Interest rates are low right now — do these 3 things to earn more money

With interest rates in decline, where can a saver go to pad their portfolio? These three landing spots make the grade. (iStock)

Coronavirus has forced the U.S. Federal Reserve to cut interest rates twice in 2020, the second time (on March 15) bringing the benchmark federal funds rate down to a range of 0 to 0.25 percent.

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The Fed cuts rates — which, in turn, led mortgage rates, refinance rates and beyond to reach all-time lows — to spark more lending and credit through a now weakened U.S. economy. On the downside, though, Main Street bank savers are scrambling to find more robust rates on traditional rate-return financial tools like bank accounts and U.S. Treasury bonds after the rate drop amid the coronavirus pandemic.

That scramble hasn’t been easy, financial experts say.

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“The flip side of low-interest rates means that lending tools such as money market accounts, certificates of deposits and bonds have low-interest rates, too,” said Ryan Moore, founder and CEO of Kingman Financial Group, in San Antonio, Texas. “Storing money in these types of instruments currently won't provide the same opportunity and rewards that have been seen in days past. Some may even be detrimental if rates increase in the future.”

That said, Moore is optimistic that traditional savers can find some upside in record low-interest rates. “Don't let it discourage you,” he said. “Instead let it provide the inspiration to examine alternatives and opportunities to grow.”

The path forward for savers in a low-rate environment requires some patience, discipline and a dash of creativity. If you're financially stable, here are three things you should do that can help save money, earn more toward savings and get out of debt.

1. Pay down debt at lower rates

The coronavirus pandemic has allowed U.S. interest rates to hit a record low, providing opportunity as well as some incentives to change a financial consumer’s existing habits.

“With interest rates so low, borrowing money is the cheapest it has been in a long while,” Moore said. “It’s a great opportunity to save money on existing debt, mortgages and business loans.”

If you already have a mortgage, for example, you may want to consider refinancing while rates are at a record low. To see how much you could save on your monthly mortgage payment, compare rates using Credible's free online tool. Within minutes, you can see what multiple mortgage lenders are offering.

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If you have student loans, it's also a good idea to consider a refinance (particularly if you have private loans — as the rate cut doesn't affect federal student loans). The rates and repayment terms of student loans vary depending on lenders. Credible uses your loan balance and estimated credit score show you your potential savings.

10 OF THE BEST STUDENT LOAN REFINANCE COMPANIES

It's also wise to crunch the numbers into a student loan refinancing calculator as you work on financial planning.

SHOULD YOU CONSOLIDATE OR REFINANCE YOUR STUDENT LOANS?

According to Moore, savers can also take advantage of low-interest rates by moving outstanding debt (like credit card debt) and replacing it with a much lower interest rate.

“However, it's important to be aware of closing cost that may offset any advantages,” he said. “Shop around banks, credit unions, mortgage companies, not only in your area but nationwide, to ensure you receive the best rates possible.”

2. Get creative with bank savings rates

Look into a money market account, which historically generates higher rate returns than bank savings or checking accounts.

“A money market account is fairly similar to a savings account, with some extra characteristics,” said Anna Barker, personal finance expert and founder of the LogicalDollar personal financial website. “In particular, they usually require a higher minimum deposit or balance to be maintained.”

HOW ARE HIGH-YIELD SAVINGS ACCOUNTS DIFFERENT THAN TRADITIONAL SAVINGS ACCOUNTS?

However, they also generally offer higher interest rates than a standard savings account. “That makes them a good option for someone looking to earn more from their savings,” Barker said.

Take a closer look at online savings accounts, as well, Barker said. “If you're not currently using an online savings account, online savings accounts are a good idea. By and large, they have interest rates that are slightly higher than those offered by traditional banks.”

3. Ladder certificates of deposit

Done correctly creating a CD ladder can lead directly to more robust savings rates.

“A certificate of deposit – or CD – allows customers to have access to higher interest rates for a certain period of time, on the condition that they not touch the deposit during that period,” Barker said. “Otherwise, you have to pay an early withdrawal penalty.”

The main benefit of a CD, especially during periods such as these where there's a chance another rate cut could happen, is that the interest rate is locked in for the entire term. Consequently, laddering CDs can be a good strategy for savvy savers.

“With a laddering approach you buy various CDs with different maturity rates,” Barker noted. “For example, say you put your money into three CDs with intervals of one, two and three years. At the end of the first year, the money in that CD will become available for you to either spend or put back into your savings.”

A laddering strategy frees up savings at the end of each interval, which provides some flexibility to CD investors, too.

“You might need the money, depending on your financial goals and when you want to use the cash,” she added. “At the same time, it lets you take advantage of the potentially higher interest rates that the CD offers.”

The takeaway on finding good savings rates

One last point. The more financial consumers shop around for higher savings rates on different investment vehicles, the stronger their odds of digging up some great rate deals.

Credible is a great resource when it comes to comparing multiple lenders to ensure you'll meet your financial goals. Their tools enable savers to instantly and accurately compare various savings rates, completely free of charge.

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By comparing rates and deploying creative strategies like leveraging lower rates to reduce debt and build a CD ladder to optimize bank savings rates, savers can better manage their money and find strong savings rates — even in a downward spiraling economy.

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Strategist: Biggest risk to market is a second outbreak

New York (CNN Business)American consumers are starting to try to get back to something resembling normal life on Main Street — and that sense of optimism is present on Wall Street too.

Stocks have soared since briefly entering bear market territory in mid-March. And the CNN Business Fear & Greed Index, which looks at the VIX (VIX) volatility index and six other gauges of market sentiment, is showing signs of greed for the first time since mid-February.
The index also looks at demand for safer Treasury bonds and riskier junk bonds, the level of stocks hitting new 52-week highs versus lows, momentum in the broader market and options trading.

    The seven indicators are each assigned a level from Extreme Fear to Extreme Greed to determine an overall reading for the market between 0 and 100. Anything over a 55 indicates Greed, while a reading below 45 suggests a level of Fear. The index hit a reading of 58 on Monday.
    The economic recovery may be shaped like the Nike swoosh
    The index plunged into Extreme Fear territory in March, as the Covid-19 pandemic led to massive shutdowns of the American economy: closures of schools, the suspension of live sports and entertainment and many people being forced to work from home. The index hit a low of 2 on March 12.

      The US economy suffered its worst drop since 2008 in the first quarter, and is likely to post its biggest contraction since the Great Depression in the second quarter, with earnings expected to slide for the remainder of this year.
      However, investors are increasingly hopeful that the economy and corporate profits will bounce back sharply in 2021.
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      Drivers take advantage of low gas prices as states reopen

      Gas prices could hit around $2 a gallon on July 4: GasBuddy analyst

      GasBuddy Head of Petroleum Analysis Patrick De Haan on gas prices and demand decreasing over the holiday weekend.

      Americans are starting to capitalize on low prices at the gas pump as states loosen travel restrictions, a boon for the battered energy industry and a hopeful signal for the U.S. economic recovery.

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      With more states easing lockdown measures enacted to fight the spread of the coronavirus, people are gradually hitting the road and causing modest car traffic in cities from Miami to San Francisco. The slight increase in congestion comes with beaches and summer destinations opening and many people avoiding public transportation and airplanes.

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      That uptick in driving coincides with a nascent recovery in consumer spending, fueling hopes that the economy is rebounding from the worst of the virus-induced slowdown.

      The optimism is driving a rally in investments from stocks to commodities. It powered the S&P 500 and oil prices last week to their highest level since early March. Meanwhile, with more people driving, the national average price for a gallon of regular gasoline climbed in four consecutive weeks through May 25 to $1.96 from a four-year low of $1.74 hit in late April, data from tracking firm GasBuddy show.

      Americans are taking advantage of low gas prices. (iStock)

      Prices are still well below where they started the year. But their rebound, and the bounceback in oil prices, represent an initial step for the energy sector's survival. Producers like Chevron Corp. and Occidental Petroleum Corp. are slashing supply with crude still below levels that make most projects profitable. Some investors expect those production cuts and a continued rise in travel to buoy energy prices moving forward.

      Matt Jackson has been driving more in Philadelphia since returning to work a few weeks ago. The 39-year-old judicial aide and paralegal student has been working alternate days and lives about 10 miles from the court building where he works. He has noticed more traffic on highways lately and hopes to travel to New Jersey beaches this summer.

      "Philadelphia is always a jumping place, and it's coming back," he said. "As things begin to reopen, I do see more people." Gas prices in the area have risen to about $2.20 a gallon from a recent low of $2.10. Mr. Jackson said the low prices add incentive to take longer drives.

      The energy crash has battered refiners that turn crude into fuel products, with companies including Marathon Petroleum Corp., Valero Energy Corp. and Phillips 66 posting some of their worst earnings in years for the first quarter. Those companies typically do well when oil prices are low and people are taking advantage by driving more, but millions of people didn't drive for much of March and April due to lockdowns.

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      Demand for gas is slowly starting to creep back. Requests for driving directions on Apple Inc.'s Maps app are back around mid-January levels, while data from Dutch location technology firm TomTom International BV show traffic congestion gradually climbing in some large U.S. cities, though it is still down substantially from March levels in many.

      "We're already seeing some improvement in demand, and this is going to continue as people return to more normal activities," Valero CEO Joe Gorder said on a call with investors and analysts in late April. Shares of Valero, Phillips 66 and Marathon Petroleum have each rebounded 46% or more so far this quarter.

      Still, refining activity in the U.S. remains well below normal levels, and many analysts expect a bumpy recovery until more of the population feels comfortable traveling long distances. The speed of recent price moves has made the current environment even more challenging for energy companies. One price of U.S. crude dropped below $0 a barrel for the first time ever on April 20, meaning holders of the futures were paying to get rid of them due to a lack of available storage.

      Oil prices have since rebounded to the mid-$30s a barrel but are still at levels that would leave much of the energy industry languishing. If prices keep rising, some investors expect producers to lift supply in response, another factor that could slow the recovery.

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      "The first leg of a recovery from a really low point is the easiest part, " said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. "There's still a lot of crude around." She has been driving more recently and has noticed more cars on the road in Hoboken, N.J., but expects it to take time for demand to fully rebound.

      The recent rise in fuel prices is also a reminder of the big disparities across states due to a combination of state and local taxes, refining costs and pricing by energy companies. Prices in California are at about $2.90 a gallon, while gas costs roughly $1.65 in Texas.

      Bob Haines, a 59-year-old who runs a small auto repair shop in Waukegan, Ill., often travels a few miles north to Wisconsin to fill up because gas is much cheaper there. Prices are currently at about $1.85 a gallon nearby in Wisconsin, 40 cents cheaper than where he lives.

      While Mr. Haines and his family are still limiting their driving, he is noticing more activity in the area, particularly in Wisconsin, where the state's top court overturned the state's coronavirus shutdown order last month.

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      "People are flocking to the bars, they're flocking to the restaurants," he said. "It appears we're getting into pre-Covid-19 traffic patterns again," he added, referring to the disease caused by the coronavirus.

      Demand for ride-shares has risen recently in Fort Worth, Texas, as businesses in the area reopen, said Katrina Titze, a 34-year-old driver for Lyft Inc. and consultant.

      Ms. Titze, who drives about 150 to 200 miles a day in her Toyota Highlander, said the price of a gallon of regular gasoline in the area has risen to about $1.60 from a recent low of $1.25.

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      She has driven throughout the pandemic — transporting everyone from health-care workers to Amazon.com Inc. employees — but recently noticed an increase in requests to travel to bars and restaurants.

      "People are starting to be more social and go out," said Ms. Titze.

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      Black Congresswoman Pepper-Sprayed By Police During Ohio Demonstration

      Ohio Rep. Joyce Beatty was pepper-sprayed by police in Columbus on Saturday during a protest decrying police brutality and demanding justice for George Floyd, who died in Minneapolis after an officer knelt on his neck. 

      Beatty, who is Black, denounced the violence perpetrated by both demonstrators and police in Columbus and elsewhere in the aftermath of Floyd’s death.

      Violence “doesn’t work — violence either way,” she told NPR’s “Weekend Edition” on Sunday. 

      “We have to somehow make sure that we get the word out that you cannot come in and tear up buildings,” said Beatty, a Democrat. “When you break windows and destroy businesses and people get hurt, that’s not going to resolve the problem of why George Floyd died.”

      Beatty said in an earlier interview that she’d attended the protest to stand “in solidarity” with demonstrators. 

      “You know, I’m a grandmother, I’m an elected official, but I’m a black woman first and I felt the pain,” she told NBC 4.

      Beatty was with Columbus City Council President Shannon Hardin and Kevin Boyce, a member of the Franklin County Board of Commissioners, when she was pepper-sprayed by police.

      Columbus Dispatch photojournalist Kyle Robertson captured the violent encounter in a series of photos, which he shared on Twitter. 

      Politico also shared a video of the incident. 

      Dominic Manecke, a spokesman for Beatty, told CNN the lawmaker had been trying to mediate between demonstrators and police when she was pepper-sprayed. 

      “People are angry. Tensions are very high and she went down there as a voice of reason. She has a very good connection with the community and was trying to be a mediator,” Manecke said, adding that Beatty got caught in a “melee” as tensions flared between the two sides.

      Following the incident, Beatty, Hardin and Boyce urged calm in a video posted to Twitter. 

      “Too much force is not the answer to this,” Beatty said. 

      Protests, some of them violent, have rocked the nation for days since Floyd’s death. 

      In Columbus on Sunday, hundreds took to the streets again for what was largely a peaceful demonstration. At around 8 p.m., two hours before the city’s curfew was set to kick in, Columbus police ordered protesters ― some of whom threw water bottles at officers ― to disperse immediately. Officers then used wooden projectiles and tear gas against demonstrators, WOSU Public Media reported. 

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      China slams Trump, US over response to George Floyd protests

      Trump must lead the world in changing China: Milken Institute analyst

      Milken Institute Asia Fellow Curtis Chin discusses US-China relations amid rising tensions in Hong Kong and investing in China’s military.

      Chinese officials and state media clobbered the Trump administration's response to violent protests sweeping the U.S., comparing the widespread unrest that began last week to the pro-democracy demonstrations in Hong Kong.

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      In a Sunday tweet directed at her American counterpart — Morgan Ortagus, who had previously criticized Beijing's crackdown on Hong Kong protests, China's foreign ministry spokespersons, Hua Chunying posted "I can't breathe."

      Her message is a reference to some of the final words uttered by George Floyd, the African American man who died while being detained by Minneapolis police after a white officer pressed his knee into his neck for several minutes. His death, captured in a viral video as he pleaded that he could not breathe, ignited angry protests across the country that escalated over the weekend amid increasingly aggressive clashes between police and protesters.

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      In some instances, police responded with teargas, pepper spray, rubber bullets and ramming protesters with vehicles; protesters have been accused of looting stores and burning buildings, and several major U.S. cities have implemented curfews.

      "I have a question for violent protesters in Hong Kong and their supporters there: Would you stand with angry Minneapolis demonstrators who attacked police station, or would you stand with President Trump who threatens to shoot 'These THUGS'?" Hu Xijin, the editor-in-chief of the state-run Global Times, wrote in a tweet.

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      Hu also took a swipe at House Speaker Nancy Pelosi, who once described the Hong Kong protests as a "beautiful sight to behold."

      "Now they can witness it by their home windows," he wrote. "I want to ask Speaker Pelosi and Secretary Pompeo: Should Beijing support protests in the US, like you glorified rioters in Hong Kong?"

      "Why did the U.S. glorify the so-called pro-independence forces in Hong Kong as heroes, but call the protesters disappointed with racism in the U.S. rioters?" Zhao Lijian, a spokesman for Chinese foreign ministry, said during a Monday press briefing, according to the South China Morning Post. "Why did the U.S. criticize the very restrained Hong Kong police but shoot its domestic protesters and even mobilise its National Guard troops?"

      Twitter is officially blocked in China, although state officials and state-sponsored entities have accounts on the social media platform.

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      The comments come amid growing tensions between China and Hong Kong, as well as between Washington and Beijing.

      One year after last summer's chaotic and frequently violent anti-government protests, the Chinese government announced plans to pass a controversial national security law to outlaw secession, subversion, terrorism and foreign interference in Hong Kong. The decision not only resuscitated the protests, but prompted President Trump to strip Hong Kong of its special status in a bid to punish China.

      Hong Kong, a former British colony, was returned to China in 1997 under an agreement known as "one country, two systems," which allowed the city to retain a "high-degree of autonomy" for 50 years. The agreement expires in 2047.

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      Banks Have a Mountain of Deposits So They Don’t Need PPP Funding

      A record surge in bank deposits has given U.S. lenders more cash than they know what to do with. One thing they don’t need: help from the Federal Reserve to fund the government-backed loans they made to small businesses.

      Banks had tapped only $49 billion from the Paycheck Protection Program Liquidity Facility by May 27 as they loaned $511 billion, according to the central bank and the U.S. Small Business Administration. That’s largely because lenders are sitting on $1.8 trillion of new deposits that have flooded in since March 11 — a 13% increase, and the biggest two-month jump since at least 1973, when comparable data is available.

      “It looks like this excess liquidity in the banking system is going to stick around much longer,” said Brian Klock, a bank analyst at Keefe, Bruyette & Woods. “So if you don’t really need it, why get the Fed loan?”

      Deposits have surged as drops in securities markets and interest rates for bonds and money market funds pushed savers and investors to banks. Also, a jump in corporate borrowing amid the pandemic has ended up as deposits back at the banks.

      The Fed loans are pretty cheap at 0.35%, but then deposit costs have gone down considerably as well. Interest-bearing deposits cost JPMorgan Chase & Co. 0.52% in the first quarter, and Bank of America Corp. paid 0.47% while the average was around 1% for smaller lenders. Meanwhile, non-interest-bearing accounts made up about 30% of all deposits at the four biggest banks, giving them cheaper funding than the Fed’s rate.

      Among the top U.S. firms, only Citigroup Inc.’s name showed up on the list of 574 banks that used the Fed’s lending facility as of May 6. Citigroup has borrowed $1.3 billion from the central bank to fund some of the $3.3 billion loans it had made by May 1. It had the highest deposit cost among the four biggest banks in the first quarter at 1.1%, and the smallest deposit base. A Citigroup spokesman declined to comment.

      While the PPP loans stay on the banks’ balance sheets, they’re risk-free because the SBA guarantees payment — and many will become government grants if companies meet certain criteria. Only a small portion are likely to mature to full term, KBW’s Klock estimates. Depending on how much of the loans are still outstanding and if liquidity gets tighter, banks can still access the Fed’s facility in the next two years.

      One deterrent to borrowing from the Fed is political. Many banks probably want to stay off the list of borrowers to avoid the impression of government support for the industry, according to executives and others familiar with their decision-making.

      ConnectOne Bancorp Inc., a regional lender in New Jersey, is among the top borrowers of the Fed facility, using $344 million of funds to cover about 75% of the PPP loans it has made. The bank has a 109% loan-to-deposit ratio. Small banks that are lending more than what they hold in deposits have to turn to other sources of funding, such as the Fed’s facility.

      Even if the Fed’s lending or buying facilities are underutilized, they provide a backup for the market, Bank of America Chief Executive Officer Brian Moynihan said.

      “The fact that those facilities aren’t all used is actually good news,” Moynihan said in a May 19 interview with Bloomberg Television. “That means you’re seeing stability in the funding structures.”

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      Govt. rejects Flipkart’s proposal for entering food retail sector

      Commenting on the development, a company spokesperson said that Flipkart intends to re-apply for the permit

      The Department for Promotion of Industry and Internal Trade (DPIIT) has rejected Walmart-backed Flipkart’s proposal seeking approval for entry to the food retail sector citing a regulatory issue, an official said on Monday.

      The government permits 100% foreign direct investment in food retail for food produced and manufactured in India.

      Last year, the company had set up a new local entity — Flipkart Farmermart — to focus on food retail in India, and had applied for requisite licences from the government.

      Flipkart Group CEO Kalyan Krishnamurthy, at that time had said that the move an important part of the company’s efforts to boost Indian agriculture as well as food processing industry in the country.

      “Yes, the department has rejected the proposal,” the government official said.

      Commenting on the development, a company spokesperson said that Flipkart intends to re-apply for the permit.

      At Flipkart, we believe that technology and innovation driven marketplace can add significant value to our country’s farmers and food processing sector by bringing value chain efficiency and transparency. This will further aid boosting farmers’ income and transform Indian agriculture.

      We are evaluating the department’s response and intend to re-apply as we look to continue making significant impact on small businesses and communities in India,” the spokesperson said.

      Interestingly, Amazon had received the government’s nod for its $500 million investment proposal for retailing of food products in India in 2017.

      Grocery segment accounts for a significant portion of the unorganised retail segment in the country. Estimates suggest the market to be worth over $200 billion in India.

      The grocery segment has witnessed significant growth amid the COVID-19 pandemic. Many people turned to e-commerce platforms like Grofers, BigBasket and Amazon India for their grocery purchases during the lockdown as they looked at maintaining social distance.

      Market watchers feel that grocery segment would continue to scale in the coming months in view of the COVID-19 situation.

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      Trump took shelter in White House bunker as protests raged

      Rioters set fire to Minneapolis police station during George Floyd protests

      The National Guard was called into Minneapolis after protests intensified overnight. FOX Business’ Maria Bartiromo with more.

      Get all the latest news on coronavirus and more delivered daily to your inbox.  Sign up here.

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      Secret Service agents rushed President Donald Trump to a White House bunker on Friday night as hundreds of protesters gathered outside the executive mansion, some of them throwing rocks and tugging at police barricades.

      Trump spent nearly an hour in the bunker, which was designed for use in emergencies like terrorist attacks, according to a Republican close to the White House who was not authorized to publicly discuss private matters and spoke on condition of anonymity. The account was confirmed by an administration official who also spoke on condition of anonymity.

      The abrupt decision by the agents underscored the rattled mood inside the White House, where the chants from protesters in Lafayette Park could be heard all weekend and Secret Service agents and law enforcement officers struggled to contain the crowds.

      Friday’s protests were triggered by the death of George Floyd, a black man who died after he was pinned at the neck by a white Minneapolis police officer. The demonstrations in Washington turned violent and appeared to catch officers by surprise. They sparked one of the highest alerts on the White House complex since the Sept. 11 attacks in 2001 .

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      “The White House does not comment on security protocols and decisions,” said White House spokesman Judd Deere. The Secret Service said it does not discuss the means and methods of its protective operations. The president’s move to the bunker was first reported by The New York Times.

      The president and his family have been shaken by the size and venom of the crowds, according to the Republican. It was not immediately clear if first lady Melania Trump and the couple’s 14-year-old son, Barron, joined the president in the bunker. Secret Service protocol would have called for all those under the agency’s protection to be in the underground shelter.

      Trump has told advisers he worries about his safety, while both privately and publicly praising the work of the Secret Service.

      Trump traveled to Florida on Saturday to view the first manned space launch from the U.S. in nearly a decade. He returned to a White House under virtual siege, with protesters — some violent — gathered just a few hundred yards away through much of the night.

      Demonstrators returned Sunday afternoon, facing off against police at Lafayette Park into the evening.

      Trump continued his effort to project strength, using a series of inflammatory tweets and delivering partisan attacks during a time of national crisis.

      As cities burned night after night and images of violence dominated television coverage, Trump’s advisers discussed the prospect of an Oval Office address in an attempt to ease tensions. The notion was quickly scrapped for lack of policy proposals and the president’s own seeming disinterest in delivering a message of unity.

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      Trump did not appear in public on Sunday. Instead, a White House official who was not authorized to discuss the plans ahead of time said Trump was expected in the coming days to draw distinctions between the legitimate anger of peaceful protesters and the unacceptable actions of violent agitators.

      On Sunday, Trump retweeted a message from a conservative commentator encouraging authorities to respond with greater force.

      “This isn’t going to stop until the good guys are willing to use overwhelming force against the bad guys,” Buck Sexton wrote in a message amplified by the president.

      In recent days security at the White House has been reinforced by the National Guard and additional personnel from the Secret Service and the U.S. Park Police.

      On Sunday, the Justice Department deployed members of the U.S. Marshals Service and agents from the Drug Enforcement Administration to supplement National Guard troops outside the White House, according to a senior Justice Department official. The official could not discuss the matter publicly and spoke on condition of anonymity.

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      Govt unlikely to tweak GST rates on non-essential items

      Retaining the GST rate assumes importance since states are under pressure to increase their revenues, hit hard by lockdown.

      Also, the Centre has not fully compensated states for their revenue losses on account of GST for 2019-20.

      Top government officials recently hinted that the finance ministry may not push for hiking Goods and Services Tax (GST) rates on non-essential goods in a bid to bolster demand in the economy.

      The GST Council is set to hold its first meeting in June after a national lockdown was enforced by the government on March 25 to curb the spread of the novel coronavirus.

      “The demand for all goods, especially non-essential items, has to be induced. Tax-related measures will be taken up for discussions in the GST Council meeting.

      “After the lockdown is lifted, economic activity has to improve on all counts.

      “Though demand for essential items hasn’t been affected much,” a top government official said, requesting anonymity.

      But the government will have to find ways in which essential and non-essential items can be segregated.

      The present lockdown norms, which have considerably allowed economic activities, were in force till May 31.

      Retaining the GST rate assumes importance since states are under pressure to increase their revenues, hit hard by lockdown.

      Also, the Centre has not fully compensated states for their revenue losses on account of GST for 2019-20.

      Compensation is to be released to states on a bi-monthly basis.

      However, due to the falling GST compensation cess collection, the Centre held back fund transfer to states beginning August.

      Following this, states raised the matter with the Centre, and in December 2019, Rs 35,298 crore was released as compensation for August-September.

      Also, Rs 34,053 crore was released in two instalments in February and April as compensation for October-November.

      On the other hand, industries such as automobiles are demanding cut in the GST rates to increase their sales.

      After easing curbs on economic activities, the government’s feedback from the industry is that in manufacturing hubs, factories are operating at 20-35 per cent capacity.

      “Economic activity is beginning to start slowly.

      “There is difficulty in terms of bringing back the workforce but business models are being re-cast in such a manner that they are now hiring locals at higher cost, offering them some incentives,” the official said.

      The labour and employment ministry is gathering data on the potential job loss as a result of the national lockdown enforced in March and it will hold discussions with the state governments on mobilising on how to bring back the migrant workers to factories, the official said.

      The government is not ruling out monetising the fiscal deficit.

      “We will try to cross that bridge when it comes,” the official said, on being asked if the government is considering monetisation of fiscal deficit.

      With revenues dipping and expenditures rising, the Centre’s fiscal deficit is expected to cross five per cent against 3.5 per cent pegged in the current financial year. Also states have been given leeway to increase their fiscal deficit till 5 per cent with some riders.

      Even as the Centre has increased its proposed market borrowings by Rs 4.2 trillion for FY’21, many experts believe that this would not be enough and the RBI will have to directly buy the government bonds or in other words monetise the fiscal deficit which means printing more currency notes.

      The official explained that the government had weighed the option of cash transfers while announcing the economic stimulus package, which was officially pegged at Rs 20 trillion, but decided against it due to large possible exclusions.

      “We wanted the money to reach a point which triggers economic activities,” the official said.

      The government is actively discussing the idea of a ‘bad bank’ which was also taken up briefly in the Financial Stability and Development Council (FSDC) meeting chaired by Finance Minister Nirmala Sitharaman on Friday.

      “Though it is being regularly discussed but the idea has not moved forward,” the official said.

      State Bank of India chairman Rajnish Kumar had said earlier in May that banks are discussing the idea to create a ‘bad bank’ in the form of an asset reconstruction company to deal with stressed assets.

      The FSDC meeting also discussed ways in which the Securities and Exchange Board of India can bring in systematic reforms to bring down stock market volatility.

      “If you look at the recent SEBI circulars, it took measures to curb speculative trade.

      “More steps will be taken on those lines,” another finance ministry official said.

      It discussed ways in which domestic investors can be given some support and how international investors can connect with joint venture partners in India.

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      Haunted By Austerity, Least-Indebted EU State Goes Big on Virus

      Memories of harsh austerity in the wake of the global financial crisis are motivating Estonia to end what’s been the continent’s greatest aversion to borrowing.

      The Baltic region became the poster child for the kind of public spending and wage cuts that later ravaged nations like Greece. Estonia remains the European Union’s least-indebted member-state — without a single government bond.

      The Covid-19 pandemic is changing that, with a 10-year debt sale of at least 1 billion euros ($1.1 billion) due in the coming weeks. Another of a similar size is planned for the fall and a third is possible next year, with maturities of up to 15 years under discussion, according to Finance Minister Martin Helme. Money will be channeled into investment to boost economic growth.

      “In the previous crisis, there were policy mistakes that deepened our recession,” he said in an interview in Tallinn. “This total austerity that was imposed very strictly then made the situation worse and we have to take a different approach.”

      As well as contributing to the steepest recession in Estonia’s history, the post-2008 policies prompted an exodus of workers from the Baltic region to Europe’s west, where salaries are higher. Austerity — which reached 9% of gross domestic product in 2009 — also stoked resentment at home that facilitated the rise of right-wing parties like Helme’s EKRE, a junior partner in Estonia’s one-year-old government.

      After adopting the euro in 2011, Estonia has increasingly debated whether it should borrow more for investment, with such calls intensifying after the European Central Bank first embarked on quantitative easing. Defenders of the country’s austere stance say the policies were justified to successfully join the euro region and boost exports, while it would have been tricky to borrow in Estonia’s old currency.

      Helme said the pandemic made a bond sale “unavoidable” in the face of economic-rescue costs and lost tax revenue. But the change also reflects a view that this is the only way to close the wealth gap with richer neighbors more quickly.

      “If other countries have over decades accelerated their economic growth this way, among other things by bringing investments forward through borrowing, I think we shouldn’t be ruling out this option due to some inflexible ideological denial,” Helme said.

      — With assistance by Milda Seputyte

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