U.S. Treasury chief Janet Yellen warned Sunday of an “economic and financial catastrophe” for the United States and the world economy if President Joe Biden and Congress cannot agree on raising the country’s debt ceiling so the government can continue to pay its bills.

“Early June is when we run out of cash” to pay ongoing bills, Yellen told ABC’s “This Week” show, although she allowed that there is “a lot of uncertainty” on exactly what day that might be.

The U.S. Treasury has already taken “extraordinary measures” to continue to pay debts since reaching the country’s $31.4 trillion borrowing limit in January, but Yellen said, “Our ability to do that is running out and we will start to run down our cash.”

“The day will come when we are unable to pay our bills,” she said.

Biden has invited top congressional leaders to the White House on Tuesday to discuss how to avert the looming crisis.

The Democratic president has for months called on Congress, including the House of Representatives narrowly controlled by Republicans, to hike the debt ceiling without other conditions.

But instead, House Republicans, by a two-vote margin, last month approved a debt ceiling increase for a year while attaching broad government spending cuts for social programs and climate control measures that Biden and congressional Democrats oppose.

The U.S. has never defaulted on its debt — payments for programs Congress has already approved — but Yellen warned that if the government runs out of cash, interest payments on U.S. government bonds held by Americans and overseas governments could be curtailed, monthly Social Security payments to older people and health care payments to their doctors could be delayed, and businesses could furlough thousands of workers.

“There could be a steep decline in the stock market,” she said, and the country’s creditworthiness questioned.

The U.S. has raised its debt ceiling 78 times, under both Democratic and Republican presidents. Amid the current uncertainty, some Washington analysts are predicting that Biden and Republican opponents could in the coming weeks reach an agreement that both could claim as a victory of sorts, with the debt ceiling raised and Biden agreeing separately to curb spending in the fiscal year that starts October 1.

White House advisers have also been considering whether, for the first time, to invoke the U.S. Constitution’s 14th Amendment, which says that the full faith and credit of the United States shall not be questioned. Use of the provision would almost certainly draw a legal challenge from those opposed to unilaterally increasing the debt ceiling.

Yellen did not rule out invoking use of the constitutional provision but characterized it as among a list of bad options.

“I don’t want to consider emergency options,” she said.
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US officials are warning that China and Russia would capitalize on the ‘chaos’ that would ensue if the United States defaulted on its debt. The warnings come amid a monthslong standoff between President Joe Biden and Republicans in securing congressional approval to raise the nation’s debt limit. White House Bureau Chief Patsy Widakuswara has the story.
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Billionaire Warren Buffett said artificial intelligence may change the world in all sorts of ways, but new technology won’t take away opportunities for investors, and he’s confident America will continue to prosper over time.

Buffett and his partner Charlie Munger are spending all day Saturday answering questions at Berkshire Hathaway’s annual meeting inside a packed Omaha arena.

“New things coming along doesn’t take away the opportunities. What gives you the opportunities is other people doing dumb things,” said Buffett, who had a chance to try out ChatGPT when his friend Bill Gates showed it to him a few months back.

Buffett reiterated his long-term optimism about the prospects for America even with the bitter political divisions today.

“The problem now is that partisanship has moved more towards tribalism, and in tribalism you don’t even hear the other side,” he said.

Both Buffett and Munger said the United States will benefit from having an open trading relationship with China, so both countries should be careful not to exacerbate the tensions between them because the stakes are too high for the world.

“Everything that increases the tension between these two countries is stupid, stupid, stupid,” Munger said. And whenever either country does something stupid, he said the other country should respond with incredible kindness.

The chance to listen to the two men answer all sorts of questions about business and life attracts people from all over the world to Omaha, Nebraska. Some of the shareholders feel a particular urgency to attend now because Buffett and Munger are both in their 90s.

“Charlie Munger is 99. I just wanted to see him in person. It’s on my bucket list,” said 40-year-old Sheraton Wu from Vancouver. “I have to attend while I can.”

“It’s a once in a lifetime opportunity,” said Chloe Lin, who traveled from Singapore to attend the meeting for the first time and learn from the two legendary investors.

One of the few concessions Buffett makes to his age is that he no longer tours the exhibit hall before the meeting. In years past, he would be mobbed by shareholders trying to snap a picture with him while a team of security officers worked to manage the crowd. Munger has used a wheelchair for several years, but both men are still sharp mentally.

But in a nod to the concerns about their age, Berkshire showed a series of clips of questions about succession from past meetings dating back to the first one they filmed in 1994. Two years ago, Buffett finally said that Greg Abel will eventually replace him as CEO although he has no plans to retire. Abel already oversees all of Berkshire’s noninsurance businesses.

Buffett assured shareholders that he has total confidence in Abel to lead Berkshire in the future, and he doesn’t have a second choice for the job because Abel is remarkable in his own right. But he said much of what Abel will have to do is just maintain Berkshire’s culture and keep making similar decisions.

“Greg understands capital allocation as well as I do. He will make these decisions on the same framework that I use,” Buffett said.

Abel followed that up by assuring the crowd that he knows how Buffett and Munger have handled things for nearly six decades and “I don’t really see that framework changing.”

Although not everyone at the meeting is a fan. Outside the arena, pilots from Berkshire’s NetJets protested over the lack of a new contract and pro-life groups carried signs declaring “Buffett’s billions kill millions” to object to his many charitable donations to abortion rights groups.

Berkshire Hathaway said Saturday morning that it made $35.5 billion, or $24,377 per Class A share, in the first quarter. That’s more than 6 times last year’s $5.58 billion, or $3,784 per share.

But Buffett has long cautioned that those bottom line figures can be misleading for Berkshire because the wide swings in the value of its investments — most of which it rarely sells — distort the profits. In this quarter, Berkshire sold only $1.7 billion of stocks while recording a $27.4 billion paper investment gain. Part of this year’s investment gains included a $2.4 billion boost related to Berkshire’s planned acquisition of the majority of the Pilot Travel Centers truck stop company’s shares in January.

Buffett says Berkshire’s operating earnings that exclude investments are a better measure of the company’s performance. By that measure, Berkshire’s operating earnings grew nearly 13% to $8.065 billion, up from $7.16 billion a year ago.

The three analysts surveyed by FactSet expected Berkshire to report operating earnings of $5,370.91 per Class A share.

Buffett came close to giving a formal outlook Saturday when he told shareholders that he expects Berkshire’s operating profits to grow this year even though the economy is slowing down and many of its businesses will sell less in 2023. He said Berkshire will profit from rising interest rates on its holdings, and the insurance market looks good this year.

This year’s first quarter was relatively quiet compared to a year ago when Buffett revealed that he had gone on a $51 billion spending spree at the start of last year, snapping up stocks like Occidental Petroleum, Chevron and HP. Buffett’s buying slowed through the rest of last year with the exception of a number of additional Occidental purchases.

At the end of this year’s first quarter, Berkshire held $130.6 billion cash, up from about $128.59 billion at the end of last year. But Berkshire did spend $4.4 billion during the quarter to repurchase its own shares.

Berkshire’s insurance unit, which includes Geico and a number of large reinsurers, recorded a $911 million operating profit, up from $167 million last year, driven by a rebound in Geico’s results. Geico benefitted from charging higher premiums and a reduction in advertising spending and claims.

But Berkshire’s BNSF railroad and its large utility unit did report lower profits. BNSF earned $1.25 billion, down from $1.37 billion, as the number of shipments it handled dropped 10% after it lost a big customer and imports slowed at the West Coast ports. The utility division added $416 million, down from last year’s $775 million.

Besides those major businesses, Berkshire owns an eclectic assortment of dozens of other businesses, including a number of retail and manufacturing firms such as See’s Candy and Precision Castparts.

Berkshire again faces pressure from activist investors urging the company to do more to catalog its climate change risks in a companywide report. Shareholders were expected to brush that measure and all the other shareholder proposals aside Saturday afternoon because Buffett and the board oppose them, and Buffett controls more than 30% of the vote.

But even as they resist detailing climate risks, a number of Berkshire’s subsidiaries are working to reduce their carbon emissions, including its railroad and utilities. The company’s Clayton Homes unit is showing off a new home design this year that will meet strict energy efficiency standards from the Department of Energy and come pre-equipped for solar power to be added later.
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Представники криптобіржі заявили, що компанія «повністю дотримується всіх американських та міжнародних санкцій»
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In the wake of three of the biggest bank failures in U.S. history over the past two months, Americans are increasingly jittery about the safety of their money, worried about instability in the banking sector and concerned that fear, whether justified or not, could result in additional collapses. 

Over the past week, multiple midsize U.S. banks have watched their share prices fluctuate wildly — some losing nearly 90% of their value — as investors and depositors struggled to ascertain whether the same problems that affected First Republic Bank, shuttered on Monday, and Silicon Valley Bank and Signature Bank, both shut down in March, were widespread. 

On Friday, investors seemed to regain some of their confidence in the sector, sending the share prices of many midsize banks back up. However, the broader environment of concern persists. 

So far, investors’ unease does not seem to have prompted significant deposit flight — when customers transfer funds from a bank they fear might be unsafe to an institution considered less risky. However, the rush to the exits that preceded the collapse of Silicon Valley Bank transpired in under 48 hours, leaving some experts nervous about a repeat. 

A broad market 

The United States, unlike many countries, has an extremely diverse banking system, with thousands of companies holding bank charters.  

In 2022, the Federal Deposit Insurance Corp., which insures individual bank accounts, covered deposits at 4,135 individual banks. The U.S. also is home to a significant number of credit unions, which are tax-exempt not-for-profit organizations that, like banks, accept deposits, provide transaction services and make loans. 

The vast majority of U.S. banks are relatively small “community” banks that serve a limited geographic area and have at most a few branches. 

However, sitting atop the U.S. banking industry are the four institutions — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — all of which have assets of more than $1 trillion. 

Those four banks are widely assumed to be “too big to fail,” meaning that the federal government would intervene to prevent them from collapsing to prevent widespread damage to the banking system and the U.S. and global economies.  

Who is ‘too big to fail’? 

While there is general agreement that the four largest banks are too big to fail, there has long been debate about whether that label should apply to the banks in the next tier, about 20 institutions with $100 billion to $600 billion in assets. 

Regulators muddied the water significantly with the failures of Silicon Valley, Signature, and First Republic banks, all of which had fallen into that second tier. 

In the case of Silicon Valley and Signature banks, the FDIC announced that deposit insurance would be extended to 100% of deposits. Technically, the agency is obligated to cover only the first $250,000 in any individual’s or company’s accounts. However, FDIC leadership invoked an exception that allowed it to expand coverage when failing to do so might cause a systemic crisis. 

When First Republic failed on Monday, the agency negotiated a deal with JPMorgan Chase, under which the larger bank assumed all deposits of First Republic at face value, completely protecting depositors from losses, at an estimated cost of $13 million to the FDIC’s deposit insurance fund. 

The agency faced considerable criticism for its actions, with some speculating that a precedent had been set under which depositors at any failed bank could expect to be fully insured. The agency pushed back, saying that was not the case.  

In the aftermath, many depositors at midsize banks began to wonder whether the problems that had brought down Silicon Valley, Signature and First Republic were present at their banks. They also worried whether the institutions holding their money were considered big enough to rate a federal rescue. 

Regional banks in focus 

Most of the concern has been focused on banks considered “regional” — second-tier institutions that are neither community banks nor trillion-dollar banks. 

PacWest Bancorp, another California-based lender, was among the banks hit hardest by the stock market sell-off. The bank has a large concentration of customers in the venture capital space, many of whom keep deposits that are orders of magnitude larger than the deposit insurance cap. A similar customer base led the flight from Silicon Valley Bank. 

PacWest, however, said that it did not experience heavier-than-usual deposit loss in the wake of the First Republic failure, though it did admit that it was in talks with potential acquirers. 

Other banks whose share prices have been hammered include Western Alliance Bancorp, Zions Bancorp, and Comerica. 

‘Disturbing trend’ 

If bank customers lose faith in the safety and soundness of small and midsize banks, experts said, it will be bad for the banking system and the broader U.S. economy. 

“It’s a very disturbing trend, because of its impact on smaller banks — not just community banks, but even some of the smaller regionals,” said Bert Ely, principal of the banking consultancy Ely & Co. “Once people make that shift, not everybody’s going to come back to smaller banks.” 

Ely told VOA that in his view, the investor concern is overblown.  

“All this nervousness, I think, is really misplaced, given the state of the economy,” he said, pointing out that U.S. markets remain strong and are not suffering from significant problems such as the collapse of the subprime mortgage market, which presaged the last major banking crisis. 
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CAPE TOWN, SOUTH AFRICA — With 12 storeys, a breathtaking view of Cape Town’s imposing Table Mountain and a minimal ecological footprint, the world’s tallest building made with industrial hemp is soon to open its doors in South Africa.

Workers in central Cape Town are putting the finishing touches on the 54-room Hemp Hotel, which is due to be completed in June.

“Hempcrete” blocks derived from the cannabis plant have been used to fill the building’s walls, supported by a concrete and cement structure.

Hemp bricks are becoming increasingly popular in the construction world thanks to their insulating, fire-resistant and climate-friendly properties.

Used notably in Europe for thermal renovation of existing buildings, the blocks are carbon negative — meaning their production sucks more planet-warming gases out of the atmosphere than it puts in.

“The plant absorbs the carbon, it gets put into a block and is then stored into a building for 50 years or longer,” explains Boshoff Muller, director of Afrimat Hemp, a subsidiary of South African construction group Afrimat, which produced the bricks for the hotel.

“What you see here is a whole bag full of carbon, quite literally,” Muller says as he pats a bag of mulch at a brick factory on the outskirts of Cape Town, where hemp hurds, water and lime are mixed together to make the blocks.

The industrial hemp used for the Hemp Hotel had to be imported from Britain as South Africa banned local production up to last year, when the government started issuing cultivation permits.

President Cyril Ramaphosa has made developing the country’s hemp and cannabis sector an economic priority, saying it could create more than 130,000 jobs.

Carbon credits

Afrimat Hemp is now preparing to produce its first blocks made only with South African hemp.

Hemp Hotel architect Wolf Wolf, 52, sees this as a game changer to make hemp buildings more widespread in this corner of the world.

“It shouldn’t be just a high-end product,” says Wolf, whose firm is involved in several social housing projects in South Africa and neighboring Mozambique.

Yet cost remains an issue.

“Hemp is 20 percent more expensive to build with” compared to conventional materials, says Afrimat Hemp’s carbon consultant Wihan Bekker.

But as the world races to lower carbon emissions, the firm sees “huge opportunities” for its green bricks, says Bekker.

Carbon credits — permits normally related to the planting of trees to safeguard tropical rainforests that companies buy to offset their emissions — could help make hempcrete blocks more financially palatable, he says.

“We can fund forests, or we can fund someone to live in a hemp house. It’s the same principle,” Bekker says.

The carbon footprint of a 40 square meter (430 square foot) house built with hemp is three tons of CO2 lower than that of a conventional building, according to Afrimat Hemp.

“We see this as a bit of a lighthouse project,” Muller says of the Hemp Hotel.

“It shows hemp has its place in the construction sector.” Hemp Hotel has been ranked the “tallest building to incorporate hemp-based materials in the world” by Steve Allin, director of the Ireland-based International Hemp Building Association.
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America’s employers added a healthy 253,000 jobs in April, evidence of a labor market that still shows surprising resilience despite rising interest rates, chronically high inflation and a banking crisis that could weaken the economy.

The unemployment rate dipped to 3.4%, matching a 54-year low, the Labor Department said Friday. But the jobless rate fell in part because 43,000 people left the labor force, the first drop since November, and were no longer counted as unemployed.

In its report Friday, the government noted that while hiring was solid in April, it was much weaker in February and March than it had previously estimated. And hourly wages rose last month at the fastest pace since July, which may alarm the inflation fighters at the Federal Reserve.

April’s hiring gain compares with 165,000 in March and 248,000 in February and is still at a level considered vigorous by historical standards. The job market has remained durable despite the Fed’s aggressive campaign of interest rate hikes over the past year to fight inflation. Layoffs are still relatively low, job openings comparatively high.

Still, the ever-higher borrowing costs the Fed has engineered have weakened some key sectors of the economy, notably the housing market. But overall, the job market has remained stable. Fed Chair Jerome Powell himself sounded somewhat mystified this week by the job market’s durability. The central bank has expressed concern that a robust job market exerts upward pressure on wages — and prices. It hopes to achieve a so-called soft landing – cooling the economy and the labor market just enough to tame inflation yet not so much as to trigger a recession.

One way to do that, Powell has said, is for employers to post fewer job openings. And indeed, the government reported this week that job openings fell in March to 9.6 million — a still-high figure but down from a peak of 12 million in March 2022 and the fewest in nearly two years.

At the staffing firm Robert half, executive director Ryan Sutton said he still sees “pent-up demand” for workers.

Applicants, not employers, still enjoy the advantage, he said: To attract and keep workers, he said, businesses — especially small ones — must offer flexible hours and the chance to work from home when possible.

“Giving a little bit of schedule flexibility so that somebody might finish their work late or early so that they can take care of children and family and elderly parents — these are the things that the modern employee needs,” Sutton said. “To not offer those and to try to still have a 2019 business model of five days a week in an office — that’s going to put you at a disadvantage” in finding and retaining talent.

Powell has said he is optimistic that the nation can avoid a recession. Yet many economists are skeptical and have said they expect a downturn to begin sometime this year.

Still, steadily rising borrowing costs have inflicted some damage. Pounded by higher mortgage rates, sales of existing homes were down a sharp 22% in March from a year earlier. Investment in housing has cratered over the past year.

America’s factories are slumping, too. An index produced by the Institute for Supply Management, an organization of purchasing managers, has signaled a contraction in manufacturing for six straight months.

Even consumers, who drive about 70% of economic activity and who have been spending healthily since the pandemic recession ended three years ago, are showing signs of exhaustion: Retail sales fell in February and March after having begun the year with a bang.

The Fed’s rate hikes are hardly the economy’s only serious threat. Congressional Republicans are threatening to let the federal government default on its debt, by refusing to raise the limit on what it can borrow, if Democrats don’t accept sharp cuts in federal spending. A first-ever default on the federal debt would shatter the market for U.S. Treasurys — the world’s biggest — and possibly cause an international financial crisis.

The global backdrop already looks gloomier. The International Monetary Fund last month downgraded its forecast for worldwide growth, citing rising interest rates around the world, financial uncertainty and chronic inflation.

Since March, America’s financial system has been rattled by three of the four biggest bank failures in U.S. history. Worried that jittery depositors will withdraw their money, banks are likely to reduce lending to conserve cash. Multiplied across the banking industry, that trend could cause a credit crunch that would hobble the economy.
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