WSJ What’s News - Has America’s Economy Reached a Tipping Point?

Episode Date: August 9, 2024

P.M. Edition for Aug. 9. As the U.S. teeters between a soft landing and recession, WSJ economy reporter Jon Kamp says the uncertainty is weighing on consumers and businesses of all sizes as they seek to plan their spending. And U.S. intelligence agencies say Iranian research has put the country in a better position to launch a nuclear-weapons program—though it has yet to do so. Plus, why a few presidential candidates are boosting the idea of a U.S. bitcoin reserve. Pierre Bienaimé hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Easy. Go to kraken.com and see what crypto can be. Not investment advice. Crypto trading involves risk of loss. See kraken.com slash legal slash ca dash pru dash disclaimer for info on Kraken's undertaking to register in Canada. The U.S. says that Iran is in a better position to launch a nuclear weapons program. And has the U.S. economy reached a tipping point?

The American economy depends an awful lot on the American consumer. And so what happens from here also depends on the millions of little decisions that everyday people make and as well as the decisions that companies make. Plus presidential candidates are talking up the idea of a U.S. Bitcoin reserve. It's Friday, August 9th. I'm Pierre Bienemé for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that moved the world today.

We exclusively report that U.S. intelligence agencies say Iranian research has put the country in a better position to launch a nuclear weapons program though it has yet to do so. The report omitted what's been a standard US intelligence assertion for years, that Iran quote, isn't currently undertaking the key nuclear weapons development activities necessary to produce a testable nuclear device. The shift in Washington's view of Iran's nuclear efforts comes at a critical time. Iran has already produced enough highly enriched nuclear fuel for a few nuclear weapons. It also comes as tensions in the Middle East have sharply escalated since Iran threatened

to strike Israel following the assassination of a leading Hamas figure in Tehran. Iran has blamed Israel. Lawrence Norman is the Wall Street Journal's deputy bureau chief in the Brussels bureau where he covers foreign affairs. Lawrence, U.S. intelligence is saying here that Iran isn't currently working to build a nuclear device, but that it's more capable of it now. What should we make of this? Lawrence Norman, U.S. intelligence chief, Wall Street Journal

The top line of this would be they're a little more worried about whether Iran will move to actually producing nuclear weapons. What they're saying Iran is doing is carrying out activities that could help Iran shrink the knowledge gap that they have about actually building a nuclear weapon. Iran knows a lot about it. It's done work on this many years in the past. It has also built up a large enrichment program, which has produced a lot of nuclear fuel that they could use in a weapon, but they haven't built a weapon before.

These activities are giving them some knowledge that they can apply to actually building nuclear weapons if they choose to do so. And that is not something that has been observed for many years, and that has the intelligence agencies in the United States a bit more worried than they were. Now, the US intelligence assessment also notes a notable increase in public statements out of Iran about nuclear weapons. Is talk about these weapons becoming less of a taboo?

It's definitely becoming less of a taboo, but ultimately what we care about is does the supreme leader in Iran who controls key elements of security policy tell his people that Iran wants to build a bomb. The taboo matters a little bit less, apart from signaling. But what we have seen is Iranian officials saying both, that they have basically amassed most of the, if not all the mastery of building a nuclear weapon. Maybe that's true, maybe it isn't, but they've been saying it. And more importantly, saying that the leadership

could reverse its official public stance, which has been there for 20 years, which says we will not work on weapons of mass destruction. That comes from a fatwa issued by the Supreme Leader in the early 2000s. And if they were to reverse that or say that no longer applied, it would ring absolute alarm bells in Western capitals. Lawrence Norman covers foreign affairs for the Wall Street Journal. And in Brazil, authorities said today that a passenger plane carrying 62 people crashed in a residential area near Sao Paulo, killing everyone on board.

Brazilian carrier Vopass said the cause was not yet confirmed. Brazil's president, Luiz Inácio Lula da Silva, interrupted an event to announce the crash. Brazil's national aviation authority said it's monitoring Vopass' response to victims and working to ensure that the company takes the necessary steps for an investigation into what caused the crash. Coming up, uncertainty is weighing on U.S. consumers and businesses. That's after the break. Introducing TD Insurance for Business with customized coverage options for your business.

Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor, or a consultant, you can get customized coverage for your business. Contact a licensed TD Insurance advisor to learn more. In U.S. markets, the S&P 500 had a wild week which, after ups and downs, brought it just about where it started the week, up 12% for the year.

The Nasdaq Composite and Dow Jones Industrial Average both rose, but logged weekly declines of 0.2% and 0.6% respectively. And the big swings may not be over. The U.S. government already keeps reserves of gold, oil and foreign currencies. How about Bitcoin? At a recent annual conference for the cryptocurrency, presidential candidates Donald Trump and Robert F. Kennedy Jr. both pledged to buy Bitcoin for the government. Vicky Huang covers crypto for the Wall Street Journal.

Vicky, what do crypto fans make of this idea? The crypto industry has for a pretty long time been in favor of the US establishing such a strategic Bitcoin reserve, because the fact that you have a reserve of this financial asset itself helps lend legitimacy to Bitcoin and potentially help stabilize the price of Bitcoin, which has been very volatile throughout its entire history. The crypto industry has in the past less than a year raised a lot of funds to support candidates in the congressional races this year. The crypto industry has been pushing this idea that there are all these voters in the country

who care deeply about crypto, who are crypto asset owners, and they would vote based on their candidates' stance on crypto and their policies in crypto. Well, what do polls have to say about that issue among voters? So there is no official scientifically conducted survey that suggests that there is a big number of crypto voters or owners. The closest example we have of an official figure is a recent Federal Reserve survey that stated that there's 7% of US adults or roughly 18 million Americans that reported holding

or using cryptocurrencies last year. But that survey was conducted online, so it could have been overstated. So we don't really know how many voters would kind of look at crypto as a single issue they would base their decision on. Vicky Huang covers crypto for The Wall Street Journal and presidential candidate Kamala Harris hasn't weighed in on the possible merits of a Bitcoin reserve. But her advisors have reached out to crypto companies in recent days in an effort to smooth relations. Until recently, the U.S. appeared to be headed for a soft landing.

Inflation was coming down while employment remained high and growth steady. But events in the past few weeks have cast doubt on that prospect. Some economists are raising the probability of recession. And that uncertainty is weighing on consumers and businesses of all sizes giving rise to a central question in the long fight to cut inflation and dodge recession have we reached a tipping point John Camp covers the economy for the Wall Street Journal and he joins me now so John are we at a tipping point what are economists saying that is a really central question that I think a lot of them are thinking about right now.

And what happened while the Fed had this really singular focus on trying to bring down really high inflation was that we saw kind of a lackluster hiring report for July and a bump up in unemployment. And so that's going to raise concerns that we could be starting to see weakness that you know Were it to compound and start to build on itself what would become even more concerning How is the average American consumer feeling about the economy consumer sentiment is certainly far above a historic low From really a couple years ago. That's according to the University of Michigan's surveys of consumers But also that consumer sentiment really remains a bit guarded as high prices drag down people's attitudes.

And this is especially the case for lower income people. The American economy depends an awful lot on the American consumer. And so what happens from here also depends on the millions of little decisions that everyday people make, and as well as the decisions that companies make. And so it's really important to understand and see in the coming months just how rattled people are and whether they'll you know just keep plugging ahead. Would a rate cut by the Fed in September as is expected help? Lower rates are very welcome and can certainly help everyday people as well

because you're effectively decreasing the cost of borrowing. At the same time, it's a blunt instrument that is being used to try and steer an incredibly complex machine that has millions of moving parts. And there's always a risk still, and this is how recessions start, that you have this self-reinforcing cycle that starts where companies get a bit nervous, they see a slowdown in spending, so they lay people off, or they slow hiring.

And when people lose their jobs, the interest rate isn't really their primary focal point, right? I mean, losing a job is a very immediate and serious concern, especially if you don't have a lot of savings. And so that could very quickly impact people's spending that can cycle back around to companies seeing their sales decline and so on and so on. Jon Camp covers the economy for The Wall Street Journal. And finally, in an era of political tumult, some affluent Americans are quietly making a plan B in case all hell breaks loose. That could be in the form of political tumult, some affluent Americans are quietly making a plan B in case

all hell breaks loose. That could be in the form of an underground bunker, complete with relatively luxurious amenities or a foreign passport. Wall Street Journal reporter Chris Maher. You're not really roughing it in these bunkers. You've got granite countertops, you've got oak flooring, but you also have protection so you have bulletproof hatches. You've got your own decontamination chambers or you've got solar energy. So that if you're disconnected from the rest of the world, you can still survive.

And some people who are anxious about the political divisions in the country right now, or that some global conflicts could spill over to the U S they're increasingly looking for other solutions. They're looking at citizenship abroad or residency in other countries. In fact, it's called citizenship by investment. And one of the more interesting cases that I found was the very small country of Malta in the Mediterranean. One of the things that you need to do is invest at least 750,000 euros, which is more than

800,000 US dollars. It's a popular plan, mostly because you can live in Malta if you need to, but you can also gain access to the more than two dozen countries in the European Union. So it gives you access to most of Europe. And that's what's news for this week. Today's show was produced by Anthony Bansi. I'm Pierre Bienemay. Our AM host is Luke Vargas. Additional support this week from Francesca Fontana. Michael Laval wrote our theme music.

Our supervising producers are Tali Arbel, Michael Kosmides, and Christina Rocca. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. Tomorrow, you can look out for our weekly Markets Wrap The Wall Street Journal's head of news audio. Tomorrow, you can look out for our weekly Markets Wrap-Up, What's News in Markets. Then on Sunday, we'll be answering your questions about taking your office anywhere in the world in What's News Sunday.

We'll be back with our regular show on Monday morning. Thanks for listening.