Aurelia Butler

WASHINGTON (Reuters) – Shanna Hayes in 2007 became the first member of her immediate family to attend college. She did not realize she was setting off on a path toward another, less-welcome family first – racking up more than $150,000 in student debt.”At no point did I actually have that conversation,” Hayes said, referring to her lack of financial planning before enrolling at New England College in New Hampshire. “And to be honest, I didn’t ask.”The finances of Hayes and millions of other Americans are in the hands of the U.S. Supreme Court as it hears arguments next Tuesday in appeals by President Joe Biden’s administration of lower court rulings blocking his plan announced last August to cancel $430 billion in student debt.Legal experts said Biden’s program, intended to ease the financial burden on debt-saddled college-educated Americans like Hayes but criticized by Republicans as an overreach of his authority, may be scrutinized by the court under the so-called major questions doctrine. Its 6-3 conservative majority has employed this muscular judicial approach to invalidate major Biden policies deemed lacking clear congressional authorization.Hayes, 34, said she plans to join a rally outside the court on Tuesday supporting Biden’s plan. The Alexandria, Virginia resident earned an undergraduate degree in mathematics and taught high school math before obtaining graduate degrees in higher education administration and sports management at Southern New Hampshire University, where she went on to work in various roles supporting students. She is now seeking a job promoting higher education access and equity.The major questions doctrine is an outgrowth of an approach favored by many conservatives and business groups to curb what they call the excesses of the “administrative state.” They object to what they see as accumulated power by the U.S. government’s executive branch without proper checks by the courts and Congress.The conservative justices already have shown skepticism toward giving deference to federal agency decisions.”It now looms over any big agency action that the administration wants to do,” University of San Diego law professor Mila Sohoni said of the major questions doctrine. “The doctrine allows courts a great deal of leeway to pick and choose which agency actions to strike down and which to sustain.”$1.6 TRILLION DEBTAbout 45 million U.S. borrowers hold $1.6 trillion in federal student loan debt, with the typical undergraduate finishing college with $25,000 in debt, according to White House figures.Many borrowers experienced financial strain during the COVID-19 pandemic. Beginning in 2020, the administrations of President Donald Trump, a Republican, and Biden, a Democrat, repeatedly paused federal student loan payments and halted interest from accruing.Both administrations relied upon a 2003 federal law called the Higher Education Relief Opportunities for Students Act, or HEROES Act, that allows student loan debt relief during wartime or national emergencies.Biden relied upon the HEROES Act when he unveiled plans to cancel up to $10,000 in federal student debt for Americans making under $125,000 and $20,000 for recipients of Pell grants awarded to students from lower-income families.The program drew swift legal challenges. Two lawsuits – one by six conservative-leaning states and the other by two student loan borrowers who opposed the plan’s eligibility requirements – prompted lower courts to block it.In the case brought by individual borrowers, Texas-based U.S. District Judge Mark Pittman, a Trump appointee, in November found the plan violated the major questions doctrine – a ruling that the New Orleans-based 5th U.S. Circuit Court of Appeals declined to put on hold pending appeal.’INSUFFICIENT FUNDS’The major questions doctrine gives judges broad discretion to invalidate executive agency actions unless Congress clearly authorized them in legislation. Sohoni said a policy being blocked under the major questions doctrine was like “an agency trying to cash a check and the court saying, ‘No, you’ve got insufficient funds.'”The justices used the doctrine since Biden took office in 2021 to block the U.S. Centers for Disease Control and Prevention from extending eviction protections for cash-strapped residential renters, stymie his COVID-19 vaccination-or-testing mandate for large businesses and restrict the Environmental Protection Agency’s power to regulate carbon emissions from power plants.Chief Justice John Roberts, writing in the EPA ruling, said the major questions doctrine “developed over a series of significant cases, all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted.”Student borrowers hope their stories are not overlooked. For Hayes, Biden’s loan forgiveness would enable her to buy a home.”It will be the difference between us being able to include both of our incomes on a new place or only my wife’s income,” Hayes said. “As we look ahead for what’s to come, it will directly impact how we are able to live.” More

Investing.com — The U.S. publishes revised data for fourth quarter gross domestic product, a day after the Federal Reserve’s minutes indicated frustration with markets trying to bounce it into an early pivot. Other central banks around the world are executing their own pivots, as Korea stops raising rates and Turkey cuts. Nvidia brings cheer to the chipmaking sector with a forecast of an AI-driven boom. Stocks are finding a floor after steady losses over the last week. Alibaba reports earnings. And crude oil prices edge higher despite another steep rise in U.S. inventories. Here’s what you need to know in financial markets on Thursday, 23rd February.1. U.S. GDP, jobless claims dueThe U.S. will release updated figures for gross domestic product in the final quarter of last year. While the numbers are inevitably backward-looking, the susceptibility of GDP data to big revisions appears to have risen since the pandemic, owing to difficulties in capturing changed patterns of work and consumption.The first reading showed the economy growing at an annualized rate of 2.9%, with the index for core personal consumer expenditure prices (the Federal Reserve’s preferred inflation measure) growing at 3.9%.Of more up-to-date interest may be the week’s jobless claims data, which are also due at 08:30 ET (13:30 GMT), while the Kansas City Fed releases its monthly business survey at 10:00 ET.2. Nvidia forecasts AI-driven boomNvidia (NASDAQ:NVDA) threw itself onto the AI bandwagon, forecasting a boom ahead in demand for its chips from data centers that, it expects, will be busy using the new generation of AI tools such as ChatGPT.The company also noted a rebound in demand from the video gaming sector, after the slump that followed the end of the pandemic. That’s of more immediate value to the company, given its dominant position in the sector.The stock jumped over 8% in premarket trading and also lifted contractor Taiwan Semiconductor Manufacturing (NYSE:TSM), and rivals BE Semiconductor Industries (AS:BESI) and Advanced Micro Devices (NASDAQ:AMD).Nvidia’s update came on the same day that Intel (NASDAQ:INTC) slashed its dividend by two-thirds to fund a massive expansion of chipmaking capacity in the U.S.3. Stocks set for modest bounce; Nvidia lifts chipmakersU.S. stock markets are set to open modestly higher, coming off the one-month lows that they hit on Wednesday. The minutes of the last Fed meeting contained little that was not already priced in, and analysts noted that the spate of stronger-than-expected economic data since the meeting had reduced the minutes’ relevance.By 06:48 ET, Dow Jones futures were up 72 points or 0.2%, while S&P 500 futures were up 0.4% and Nasdaq 100 futures were up 0.8%, with chipmakers leading the way after Nvidia’s update.Other stocks likely to be in focus later include shale producer Pioneer Natural Resources (NYSE:PXD), which posted better-than-expected earnings at the end of a day when its stock hit a five-month low, and Lucid Group (NASDAQ:LCID), whose forecast of a doubling of production this year disappointed market hopes. The stock fell over 10% in premarket.Elsewhere, the National Transportation Safety Board is due to release its report on the derailment of a Norfolk Southern (NYSE:NSC) train carrying hazardous chemicals.Alibaba (NYSE:BABA) is the big earnings update of the day, with American Tower (NYSE:AMT), Keurig Dr Pepper (NASDAQ:KDP), Newmont Goldcorp (NYSE:NEM) and Cheniere Energy (NYSE:LNG) in the supporting cast.4. Eurozone core inflation sticky in January; Korea pauses hikes, Turkey cutsEurostat drew a line under the great inflation mystery of January 2023, saying that prices fell 0.2% on the month, bringing the annual rate down to 8.6% from 9.2%. Core prices fell a stronger 0.8%, but the annual rate ticked up to 5.3% from 5.2%.Economists zeroed in on the last figure in particular, seeing it as the main reason for the upward repricing of ECB rate expectations over the last week.Elsewhere in Europe, Bank of England policymaker Catherine Mann echoed a concern that also featured in the Fed minutes – namely, that expectations of a ‘pivot’ by central banks had led to an easing of financial conditions. This made it more likely that inflation stays higher for longer.In Asia, the Bank of Korea kept its key rate unchanged after 12 months of successive rate hikes. However, the Turkish central bank cut its key rate by 50 basis points to 8.5%, the lowest in two years.5. Oil shrugs off big rise in U.S. inventoriesCrude oil prices rose, undeterred by another massive build in U.S. crude stockpiles. The American Petroleum Industry said inventories rose by nearly 10 million barrels last week, far above estimates. The U.S. government’s data may or may not corroborate that at 11:00 ET.By 06:15 ET, U.S. crude futures were up 0.9% at $74.64 a barrel, while Brent crude was up 0.9% at $81.30 a barrel.Prices had been supported on Wednesday by a Reuters report suggesting that Russia intends to cut exports from its western ports by as much as 25% for a month in an effort to squeeze more revenue out of shipments that are being restricted by western sanctions. More

A year ago tomorrow was when Russia’s campaign to subject Ukraine to Vladimir Putin’s will turned into a full-scale invasion. By launching it, the Russian president and his colonialist autocracy broke two things. One was the postwar international order, until then threadbare but still holding. The other was the reigning perception in the west that autocracies could be somehow accommodated for mutual benefit. But if the former shattered, the latter merely cracked.It is something to celebrate that the scales have fallen from many western eyes — the most important cases being Germany’s Zeitenwende and its recognition that it was a mistake to cultivate energy dependence on Russia, as well as how impressively fast Europe has freed itself from that dependence. Yet too many western leaders hold on to old misconceptions about the Russian regime. Some think “we” must eventually push for some solution that Putin, too, finds acceptable (which is what we did in Georgia in 2008 and Ukraine after 2014 — bringing to mind the apocryphal Einstein remark defining insanity as doing the same thing over and over while expecting a different result). Some say Putin/Russia (these views tend to conflate the two) must not be humiliated (as if the dictator’s life-long sense of humiliation, rooted in the Soviet Union’s collapse, would be overcome by anything less than totally dominating Ukraine).I think what sustains this misplaced awe for Russia is the tendency to see its war on Ukraine as “merely” a war over who gets to control territory. It is, however, so much more a war about how the territory in question is governed. To see this, we need to pay more attention to the nature of Russia’s occupation, both in regions it has seized in the past year and those it invaded since 2014. A good place to start is Anne Applebaum and Nataliya Gumenyuk’s article, based on the work by the Ukrainian Reckoning Project. (It doesn’t hurt, too, to reread the literary classics on totalitarian regimes, as explained by their own henchmen in works such as Darkness at Noon or 1984.) The difference in “governance” — too bloodless a term — between Russia and Ukraine is not just down to one sanctioning torture, rape and plunder and the other not. As I wrote on the day of last year’s invasion, it is also a matter of the economic system each country has been putting in place: Ukraine has been violently punished for Europeanising its economy — a system that for all its flaws is inimical to Russian control. Understanding these differences, which go deeper than simply where the border is drawn, is crucial for keeping our eye on the ball and staving off “Ukraine fatigue” in the west. I warned about that risk last May and was pleasantly surprised to see that my fears were not confirmed: western resolve has held up well.This must continue. And that means redoubling support for Ukraine’s existential struggle and European future. What does that mean? This is not a column for military analysis, but with an economist’s game theory glasses on, we can at least point out that the weapons the west has slowly become willing to give would have done more good — on the ground and in terms of deterrence — had they been granted faster and with less hand-wringing: it would have made clearer, sooner, the cost to Russia of Putin’s crimes.This is, however, a column for economic analysis, and in economic terms this is already a war between Russia and the west. Putin unleashed his economic warfare in 2021 when he dialled down gas deliveries to Europe, which meant its reservoirs were unusually empty as winter arrived, and higher prices were intended to soften up Ukraine’s western friends. Since then, of course, the west’s response has been much more forceful than anyone thought. The EU has put together 10 sanctions packages in almost the same number of months, and the scale and scope of the sanctions from the united west have been unprecedented. So, in the next two weeks, I want to look more closely at a particular set of sanctions. From an economic point of view we can distinguish between sanctions on stocks of valuable assets that belong to the Russian state or individuals connected with it, and those on the flows of resources in and out of Russia. Some of the early sanctions were on stocks, most significantly the path-breaking move to sever Russia’s access to its foreign exchange reserves in western countries. In addition, of course, many private assets of the Kremlin’s henchmen and corporate proxies were frozen.In sanctions policy since then, the focus has mostly been on further restricting the flow of resources to and from Russia. In sanctions on flows, two areas have rightly taken pride of place. One is Russia’s sale of energy resources — with most oil sales now banned from most of the west, and a price cap required for any other sales serviced by western companies. The other is Russia’s ability to import goods that helps it perpetrate its assault on Ukraine, such as advanced semiconductors and other tech that hugely enhance military strength. These have done a lot of good and should all be tightened further.But there is a need to go back to the earliest sanctions on asset holdings, for a number of reasons. First, because the move of blocking official reserves was unprecedented and done at extreme speed, it had flaws. Over time, the sanctioning coalition has had to recognise both that it did not cause the financial collapse it was intended to, and there were many shortcomings in the way the measure was designed. An overhaul is overdue.Second, while sanctions on flows may be expected to hurt more over time — the longer you are without an income, the worse it gets — that is not necessarily true for sanctions on stocks of assets. German chancellor Olaf Scholz recently wrote in Foreign Affairs that “sanctions would have to be in place for a long time, as their effectiveness increases with each passing week”. But in the case of central bank reserves, the opposite is the case. Not just because of design flaws, but because even the best-designed asset freezes hit at once. If anything changes over time, it is that those whose assets are frozen find ever better ways of coping without.And also because, third, flows become stocks over time if they are not consumed. The fact that the sanctioning countries left untouched Russia’s energy sales to Europe for so long, even as they made it harder for the country to import most things, means that the country has built up a cumulative surplus nearly as big as the reserves that were blocked after the invasion: in all of 2022, Russia’s current account surplus was more than $220bn. There is, in other words, a big pot of Russian state money that can in principle function as “shadow” foreign currency reserves. That makes it timely to ask whether they blunt the effect of blocking the reserves, and what to do about this.Last but not least, because the amounts involved in the stocks of assets are enormous. The Central Bank of Russia itself estimated that it lost access to about half of its reserves, or a staggering $300bn or more. The saved export surpluses come on top. This is serious money, and only amounts of this magnitude will be enough for Ukraine’s reconstruction. The frozen private assets of oligarchs are woefully inadequate in comparison — the European Commission’s “freeze and seize task force” has put them at €30bn across the EU.What happens with Russia’s state assets, both official reserves and accumulated energy surpluses free from sanctions, matters enormously both for winning the war and for winning peace. It’s good that the sanctioning coalition has returned its attention to them (not before time): last week the Swedish prime minister announced the creation of a working group looking at the possibility of using Russian assets to rebuild Ukraine. So, in the next few weeks, I will pick up the pace here in Free Lunch, with a series of twice-weekly newsletters. On the next Tuesdays and Thursdays, I will go through what we know and what we don’t know about both the blocked reserves and the accumulated energy profits. I will also cover the debate that’s being had — and the debate I think we should be having but aren’t — on what to do about both.Other readablesThe rest of the world does not share the west’s support of Ukraine. Ivan Krastev reports the findings from an important new survey: “Paradoxically, it is Russia’s lack of soft power that leaves the non-western world relatively unmoved by what Moscow is doing in Ukraine . . . Russia is no longer important enough to hate.” The Upshot column asks whether China can reverse its population decline. How anti-vax conspiracy theorists got triggered by the 15-minute city concept.Numbers newsKetchup-bottle economics is at work again, with European natural gas prices hitting an 18-month low!EU bankruptcies jumped to their highest level in at least eight years — but not everywhere. The biggest jump was in Spain which recently passed reforms to make insolvency procedures more efficient. More

The EU and its allies are investigating a surge in exports to economies in Russia’s vicinity as they seek to prevent companies from evading western sanctions imposed on Moscow.David O’Sullivan, the EU’s newly appointed sanctions envoy, told the Financial Times that big increases in trade with countries in Russia’s neighbourhood raised questions as to whether products hit by sanctions were entering the country via the back door. “We see a massive fall-off in trade flows from the EU to Russia and unusual spikes in trade with other third countries, particularly with those in close vicinity to Russia,” he said.“Have they suddenly developed a lot of new needs for this material, and it’s all staying there, or is some of it leaking into Russia in one form or another?”O’Sullivan did not name individual countries, stressing that he started with a “presumption of innocence” when it came to investigating changes in trade flows. Armenia and Kyrgyzstan are among those with sharp increases of western imports and rises in exports to Russia, according to analysis by the European Bank for Reconstruction and Development. Turkey’s exports to Russia have also surged.

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The EU and partners including the US and UK are set to share intelligence on possible sanctions dodging at a meeting on Thursday as they seek to push for tighter controls, O’Sullivan said. EU, US and UK exports to Russia slumped by more than half in the May to July period last year when adjusted for inflation, compared with the average in 2017-19, according to EBRD data that lays bare the impact of the sanctions. But that drop coincides with a jump of more than 80 per cent in sales from Europe and the US to Armenia and Kyrgyzstan. Those two countries, in turn, more than doubled their exports to Russia during the same period, indicating a possible diversion of trade via new routes, the bank said.Exports of products including vehicles, electronics, agricultural machinery and pumps from the EU to Central Asia increased, mainly driven by Kazakhstan, the bank added.One of the possible drivers behind the shifting trade patterns is that western companies are voluntarily withdrawing from direct sales to Russia even when products are not subject to sanctions. However, Beata Javorcik, chief economist at the EBRD, said there were also increases in flows of goods that could “potentially” be subject to sanctions.The government of Armenia said it “takes all measures to prevent any attempt [of] bypassing the sanctions”. Kyrgyzstan’s government did not immediately respond to requests for comment.

Turkey, which substituted some of Moscow’s old trading partners in the aftermath of the Ukraine war, posted a 97 per cent surge in its exports to Russia during the May to July period last year compared with 2017-19, according to the EBRD analysis. Javorcik said the EBRD’s data did not suggest that the increase in trade from Turkey to Russia was related to products subject to sanctions. “Turkey is just selling a lot more of everything to Russia,” she said.Some imports could have a dual use. Several months into the war, the Ukrainian army began to report that some of the microchips they found in captured Russian military equipment were repurposed from everyday household appliances. All the while, EU exports of white goods to Russia’s neighbours surged. According to data from the EU’s Eurostat database, Kazakhstan imported €1mn worth of washing machines from the EU in December 2022, four times the amount it did in the December before Russia’s full-scale invasion of Ukraine. A Kazakhstan spokesperson said: “We have not seen any evidence that specific companies in Kazakhstan are being used to evade western sanctions but will continue to monitor this, and will act swiftly and firmly if we establish any wrongdoing.”

China has also stepped in to fill the void left by western exports, including by shipping increasing quantities of semiconductors to the country, according to Silverado Policy Accelerator, a think-tank.EU ambassadors are aiming to sign off a tenth sanctions package this week, including a swath of measures aimed at closing loopholes in the existing regime — among them a ban on the transit through Russia of goods that can be repurposed for military use. Mark Gitenstein, the US ambassador to the EU, said on Wednesday that there were “havens” where there was “circumvention going on in a major way”, although he declined to name names. Additional reporting by Henry Foy in Brussels More