems.  Wall St global financial systems, controlled by a limited number of large institutional multinationals, are much easier to control.

Remember the catch phrase “too big to fail” in the banking system?  The DC ruling class said a small group of banks controlled too much wealth.  So they instituted ‘banking reform’.  The result was even fewer banks that were even bigger.  The outcome was the exact opposite of what they said was the purpose.  Their policy made the problem worse.

President Trump’s America First agenda is specifically a benefit to Main Street and the middle class.  In the banking sector treasury policy and targeted deregulation focused on creating more community banks and credit unions to benefit Main Street.  That’s exactly what happened. By focusing on Main Street, Trump and Mnuchin fixed what the uniparty congress did not. [Arguably, congress purposefully and willfully did not.]  Smaller, more nimble, banks are now positioned to assist small and medium Main Street businesses.

President Trump’s domestic and global political opposition recognize that his trade and economic policies have reversed much of their control.  There are trillions at stake, that’s the financial motive for the opposition.  However, a lack of control over the economic outcome; meaning President Trump creating more pies; means not only do they lose control over the money, they also lose control through diminished political power.

America-First is a program focused on Main Street and it expands the middle class.  That is why during President Trump’s first term the wealth gap actually started to narrow for the first time in decades.   The wage growth for line-level or blue collar workers was/is rising faster than the supervisory wages.  This is a uniquely trumpian effect from a return to economic policies that benefit Main Street USA workers.

More jobs means the value of labor to do those jobs increases.  This economic path is against the interests of coastal elites and the politicians they pay to retain the wealth gap.

When the economy was shut-down by the COVID virus, it was an unnatural economic event.  Everything inside the U.S. economy including: the number of workers; the growth in wage rates; the availability of jobs; the lack of inflation; the expansion of investment, was the strongest in our history.  However, when everything was stalled all of that positive architecture, the policy that created the outcome, did not go away.

U.S. economic conditions were being driven by internal economic activity that was no longer as dependent on global drivers.  When the underlying economic strength is domestic, it makes sense the economy can restart much faster because the activity is not dependent on outside global stimulus.  In essence, the USA can rebound much faster because we are NOT dependent on the restart of other global economies.  Again, another uniquely positive attribute that is enhanced by ‘America-First’ policies.

China, Obama, Pelosi and Schumer can, and did, attempt to throw a COVID wrench in the expanding U.S. economy.  However, they cannot undo the foundation President Trump had already established.  Those America-First policies will again work in our favor; and yes, when President Trump says he “can do it again” his confidence is based on that underlying foundation.

Trump may not articulate it, but he knows the U.S. economic independence he has already achieved through three years of advanced policy to benefit Main Street.  He knows the trade agreements, the cutting of regulation, the unleashing of energy development and the weight of tariffs on imports all mean the best place for investment is inside the U.S.A.

That fundamental structure did not change, and is not going to change.

A recent example – Remember the previously mentioned policy focus on deregulated community banks and credit unions to assist Main Street?  Perhaps a sidebar is important:

SIDEBAR: Trump and Mnuchin viewed the entire U.S. banking system as too monolithic and generally positioned to the benefit of Wall Street and not Main Street.  As such their approach toward regulation was to split the regulatory financial system into two segments according to the size of the bank (or financial entity).

Big institutional banks (more than $10 billion) retained comprehensive regulation over their practices; however, smaller banks do not have the same level of regulatory and compliance mandates. This approach is the modern era financial outlook that, like MAGAnomics, is entirely new and bold.

“we do not support a separation of banks from investment banks, we think that would have a very significant problem on the financial markets, on the economy, on liquidity; and we think that there is proper things that potentially we could look at around regulation, but we do not support a separation of banks and investment banks.”

~ Treasury Secretary Steven Mnuchin testifying to the Senate Banking Committee, May 18th 2017

At first blush that statement from Secretary Mnuchin might seem to run counter to the Trump administration’s prior policy statements outlining a preference for a reinstatement of some form of “Glass-Steagall” regulatory separation between commercial banking and investment banking.  However, it doesn’t.

When combined with the totality of Mnuchin’s testimony before the Senate Finance Committee, Mnuchin was saying the “too big to fail” (‘too big to succeed’) issue has created a problem for lending liquidity.  Specifically, if divisional separation is required – the banks’ best interests would naturally put the investment division ahead of commercial lending and the liquid capital within the overall U.S. economy would shrink.

Back in July 2010 when Dodd-Frank banking regulation was passed into law, there were approximately 12 to 17 banks who fell under the definition of “too big to fail”.

Meaning 12 to 17 financial institutions could individually negatively impact the economy, and were going to force another TARP-type bailout if they failed in the future.  Dodd-Frank regulations were supposed to ensure financial security, and the elimination of risk via taxpayer bailouts, by placing mandatory minimums on how much secure capital was required to be held in order to operate “a bank”.

One large downside to Dodd-Frank was that in order to hold the required capital, all banks decreased lending to shore-up their liquid holdings and meet the regulatory minimums.

Without the ability to borrow funds, small businesses had a hard time raising money to modernize or create new business.  In the big picture, growth in the larger economy is hampered by the absence of capital.

Another downstream effect of banks needing to increase their liquid holdings was exponentially worse.  Less liquid large banks needed to purchase and absorb the financial assets of more liquid large banks in order to meet the regulatory requirements.  Indeed this is exactly what happened.

In 2010 there were approximately twelve “too big to fail banks”, and that was seen as a risk within the economy, and more broad-based banking competition was needed to be more secure.

Unfortunately, because of Dodd-Frank, by 2016 those twelve banks had merged into only four even bigger banks that were now even bigger risks; albeit supposedly more financially secure in their liquid holdings.   This ‘less banks’ reality was opposite of the desired effect.

The four to six big banks (JP Morgan-Chase, Bank of America, Citigroup, Wells Fargo, US BanCorp and Mellon) now control $9+ trillion (that’s “TRILLION).  Their size is so enormous that small number of banks now control most of the U.S. financial market.

Because they control so much of the financial market, instituting a Glass-Steagall firewall between commercial and investment divisions (in addition to the Dodd-Frank liquid holding requirements), would mean the capability of small and mid-size businesses to get the loans needed to expand or even keep their operations running would stop.

2010’s “Too few, too big to fail” became 2016’s “EVEN FEWER, EVEN BIGGER to fail”.

That’s the underlying problem for a Glass-Steagall type of regulation now. 
The Democrats created Dodd-Frank which:

•#1 generated constraints on the economy (less lending),

•#2 made fewer banking options available (banks merged),

•#3 made top banks even bigger.

This problem is why President Trump and Secretary Mnuchin created a parallel banking system of smaller community and credit union banks that are external to Dodd Frank regulations and can act as the primary commercial banks for small to mid-sized businesses, ie. “Main Street”.

This intended banking design of smaller, more connected to Main Street lending, is why President Trump and Secretary Mnuchin did not support the CFPB banking rule that allowed lawsuits against all financial entities.

The goal of “Glass Steagall”, ie. Commercial division -vs- Investment division, is actually being achieved by generating an entirely new system of banks under different regulation.  The currently remaining ten U.S. “big banks” operate as “investment division banks” per se’, and are subject to larger regulatory requirements.  However, the lesser regulated community banks/credit unions operate as the “Commercial Side” benefiting Main Street.

Instead of fire-walling an individual bank internally within its organization, the Trump/Mnuchin plan actually created a fire-wall the banking ‘system’ within the U.S. internally.  Hope that makes sense.  SIDEBAR ENDS –

The success and efficiency of the Paycheck Protection Program for small and medium business was a direct result of that earlier banking regulation and policy change.  Brilliantly, Mnuchin used the architecture of the FDIC system to guarantee the loans so the small nimble banks could move quickly. The FDIC was used an an underwriter of sorts for the affiliated lenders; and removed any risk.

PPP borrowers who use small to mid-sized banks or local credit unions were able to get fast access to the funds and retain or re-employ their workforce.  Those businesses who operate through the big banks, did not get the same responsiveness.  [Again, a good lesson for small business owners…. keep your banking as local as possible.]

The rapid response rate for PPP loans by smaller banks is specifically and directly responsible for the May jobs result of 2.5 million gains.  Even in crisis the America-First foresight pays dividends.

The far left is hoping to curtail the strength of the economy; that’s why the blue state governors are fighting against reopening.  However, the organized protests of thousands of people gathering together have made their best COVID shutdown arguments moot.

We must not allow the media and politicians to demand keeping restrictions on the economy when we know the underling control mechanism, the social distancing effort, was entirely based on politics.  Their support for the protest crowds proves that point.