Wednesday, March 18, 2015

Today's Links

1--U.S. Republican budget cuts social spending, boosts military, Reuters


2--100,000 Layoffs and Counting: Is this the New Normal?, oil price


3--Interview 1014 – Financial Survival: Why the Dollar is Rising, and How it Will Fall


4--Hurricane Pam  means that there is, all of a sudden, a very high probability that an El Nino is right around the corner.


5--The dollar may now be the market's biggest enemy, cnbc


6--Dalio warns Fed of 1937-style rate risk, FT


7--IMF Fears "Taper Tantrum"; Rear View Mirror Discovery Mish


8--Obama Goes After UK, Australia, the World for "Constant China Accommodation"; US Influence Clearly Waning



9--Santelli on Fed move, cnbc audio "Dollar Is New Oasis" DINO meets TINA


10--The Corbett report audio


11--Hedge Fund Manager Fears "Sudden, Pervasive Loss Of Faith" In Markets; Says "It's A Truly Scary Time", ZH


12--Breaking the Rsistance with Terrorism and Proxy Wars, eric draitser


13--Crash time?
Here’s Goldman:
Long-dated crash put protection costs on the SPX have more than doubled over the past 9 months. We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as US equities trade near all-time highs. Based on our conversations with investors over the past few months, it appears the increase in long-dated put prices has largely gone unnoticed among equity and credit investors. In fact, Investment Grade credit spreads have actually tightened slightly over the same period. The rise in long-dated equity put prices may signal an increasing fear that a substantial market correction is on the horizon, despite low short-term put prices which suggest low probably of a near-term drawdown vs history.
As you can see from the following, this is no trivial divergence — it’s actually quite the anomaly:


14--Surprise: U.S. Economic Data Have Been the World's Most Disappointing, Bloomberg


15--UPDATE 1-New BoE regulator warns of risks from U.S. rate hikes, dollar strength, Reuters


16--Stronger Dollar will hurt Emerging Markets, wsws


Speaking in Mumbai, India on the eve of today’s Fed decision, International Monetary Fund Managing Director Christine Lagarde warned that so-called “emerging markets” faced a new period of turmoil if interest rates started to rise. She pointed to the “taper tantrum” of 2013, when money flooded out of these markets in response to indications by the Fed that it was going to start winding back its “quantitative easing” (i.e., money-printing) program.
She also warned of the impact of the rising US dollar on corporate balance sheets in emerging markets when major companies suddenly find that their interest and debt burdens have increased. In India alone, the dollar-denominated corporate debt had risen “very rapidly” in the past five years, nearly doubling to $120 billion.


“The appreciation of the US dollar is … putting pressure on balance sheets of banks, firms and households that borrow in dollars but have assets or earnings in other currencies,” she said.
In a comment published in the Financial Times last month, well known financial analyst Satyajit summed up the present situation as follows: “Mark Twain reputedly stated that history does not repeat but it rhymed. In an eerie parallel to 1997-98, falling commodity--especially oil--prices, a rising US dollar and potential increases in US interest rates may presage a new financial crisis.”
The 1997-98 financial crisis began with the collapse of the Thai baht and then swept across the Asian region, producing a downturn as significant as that resulting from the Great Depression in the advanced capitalist nations. While it was dismissed as merely a “blip” on the road to globalisation by US President Bill Clinton, the Asian crisis led to a debt default by Russia and the collapse of the hedge fund Long Term Capital Management in the US, requiring a major intervention by the New York Federal Reserve to stave off a wider crash.


Since then, Asian governments have sought to avoid the dollar-denominated loans that played a major part in spreading the financial contagion as investors pulled their money out. But it is a different story in corporate markets.
Already, the index of emerging market currencies compiled by JPMorgan Chase is at a record low, meaning the dollar-denominated debt burden for corporations has risen in real terms.


It has been estimated that foreign borrowings in US dollars have expanded to $9 trillion, compared to $2 trillion in 2000. The share of emerging markets, mostly in Asia, has doubled to $4.5 trillion since the eruption of the financial crisis in 2008.
Last December, the Bank for International Settlements (BIS), sometimes known as the central bankers’ bank, issued a warning about the growing volume of debt held in the American currency, noting that a rise in the dollar’s value could expose financial vulnerabilities.


Laying out what he called the increasing fragility beneath apparent market buoyancy, the head of the BIS monetary and economic department, Claudio Borio, said: “Should the US dollar, the dominant international currency, continue its ascent, this could expose currency and funding mismatches by raising debt burdens. The corresponding tightening of financial conditions could only worsen once interest rates in the US normalise.”


In the three months since these comments, the ascent of the dollar has accelerated. From July last year, the dollar index has risen by more than 23 percent, a steeper rise than that which took place in the mid-1990s, setting off the Asian financial crisis. Against the euro, the dollar has increased by 16 percent in the past three months, and by about 25 percent over the past year.
A continuation of this trend will not only hit emerging markets, but will start to have a significant effect in the US. While exports comprise about 13 percent of US gross domestic product, they are far more important for major corporations. It is estimated that foreign-generated revenues account for 46 percent of sales by S&P 500 companies, with information technology the most highly-dependent on foreign sales.


17--Mosler on Housing starts


18--The dollar is rising faster than any time in the last 40 years  Wa Post


The dollar has hit a 12-year high against the euro, and it's not going to stop anytime soon. Not when the dollar is in the middle of its biggest rally in almost 40 years.


But it's not just the euro that the dollar is rising against. It's pretty much every currency in the world. That's because the U.S. economy is doing well enough that the Federal Reserve is getting ready to raise rates, and the rest of the world is slowing down enough that it's cutting them. And that's not hyperbole. The not-so-short list of countries that have eased monetary policy the past few months includes Australia, Canada, Chile, China, Denmark, Egypt, India, Indonesia, Israel, Peru, Poland, Russia, Singapore, South Korea, Sweden, Switzerland, Thailand, Turkey, and, above all, the eurozone now that it's buying bonds with newly-printed money—aka quantitative easing—which Japan has also been, and still is, doing itself. The result is that investors can get better returns in the U.S. than they can in a lot of other places—would you rather buy a U.S. 10-year bond that pays 2.05 percent or a German one that pays 0.28 percent?—so that's where they're moving their money, and, in the process, pushing up the value of the dollar.


That's actually an understatement. The dollar is exploding up more than it's getting pushed up. As Citibank's Steve Englander points out, the dollar, going by its trade-weighted exchange rate, has increased more in percent terms the past 175 trading days than it has in any other similar period going back to 1976. And that will only continue if the Fed really does raise rates in June. It's expected to take the first step towards doing that by saying it will no longer be "patient"—Fedspeak for waiting at least two months—about hiking rates at its next meeting on Wednesday.


But wait a minute. If the Fed has told us it might raise rates, and told us that again, and again, and again, why would the dollar go up that much if it does does raise rates like it's said? You don't have to believe in perfectly efficient markets—only non-inefficient ones—to think that some of this should be priced in already. Well, the answer is that markets don't believe the Fed. Investors used to think there was an almost 50 percent chance the Fed would start raising rates in June, but then inflation fell and, as you can see below, those odds did too, down to just 18 percent today. Even normal-ish unemployment hasn't been enough to convince them that the Fed will begin normalizing policy—not when core inflation is so far below target.
Now it's true that more investors are starting to listen to the Fed and bet on a June rate hike. But despite that, markets would still be caught pretty off guard if the Fed's lack of "patience" turns into higher interest rates so soon. The dollar would shoot up even more violently, and put even more of a crimp in the recovery by making it harder for U.S. companies to sell exports overseas and compete against imports at home. But why would one teeny tiny rate hike matter that much? Well, because it's not just one teeny tiny rate hike. Earlier liftoff tells us that what economists call the Fed's reaction function is more hawkish than we thought. In other words, if the Fed raises rates sooner than we think they should today, they might raise rates more than we think they should later.
The only question is how much more the dollar is going to go up: a historic amount or something slightly less than that.


19--The End is Kind of Nigh, Bill Bonner


20--Dollar surge continues, wolf street


Take a look at this long-term, monthly chart of the U.S. Dollar Index plotted alongside its 50-day moving average (DMA)…

The dollar is up 25% in the past eight months. That would be a terrific gain for a stock – though not uncommon. But it’s an amazing gain for a currency – which tends to be much more stable. And traders are continuing to pour into the dollar.
Interest rates in several European countries have dipped into negative territory – meaning depositors are now paying banks to hold their funds. Meanwhile, there’s a growing conviction that the Federal Open Market Committee (FOMC) is going to start raising rates here in the United States. So money is flowing out of Europe and into the U.S. That action strengthens the dollar and weakens the euro.
And currency traders are lining up to profit off it. The most popular currency trade on the planet right now is to be long the dollar and short the euro. But the markets don’t usually reward popular trades. We’ve seen this sort of lopsided currency betting before. And the trades almost always break down.


21--The housing crunch with a taste of rental squeeze: Incomes down and home prices up. Los Angeles families took a hit to their household incomes yet home prices soared., Dr Housing Bubble


Extra:  Flippage


Flippers succeed through buying low

I spent three years actively flipping homes in Las Vegas before the inventory dried up, so I have some working knowledge of how the business works. While most people focus on the renovation, this isn’t really where the value resides. In real estate, investors make money when they buy property, not when they renovate or sell


a property is purchased at a good price, the subsequent improvements and sale merely convert that good purchase savings to cash. If a buyer overpays for a property, no amount of renovation is going to add enough value to dig them out of a hole. Of course, most novices don’t realize this, which is why most novices don’t get past their first flip.
Since the foreclosure market dried up, the only stable source of properties flippers can acquire at undermarket prices has been through short sales. A flipper I know in Riverside county even started a charity to help families obtain loan modifications purely as a source of leads for short sales when the loan modifications failed. Short sales make up 70% or more of the business of successful flippers.

Nobody looks out for the lender

Obtaining a property for an under-market price, by definition, hurts the seller who didn’t get fair-market value for the property. Since the owners on title really don’t care because they have no equity, the only really concerned party is the lender who must approve the short sale, and neither the agent for the seller or the agent for the buyer
 has a fiduciary responsibility to the lender  The seller’s agent has responsibility to the seller, so they are only concerned with getting the bank to sign off on the debt.
Nobody represents the lender, so in a short sale, everyone wants the screw the lender. The seller is losing their house because the lender wouldn’t forgive the debt (something loanowners think they deserve), so the seller is happy to screw the lender. The buyer wants to get the property at the lowest possible price, so they are happy to screw the lender.
In fact, the only leverage the lender has to get a better price is to threaten to reject the sale, but this only serves to delay the deal, which in turn makes most buyers shun short sales. The only buyers with the patience to wait out these deals are the all-cash flippers, a group likely to bid very little for the property.

An example of a flipper rip off

The property below was recently purchased by a flipper who put it on the market the day after closing for $110,000 more than he paid.
Capture1




Tuesday, March 17, 2015

Today's links

1---Ralph Nader on stock buybacks, cp


Mr. Hanauer is speaking before business and political groups, including the Democratic senators at their recent Baltimore retreat, about a favorite cause of mine—the utterly damaging waste of massive corporate profits known as stock buybacks. Stock buybacks are so massive—6.9 trillion since 2004—that it justifies Mr. Hanauer’s description of them as “the biggest scam bankrupting business and the middle class.”


Hear him out: “Our crisis of income inequality wasn’t principally caused by the rich not paying enough tax, even though we don’t. Rather, it is largely the product of the $1 trillion a year that once went to wages, but now goes to corporate profits. And this consumer demand and investment-killing trillion-dollar-a-year transfer of wealth from the bottom 80 percent of households to the top 1 percent is the direct result of the economic and regulatory policies both Republicans and Democrats have imposed since the dawn of the trickle down era.” That was in 1982 when President Reagan loosened the rules that had made stock buybacks a form of illegal stock manipulation, he adds.


Between 2003 and 2012, stock buybacks amounted to an astounding 54% of corporate profits which could have gone to “higher wages or increased investments in plants and equipment or in public investment,” such as infrastructure, all of which would have increased consumer demand, the engine of economic growth, he notes....


“Wal-Mart has spent [over ten years] more than$65.4 billion on stock buybacks — about 47 percent of its profits. That’s an average of more than $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million U.S. workers a $4,670-a-year raise. It is also, coincidentally, an amount roughly equivalent to the estimated $6.2 billion Wal-Mart costs U.S. taxpayers every year in food stamps, Medicaid, subsidized housing, and other public assistance to its many impoverished employees. In this context, how can stock buybacks be either morally or economically justified?”


For more information, see Hanauer’s True Patriot Network.


2--Options Market Signals 2007-Like Crash Risk, Goldman Warns, ZH,


Here’s Goldman:
Long-dated crash put protection costs on the SPX have more than doubled over the past 9 months. We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as US equities trade near all-time highs. Based on our conversations with investors over the past few months, it appears the increase in long-dated put prices has largely gone unnoticed among equity and credit investors. In fact, Investment Grade credit spreads have actually tightened slightly over the same period. The rise in long-dated equity put prices may signal an increasing fear that a substantial market correction is on the horizon, despite low short-term put prices which suggest low probably of a near-term drawdown vs history.


3---Greece Faces Cash Crunch This Friday Without "Plan A Or Plan B": What Happens Next, ZH


4--Top Russia Public Intellectual: Western Financial System Is Driving It to War, RI


"In order to survive and preserve its leading role on the international stage, the US desperately needs to plunge Eurasia into chaos, (and) to cut economic ties between Europe and Asia-Pacific Region.....Russia is the only (country) within this potential zone of instability that is capable of resistance. It is the only state that is ready to confront the Americans. Undermining Russia’s political will for resistance... is a vitally important task for America." Nikolai Starikov, Western Financial System Is Driving It to War, Russia Insider


5--1 in 3 US families classified as 'working poor,' higher for minorities, RT


6--China cuts back on US debt for 5th month in a row RT


7--Germany, France, Italy to join Chinese-led Asian bank,  yahoo


8--Major American Allies Ignore U.S. Pleas and Join China’s Development Bank, NC


9--Nomi Prins: The Volatility/Quantitative Easing Dance of Doom, NC


10--A shadow banking sector has gotten 65 times larger, CNBC


11--Bull market is ‘closer to the end’ than investors think , Marketwatch


12--Stratfor's George Friedman at the Chicago Council on Foreign Affairs
12 min video


13--Iran, Hezbollah left off US terror threat listing, RT


14---Putin:  “Direct attempts to silence history, to distort and rewrite history are inadmissible and immoral. Behind these attempts often lies the desire to hide one’s own disgrace, the disgrace of cowardice, hypocrisy and treachery, the intent to justify the direct or indirect collaboration with Nazism,” the Russian leader stated, as he spoke in the Jewish Museum and Tolerance Center in Moscow at an event dedicated to the 70th anniversary of Auschwitz’s liberation.
In places where they imprint the ideas of ethnic and moral supremacy into people’s heads, where they destroy or scoff at human values, civilization is being quickly and inevitably replaced by barbarity,” Putin noted, adding that the process is often accompanied by war and aggression.


15--Neo Nazis turn to US for help, sputnik


64 years ago, on March 17, 1951, the Ukrainian Insurgent Army (UPA), notorious collaborators of Nazi Germany during the Second World War, called upon the United States to provide it with military assistance aimed against the Soviet Union.
After the defeat of German Nazism in 1945, members of the Organization of Ukrainian Nationalists (OUN) and their paramilitary UPA units continued their struggle against the Soviet Union. Although former Nazi collaborators officially dissolved the UPA in 1949, many of them joined foreign subversive groups and intelligence agencies, dreaming of revenge....


The CIA and the US State Department also sponsored OUN leaders' immigration to the United States in 1949.
The collaboration between the OUN, the CIA and other intelligence services was mutually beneficial: former Nazi collaborators were shielded from prosecution for war crimes, while intelligence agents received valuable information about their Soviet adversaries. Furthermore, the CIA helped nationalist veterans to create "semiacademic" institutions and to assume high academic positions at established universities.

16--Maduro and Putin join forces, sputnik


17--Towards The End Of The U.S. Dominated International Money System, MOA


Welcome to the end of Brenton Woods and the Washington Consensus that defined the world money systems around U.S. controlled institutions and the U.S. dollar as the sole reserve currency.
Defying U.S., European allies say they'll join China-led bank
Germany, France and Italy said on Tuesday they had agreed to join a new China-led Asian investment bank after close ally Britain defied U.S. pressure to become a founder member of a venture seen in Washington as a rival to the World Bank. The concerted move to participate in Beijing's flagship economic outreach project was a diplomatic blow for the United States, reflecting European eagerness to partner with China's fast-growing economy, the second largest in the world.
It comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund due to give China and other emerging economies more say in global economic governance.
Especially under the Obama administration the U.S. abused its important role in international finance to further its political pet projects at the cost of other participants in the system.
On Washington's insistence the International Monetary Fund is breaking its rules to finance a civil war in Ukraine. U.S. spying on the SWIFT banking information exchange is used to sanction U.S. enemies by excluding them from the international banking system. Foreign banks get punished with huge fines because they conduct business with countries the U.S. sees as unpalatable. Wall Streets huge mortgage scam and selling of worthless derivatives to foreign entities left the world economy in shambles and investors and whole countries bankrupt but went completely unpunished.
Enough. Over time the world will no longer adhere to the rules set in Washington. The global banking system will evolve into a multipolar system where different public international banks will act and where monetary information exchanges can be conducted on various systems under various jurisdiction.
This will be a huge loss to the coercive power of the U.S. and thereby a good step towards a more Westphalian world where power is more equally distributed. International sanctions against countries that defy U.S. regime change orders will no longer be sustainable.


18--Zugzwang




Friday, March 13, 2015

Today's Links

The Global Currency Wars, Jack Rasmus, CP


A final area of emerging new rules for inter-capitalist competition is the emergence of greater resort to introduce economic sanctions as a competitive measure.  The best case is Russia today, and the US-led sanctions.  It should not be misunderstood: the sanctions on Russia are in the last analysis an economic competitive measure, not a politically motivated initiative.  Behind the sanctions is the USA objective of driving Russia out of the European economy.  Europe was becoming too integrated and dependent on Russia. Not only its gas and raw materials, but trade relations and money capital flows were deepening on many fronts between Russia and Europe in general prior to the Ukraine crisis that has provided the cover for the introduction of the sanctions.  Russia’s growing economic integration with Europe threatened the long term economic interests of US capitalists. Strategically, the US precipitated coup in the Ukraine can be viewed, therefore as a means by which to provoke Russian military intervention, i.e. a necessary event in order to deepen and expand economic sanctions that would ultimately sever the growing economic ties between Europe and Russia long term. That severance in turn would not only ensure US economic interests remain dominant in Europe, but would also open up new opportunities for profit making for US interests in Europe and Ukraine as well....


War with Russia?


Washington is pressing ahead despite stark warnings from Moscow that it views massive weapons deliveries by NATO to hostile states on its borders as an intolerable threat to Russian national security.
“Without a doubt, if such a decision is reached, it will cause colossal damage to US-Russian relations, especially if residents of the Donbass [east Ukraine] start to be killed by American weapons,” Russian Foreign Ministry spokesman Alexander Lukashevich said last month. He called NATO’s plans “very worrying,” adding: “This is about creating additional operational capabilities that would allow the alliance to react near Russia’s borders... Such decisions will naturally be taken into account in our military planning.”..... 




1--US Rebukes UK for Joining Beijing's World Bank, sputnik


In October last year, 21 Asian nations signed a Memorandum of Understanding [MoU] on the establishment of the new bank, which is intended to finance infrastructure projects and promote regional cooperation in the Asia-Pacific region. The bank represents an alternative source of funds from the Washington-based International Monetary Fund and World Bank, and the Asian Development Bank, which is based in Manila and whose largest shareholders are Japan and the



"Joining the AIIB at the founding stage will create an unrivaled opportunity for the UK and Asia to invest and grow together," said UK Chancellor of the Exchequer George Osborne, adding that his government "has actively promoted closer political and economic engagement with the Asia-Pacific region" as a key part of the country's long-term economic plan.
However, officials from the US signaled their unhappiness about the UK's decision to pursue greater economic engagement with China through the institution, and repeated criticism US State Department spokesperson Jen Psaki voiced last year that the project does not "meet international standards of governance and transparency."
"This is the UK’s sovereign decision," said the White House in a statement. "We hope and expect that the UK will use its voice to push for adoption of high standards."
A US official speaking to the Financial Times was forthright with their criticism: "We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power," he said, complaining that the British government had not consulted with the US before taking the decision.




2--Eyes on dollar parity as euro steadies after brutal week, Reuters


"I don't think its an exaggeration to say this week has been a gamechanger," said Neil Mellor, a currency strategist with Bank of New York Mellon in London.
"The combination of last Friday's jobs numbers and the launch of QE in Europe this week has cemented the picture of monetary policy divergence. People are now convinced the Federal Reserve will be able to move in the middle of this year. In that context, talk of parity and even below it is not overdone."


3--US Producer Prices Tumble Most Since 2009 (And Don't Blame Oil) ZH
And finally, perhaps it's time to rethink this whole "central banker" thing...




US Producer Price Index (ex food and energy) fell 0.5% MoM in February (against expectations of a 0.1% rise) - the biggest drop on record (since 2009).The great news for Americans is that the drop in overall producer prices was led by a 1.6% fall in food prices. Year-over-Year PPI Final Demand has fallen (-0.6%) for the first time on record.


4--US Producer Price Index down 0.5% in Feb vs. up 0.3% expected, cnbc


5--Recession? ZH


For context, let's start with a chart I published earlier this week of new manufacturing orders--which look unambiguously recessionary:
 
 
Here is a chart of real final sales (as a percentage of change) and the S&P 500 (SPX). The percentage of change of real sales declined for four years in the 2000s while the stock market soared--a remarkably long-lasting divergence


My colleague Dave P. at Market Daily Briefing has posted information on arecession detector based on the work of economists Chauvet and Piger.
 
In essence, the model considers four data series: real personal income, nonfarm payrolls, industrial production and real final sales (as a percentage of change). If all four are rising, the probability of recession is low.
 
If all four roll over and decline, the probability of recession (generally defined as a decline in gross domestic product for two consecutive quarters) approaches 100%.
 
This makes intuitive sense: if personal income, industrial production, real final sales and payrolls are all declining, how can GDP continue expanding?




Central banks may be spreading deflation by easing monetary policy and weakening their currencies, but the biggest threat is that China will wade into the battlefield, analysts say.
"The three trillion dollar question is whether the People's Bank of China (PBoC) will allow the yuan to depreciate and export their own disinflation to the rest of the world, setting off a series of competitive devaluations in the region," Nicholas Ferres, investment director at Eastspring Investment said in a note on Friday.
Twenty-four central banks have eased monetary policy this year amid slowing economic growth and deflationary pressure as oil prices hover near six-year lows. In February, the PBoC cut the one-year deposit rate by 25 basis points to 5.35 percent.


9---Be Happy: Fed says you are richer!  The rich get richer, according to Fed


Fueled by higher stock and home values, Americans' net worth reached a record high in the final three months of 2014.
Household wealth rose 1.9 percent during the October-December quarter to nearly $83 trillion, the Federal Reserve said Thursday. Stock and mutual fund portfolios gained $742 billion, while the value of Americans' homes rose $356 billion.
The typical household didn't benefit much, though. Most of the wealth remains concentrated among richer families. The wealthiest 10 percent of U.S. households own about 80 percent of stocks.
Still, greater wealth could help lift spending and economic growth. Higher stock and home values can make people feel more financially secure and more willing to spend, and consumer spending fuels about 70 percent of the economy.


10--The investor buying party in real estate: In last four years institutional investors have purchased over half a million homes. 2014 was a four year low in investor buying
http://www.doctorhousingbubble.com/all-cash-investors-real-estate-housing-institutional-investors-us/


11--Repeat foreclosures result from failed lender can-kicking , OCH


12--Household Debt Soars in Canada, “Stability” at Risk, wolf street


Canada-household-leverage-indicators-1992-2014_Q4
The ratio of debt to disposable income picked up speed from 2001 on. It blew through the financial crisis even as US households were whittling down their debt by deleveraging and defaulting. Canadian households didn’t even stop to breathe. They kept spending and piled on debt at an astounding rate. Their incomes rose also, but not nearly enough. It wasn’t until 2011 that the red-hot growth rate started to lose some of its fire, bumping into all sorts of resistance from reality...


Years of low interest rates encouraged this dreadful level of leverage. Now it’s an albatross around the neck of the Bank of Canada, and for decades to come. And for the economy, it’s a high-risk burden that could quickly, as Equifax suggested, blow up


13--The Global Currency Wars, Jack Rasmus, CP


A final area of emerging new rules for inter-capitalist competition is the emergence of greater resort to introduce economic sanctions as a competitive measure.  The best case is Russia today, and the US-led sanctions.  It should not be misunderstood: the sanctions on Russia are in the last analysis an economic competitive measure, not a politically motivated initiative.  Behind the sanctions is the USA objective of driving Russia out of the European economy.  Europe was becoming too integrated and dependent on Russia. Not only its gas and raw materials, but trade relations and money capital flows were deepening on many fronts between Russia and Europe in general prior to the Ukraine crisis that has provided the cover for the introduction of the sanctions.  Russia’s growing economic integration with Europe threatened the long term economic interests of US capitalists. Strategically, the US precipitated coup in the Ukraine can be viewed, therefore as a means by which to provoke Russian military intervention, i.e. a necessary event in order to deepen and expand economic sanctions that would ultimately sever the growing economic ties between Europe and Russia long term. That severance in turn would not only ensure US economic interests remain dominant in Europe, but would also open up new opportunities for profit making for US interests in Europe and Ukraine as well....


When the rules of the competition game between capitalists break down altogether, the result is war—i.e. the ultimate form of inter-capitalist competition.   The two World Wars of the 20th century immediately come to mind. The fight for colonies and resources was particularly obvious in the case of the First World War, while the Second War was the consequence of unresolved issues left over from the First World War, as well as the consequence of the economic collapse of global capitalism in the 1920s and 1930s.


More recent and on-going, USA led wars in the middle east this century are also testimony of the periodic resort to war and military conflict on behalf of national capitalists interest. The Middle East wars starting in 1990 and intensifying in the early 21st century, have been fundamentally about ensuring resource availability to USA and the other advanced economies, especially oil.
Memoirs of key members of the US economic elite after the 2003 invasion of Iraq have admitted that the Iraq invasion was fundamentally about oil—even if that acknowledgement by US politicians and the press still has not been forthcoming.


More contemporary still, there’s the USA direct intervention to pull off a coup d’etat in the Ukraine last year, and then subsequently the setting up of USA neocon-cum-shadow bankers to run that country’s economy that took place last December 2014...


But what their desperate QE initiatives fundamentally means is that Europe and Japan have engaged in government-assisted programs, aimed at ‘stealing’ global export market share from other capitalist economies, both in the advanced economy sector, as well as from China, the BRICs, and emerging markets in general.  Their QE programs represent a desperate competitive move, after their prior policies for five years have proved dismal failures, as their economies sink further into stagnation or worse.  Were it not for the economic desperation now engulfing these two important wings of the advanced economies region of the global economy, their shift to ‘competition by competitive devaluation’—a development not seen since the 1930s—would not be occurring.


14--Sharing’ the Wealth , Robert Parry


In exchange for those “reforms,” the IMF approved $17.5 billion in aid that will be handled by Ukraine’s Finance Minister Natalie Jaresko, who until last December was a former U.S. diplomat responsible for a U.S. taxpayer-financed $150 million investment fund for Ukraine that was drained of money as she engaged in lucrative insider deals – deals that she has fought to keep secret. Now, Ms. Jaresko and her cronies will get a chance to be the caretakers of more than 100 times more money. [See Consortiumnews.com’s “Ukraine’s Finance Minister’s American ‘Values.’”]
Other prominent Americans have been circling around Ukraine’s “democratic” opportunities. For instance, Vice President Joe Biden’s son Hunter was named to the board of directors of Burisma Holdings, Ukraine’s largest private gas firm, a shadowy Cyprus-based company linked to Privat Bank.


Privat Bank is controlled by the thuggish billionaire oligarch Ihor Kolomoysky, who was appointed by the Kiev regime to be governor of Dnipropetrovsk Oblast, a south-central province of Ukraine. In this tribute to “democracy,” the U.S.-backed Ukrainian authorities gave an oligarch his own province to rule. Kolomoysky also has helped finance paramilitary forces killing ethnic Russians in eastern Ukraine.
Burisma has been lining up well-connected American lobbyists, too, some with ties to Secretary of State John Kerry, including Kerry’s former Senate chief of staff David Leiter, according to lobbying disclosures.


As Time magazine reported, “Leiter’s involvement in the firm rounds out a power-packed team of politically-connected Americans that also includes a second new board member, Devon Archer, a Democratic bundler and former adviser to John Kerry’s 2004 presidential campaign. Both Archer and Hunter Biden have worked as business partners with Kerry’s son-in-law, Christopher Heinz, the founding partner of Rosemont Capital, a private-equity company.” [See Consortiumnews.com’s “The Whys Behind the Ukraine Crisis.”]
So, it seems even this modern form of “democracy” has some “sharing the wealth” aspects.


15--Mosler economics


Even if the Fed keeps rates at their near-zero level until next year, he said, inflation probably won’t reach the Fed’s 2-percent goal until the end of 2018. And if his forecast proves wrong and the economy begins to run too hot too fast, he said, the Fed would have “ample time” to raise rates moderately to head off excessively high inflation..Evans


payrolls-feb-5


Wage pressure?
payrolls-feb-7


The factory sector has not been contributing to economic growth, the result of weakness in the oil patch and weakness in foreign demand.
factory-orders-jan-graph
Posted in Employment |

.car sales fall again.....


GDP below ‘stall speed’?
gdp-stall


Posted in GDP, Oil |

16--Wage pressure?


17----Danger of war with Russia grows as US sends military equipment to Ukraine, wsws
 wsws By Johannes Stern and Alex Lantier
13 March 2015
Washington is pressing ahead despite stark warnings from Moscow that it views massive weapons deliveries by NATO to hostile states on its borders as an intolerable threat to Russian national security.
“Without a doubt, if such a decision is reached, it will cause colossal damage to US-Russian relations, especially if residents of the Donbass [east Ukraine] start to be killed by American weapons,” Russian Foreign Ministry spokesman Alexander Lukashevich said last month. He called NATO’s plans “very worrying,” adding: “This is about creating additional operational capabilities that would allow the alliance to react near Russia’s borders... Such decisions will naturally be taken into account in our military planning.”..... 
Washington has begun delivering military hardware to Ukraine as part of NATO’s ongoing anti-Russian military build-up in eastern Europe, escalating the risk of all-out war between the NATO alliance and Russia, a nuclear-armed power.
The Obama administration announced on Wednesday that it would transfer 30 armored Humvees and 200 unarmored Humvees, as well as $75 million in equipment, including reconnaissance drones, radios and military ambulances. The US Congress has also prepared legislation to arm the Kiev regime with $3 billion in lethal weaponry.


Washington is at the same time deploying 3,000 heavily armed troops to the Baltic republics, near the Russian metropolis of St. Petersburg. Their 750 Abrams main battle tanks, Bradley armored personnel carriers, and other vehicles are slated to remain behind after the US troops leave. This handover is aimed at “showing our determination to stand together” against Russian President Vladimir Putin, US Major General John O’Connor said in the Latvian capital, Riga
...

This week, Pentagon and Congressional officials called for Washington to arm Kiev, pressing for faster action from the White House. Defense Secretary Ashton Carter and Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey are pressing for large-scale weapons deliveries to Kiev, as are leading members of Congress from both big-business parties


The ECB program is pushing the US dollar higher against all major global currencies. There are growing concerns that the higher dollar is worsening the international competitive position of US corporations and impacting their bottom line.
These profit concerns appear to be behind the recent falls on Wall Street, coupled with fear that an ostensibly favourable US jobs report last Friday will encourage the Fed to begin lifting official interest rates from their current record low level of 0.25 percent. It is a sign of the way in which the financial markets have entered a “through the looking glass world” that what should be a sign of an improving real economy gives rise to a stock market fall.


The rise in the dollar’s value has reignited fears that so-called emerging markets could face financial problems because the more expensive dollar increases the real debt and interest burden from by dollar-denominated loans. In 2013, emerging market currencies fell sharply following indications by the US Federal Reserve that it was going to wind down its asset-purchasing program. Now there are signs that the “taper tantrum” could be repeated.


Last week, the JPMorgan Emerging Market Currency index fell to a record low after the release of the latest US jobs data. A JPMorgan analyst told the Financial Times that divergences in monetary policy between the US and emerging economies would become more relevant in the months ahead. If the Fed lifts interest rates, the money that has flowed into emerging markets over the past two years could rush for the exit.


19--Debate around the 2015 rate hike intensifies
Posted by Walter

Following Janet Yellen's Senate Banking Committee testimony, the Fed seems to be quite deliberate in preparing for a rate hike in 2015. It's hard to imagine taking such action in the disinflationary environment we find ourselves in, but market participants are increasingly accepting that possibility. That's why we've seen the equity markets pull back somewhat and the dollar continue climbing.

20--IMF loans $17 billion to Ukraine to repay banks, loot economy

21--“Ukraine Tomorrow”: Domestic oligarchs and western politicians plunder Ukraine, wsws

22--Dollar Strength: The Crunch Cometh , SA             



Thursday, March 12, 2015

Today's Links

Putin---We are often told our actions are illegitimate, but when I ask, “Do you think everything you do is legitimate?” they say “yes”. Then, I have to recall the actions of the United States in Afghanistan, Iraq and Libya, where they either acted without any UN sanctions or completely distorted the content of such resolutions, as was the case with Libya. There, as you may know, the resolution only spoke of closing the airspace for government aircraft, while it all ended with bomb attacks and special forces land operations.

 Our partners, especially in the United Sates, always clearly formulate their own geopolitical and state interests and follow them with persistence. Then, using the principle “You’re either with us or against us” they draw the whole world in. And those who do not join in get ‘beaten’ until they do








1--Get Ready for BRICS plus Germany, Pepe Escobar, RI


Just as much of Europe is stagnant German economic ties with Asia are growing rapidly. Eventually politcs has to catch up with economics


2--Japanese firms' mood worsens as yen slump rattles, dims outlook, Reuters


Confidence at big Japanese manufacturers worsened in January-March and is seen turning negative in the second quarter as a slumping yen ramped up the costs of raw material imports, a survey showed, complicating Tokyo's stimulus-driven campaign to revive the economy.


The yen skidded to 8-year lows against the dollar to above 122 yen on Tuesday, on expectations the Fed may raise rates as early as in June, heightening worries that an unrelenting drop in the Japanese currency could prove more harmful in the long run.
"It could be worrisome if the yen depreciation accelerates under the current deflationary circumstances where companies are unable to pass on costs, causing a profit-squeeze," said Takeshi Minami, chief economist at Norinchukin Research Institute.


3--The Mystery Of America's Missing Wage Growth Has Been Solved, ZH
The important math: production and non-supervisory employees, those not in leadership positions, represent 80% of the employed labor force. This is important when looking at the next chart which show the annual increases in hourly earnings just for production and nonsupervisory employees.
It is as this point that we ask that all economists avert their eyes, because it gets ugly:


As the BLS reports, not only is the annual wage growth of 80% of the work force not growing, but it is in fact collapsing to the lowest levels since the Lehman crisis!


4--The Mystery Of America's Missing Wage Growth Has Been Solved, cnbc


The continuing strengthening of the dollar is weighing on U.S. equity markets even though little has changed since Friday's positive jobs report, BlackRock's chief global investment strategist told CNBC on Tuesday.


"You've got the dollar up about 23 percent from the summer lows, and people are realizing this is starting to bite into earnings" BlackRock's Russ Koesterich said during a "Squawk Box" interview.
Read More Morgan Stanley sees US strength, 'slow grind' in Europe
A stronger dollar makes U.S. goods more expensive abroad and dilutes the value of earnings when American companies bring overseas profits back home. With price-to-earnings ratios already fairly extended, it will be harder for the United States to post gains this year without earnings growth, he said.
  
"The fundamentals are what they are and the reality is the U.S. is going to outgrow Europe and Japan, the path of U.S. monetary policy is very different than the rest of the world, and you've got a much lower current account deficit because of domestic oil production, all of which favor a stronger dollar over the next few years," he said.


5--Global finance faces $9 trillion stress test as dollar soars, AEP


The world is more dollarized today that any time in history, and therefore at the mercy of the US Federal Reserve as rates rise


6--Emerging-Market Currency Defenses May Come Up Short Over Long Term, WSJ


Intervention can provide short-term support but is no match for a soaring dollar


7--Ukraine’s economy, Economist

The new Greece in the east






Tuesday, March 10, 2015

Today's links

"The response of the euro zone ministers (Eurogroup) to the Greek government reveals the ruthless character of this capitalist body. Greek voters, who elected Syriza based on the party’s election promises to end austerity, have been told their votes count for nothing. The financial aristocracy and its institutions will tolerate nothing that impedes the transfer of wealth from the poor to the rich."
WSWS


The US-instigated war in Ukraine since March 2014 has caused a humanitarian catastrophe, one which the US-steered German and other western media have blocked out of their coverage. More than one million Ukrainian citizens, losing their homes or in fear of being destroyed in the insane US-instigated carnage that is sweeping across Ukraine, have sought asylum in Russia. They have been welcomed as brothers according to all reports. That is a human response that has untold resonances among ordinary Russians. Because of the wonders of YouTube and smart phone videos, Russians are fully aware of the truth of the US war in eastern Ukraine. Russians are becoming politically sensitive for the first time in years as they realize that some circles in the West simply want to destroy them because they resist becoming a vassal of a Washington gone berserk......


This for me is the heart of an emerging renaissance of the spirit among Russians that gives me more than hope for the future. And, a final note, it has been policy among the so-called Gods of Money, the bankers of London and New York, since at least the assassination in 1881 of Czar Alexander II, to prevent a peaceful growing alliance between Germany and Russia. A prime aim of Victoria Nuland’s Ukraine war has been to rupture that growing Russo-German economic cooperation. A vital question for the future of Germany and of Europe will be whether Germany’s politicians continue to kneel to the throne of Obama or his successor or define their true interests in closer cooperation with the emerging Eurasian economic renaissance that is being shaped by President Putin’s Russia and by President Xi’s China."
Russia’s Remarkable Renaissance, F. William Engdahl, Sputnik
"
Central Banks Are Crack Dealers & Faith Healers






1--NATO begins military manoeuvres in Black Sea, wsws


Juncker’s proposal was welcomed above all by the German government. Through deputy spokeswoman Christiane Wirtz, German Chancellor Angela Merkel (Christian Democratic Union, CDU) called for “intensified military cooperation in Europe.”


German Foreign Minister Frank-Walter Steinmeier (Social Democratic Party, SPD) and Defence Minister Ursula Von der Leyen (CDU) spoke out in favour of a European army. “For the SPD, the long-term goal of a European army is an important political issue and has been part of the party programme for many years,” Steinmeier told the Berlin-based Tagesspiegel .
“Confronting the new dangers and threats to our peaceful European order” requires “a rapid adjustment and modernisation of the joint European security strategy,” said Steinmeier. “I am pushing for that. We have brought our ideas to Brussels on this.”


2--Greece told deeper austerity needed to secure additional loans, wsws


The Eurogroup “needed to see signs that reforms are being implemented,” he demanded, warning that there “can be no talk about early disbursement if there is no agreement and no implementation.” The Greek government, he added, had promised the Eurogroup that it would take no unilateral actions or roll back austerity measures already adopted.


Without billions of euros being made available in loans, Greece faces default on its €320 billion foreign debt in a matter of weeks. The euro zone meeting took place amid dire warnings that Greece’s banks can no longer finance the economy due to their lack of liquidity and an ongoing flight of deposits.
Nearly €20 billion were withdrawn from the banks in January and February. There is a nearly €80 billion gap between the €135 billion available in the banks’ deposits and their loan balance, which exceeds €210 billion. The banks only have temporary access to high interest rate emergency liquidity assistance (ELA) from the ECB, which can be ended at any time....


Upon taking office, Syriza began its rapid capitulation to the demands of global capital, insisting it had already agreed to 70 percent of the austerity measures in place. Addressing Syriza’s latest proposals Sunday, Dijsselbloem said, “Those absolutely won’t be accepted as the 30 percent that they wanted to replace.”....


In reality, everything is being done on the troika’s terms, as has been the case since 2010. Even the pretence of renaming the troika has been ditched, with German Finance Minister Wolfgang Schäuble purposefully using the word numerous times as he entered Monday’s meeting and other euro zone ministers, including Dijsselbloem, following suit. Far from an end to the troika’s monitoring of the Greek government in Athens, the technical talks beginning Wednesday will be held in both Brussels and Greece, Dijsselbloem told the press conference.
The response of the euro zone ministers to the Greek government reveals the ruthless character of this capitalist body. Greek voters, who elected Syriza based on the party’s election promises to end austerity, have been told their votes count for nothing. The financial aristocracy and its institutions will tolerate nothing that impedes the transfer of wealth from the poor to the rich.


3--The carnage in fracking, sputnik


experts point out that the astonishing growth of US oil production has finally slowed down as the oil market has been suffering from a 50 percent decline in prices since June 2014. For instance, the Eagle Ford in Texas, the American second-largest oil field, is expected to reduce its output by 10,000 barrels per day, while oil production in the Bakken region in North Dakota is likely to drop by 8,000. Experts stress that the overall number of drilling rigs in the US has already plunged by 41 percent; this while investments have been cut back and employees laid off


4--Russian Foreign Minister Lavrov said that Moscow would respond to NATO military buildup near Russian border "in an adequate way."



5--US Dollar at 12-year High, Puts Emerging Markets in Jeopardy, sputnik


The S&P advanced some 207% in 2009-2015, driven by the Fed’s ultra-easy monetary policies and record high corporate earnings. Similar dynamics were seen twice during past century: in 1974-1980, preceding the Reaganomics, and early 1929, just before the dramatic end of the Great Prosperity in October that same year. Both situations, despite preceding two completely different further developments in America’s economy, had also laid the cornerstone for the dollar’s appreciation.
6--Recession Alarm: Wholesale Sales Plunge Alongside Factory Orders, Worst Since Lehman, ZH



7--Why Is Per Capita Energy Consumption At Recession Levels After Six Years Of "Recovery"?, ZH


8--Consumer Spending Tumbles: BofA Blames Snow, Oil; Claims Its Models Are Right, Reality Is Wrong, ZH


9--Market selloff is about the dollar: Koesterich, cnbc


You've got the dollar up about 23 percent from the summer lows, and people are realizing this is starting to bite into earnings" BlackRock's Russ Koesterich said during a "Squawk Box" interview.


A stronger dollar makes U.S. goods more expensive abroad and dilutes the value of earnings when American companies bring overseas profits back home. With price-to-earnings ratios already fairly extended, it will be harder for the United States to post gains this year without earnings growth, he said.
The dollar is due for a pullback at some point this year because it is currently at the center of an incredibly crowded trade, Koesterich said. He expects the dollar to continue to appreciate as monetary policy around the world remains loose.


"The fundamentals are what they are and the reality is the U.S. is going to outgrow Europe and Japan, the path of U.S. monetary policy is very different than the rest of the world, and you've got a much lower current account deficit because of domestic oil production, all of which favor a stronger dollar over the next few years," he said.


10--Dear Federal Reserve: *Now* is the Time to Raise Interest Rates? Really? Seriously?!?, NC


GREAT ARTICLE


11--So did Syriza win a victory?, saker


The point to understand is that unless there is a restructuring of Greece’s debt, either by a lengthening of the terms of repayment or through an outright debt write-off (surely the most logical option), then flexibility on the size of the primary budget surplus is limited since the whole point of setting it at the ridiculous target of 4.5% of GDP is to generate a sufficient surplus to start paying off the debt.  Needless to say, given the size of the debt, on the existing terms of repayment that would mean running such a surplus for decades, something, which would utterly devastate whatever is left of Greece’s economy if it were done, which of course it won’t be.


As it happens, I think it is most unlikely that Greece is actually running a primary budget surplus at all.  Output appears to have fallen sharply in the last quarter of 2014 (with the fall beginning before the election was called) whilst tax receipts seem to have fallen off a cliff since the start of the year.  Whether Greece ever did run a primary budget surplus for any part of 2014 (and my brother for one believes that claims that it did were smoke and mirrors) I think it is very unlikely that it is doing so now.  With the economy in the state it is in, I think that any plan to run a primary budget surplus at whatever level so that Greece can remain in the Eurozone and pay its debts is anyway an utterly fantastic one.  I am sure that Yaroufakis at least is clever enough to understand this.


In my opinion the only realistic way forward is for Syriza to use whatever grace period it has got (and it may turn out to be a lot less than 4 months) to prepare the Greek economy and the Greek people for a default and (since the European authorities in their great unwisdom have decided that a default is incompatible with membership of the Eurozone) for a Grexit.


12---Russia's remarkable renaissance, Engdahl


My first of many visits to Russia was more than twenty years ago, in May, 1994. I was invited by a Moscow economics think-tank to deliver critical remarks about the IMF. My impressions then were of a once-great people who were being humiliated to the last ounce of their life energy. Mafia gangsters sped along the wide boulevards of Moscow in sparkling new Mercedes 600 limousines with dark windows and without license plates. Lawlessness was the order of the day, from the US-backed Yeltsin Kremlin to the streets. “Harvard boys” like Jeffrey Sachs or Sweden’s Anders Aaslund or George Soros were swarming over the city figuring new ways to rape and pillage Russia under the logo “shock therapy” and “market-oriented reform” another word for “give us your crown jewels.”


The human toll of that trauma of the total collapse of life in Russia after November 1989 was staggering. I could see it in the eyes of everyday Russians on the streets of Moscow, taxi-drivers, mothers shopping, normal Russians.


Today, some two decades later, Russia is again confronted by a western enemy, NATO, that seeks to not just humiliate her, but to actually destroy her as a functioning state because Russia is uniquely able to throw a giant monkey wrench into plans of those western elites behind the wars in Ukraine, in Syria, Libya, Iraq and well beyond to Afghanistan, Africa and South America.
Rather than depression, in my recent visits to Russia in the past year as well as in numerous discussions with a variety of Russian acquaintances, I sense a new feeling of pride, of determination, a kind of rebirth of something long buried.




The renaissance I detect is evident in more than protests or polls, however. The US-instigated war in Ukraine since March 2014 has caused a humanitarian catastrophe, one which the US-steered German and other western media have blocked out of their coverage. More than one million Ukrainian citizens, losing their homes or in fear of being destroyed in the insane US-instigated carnage that is sweeping across Ukraine, have sought asylum in Russia. They have been welcomed as brothers according to all reports. That is a human response that has untold resonances among ordinary Russians. Because of the wonders of YouTube and smart phone videos, Russians are fully aware of the truth of the US war in eastern Ukraine. Russians are becoming politically sensitive for the first time in years as they realize that some circles in the West simply want to destroy them because they resist becoming a vassal of a Washington gone berserk......


Russia and its leaders are hardly trembling behind Kremlin walls. They are forging the skeleton of a new international economic order that has the potential to transform the world from the present bankruptcy of the Dollar System. Moscow and Beijing recently announced, as I discussed in a previous posting, their project to create a joint alternative to the US credit rating monopoly of Moody’s, S&P and Fitch. President Putin’s travel agenda in the past year has been mind-boggling. Far from being the international paraiah Washington and Victoria Nuland hoped for, Russia is emerging as the land which has the courage to “just say No!” to Washington.
Russia’s president has been in Cyprus where possible basing for the Russian navy was discussed, in Egypt where General al-Sisi warmly welcomed the Russian leader and discussed significant economic and other joint cooperation. Late last year Russia and the BRICS states agreed to form a $100 billion infrastructure bank that makes the US-controlled World Bank irrelevant. The list grows virtually every day...






13--The euro slipped to just below $1.0725 today, marc to market


14--Santelli on Euro troubles, cnbc


15--Market selloff is about the dollar: Koesterich, cnbc









Monday, March 9, 2015

Today's Links

1--U.S. declares Venezuela a national security threat, sanctions top officials, yahoo


2--Breedlove's Bellicosity: Berlin Alarmed by Aggressive NATO Stance on Ukraine, Spiegel


3--The Origin of the ‘New Cold War’, Zuesse
4--The ‘Democrat’ Brzezinski Says Russia’s Putin Wants to Invade NATO, Zuesse
5--Europe Blocks U.S. from Racing to War Against Russia, zuesse




6--Greece's Varoufakis warns of referendum if eurozone rejects debt plans, DW


Athens could call for a referendum or early elections if the eurozone rejects its debt plans, Greece's finance minister has said. The present government won elections on promises of renegotiating the EU bailout program.

9--Give peace a chance, decide sanctions later’: EU split over extension, new Russia penalties, RT


10--The Threat To The Dollar As The World’s Primary Reserve Currency, ZH


11--What Trickle-Down Economics Has Done to the US: The Rich Get All the Money, truthout


12--US Bank Lending Growing At Highest Rate Since the Great Recession,


13--Inflation rate slowest since war on falling prices began, JT


14--Workers getting smaller share of corporate earnings despite record profits, JT


15--A “Crush” of Bond Sales Before the Market Goes to Heck , wolf street

Friday, March 6, 2015

Today's Links

1--Mark Cuban Does the Bubble Beat, CEPR


At its peak in 2000 the value of corporate stock was more than 30 times trend earnings, today it is closer to 20. The bubble was clearly moving the economy both by sending investment to its highest share of GDP since the 1970s and by causing a consumption boom through the wealth effect.
Neither story is close to being true today. If over-valued tech companies were to lose 95 percent of their value tomorow, few people outside of Silicon Valley would notice.


This issue about these companies being privately traded makes between little and no sense. If Mark Zukckerberg paid $19 billion too much for Whatsapp, who cares? It's a form of redistribution from the incredibly rich to the new superrich. That's hardly a publicly policy problem.


2--China cuts growth forecast, warning of “deep-seated” economic problems, wsws


Nomura financial analyst Rob Subbaraman told the British Daily Telegraph: “We assign a one-in-three chance of a hard landing—growth averaging 5 percent or less over four quarters—starting within the next two years.”
Such a fall would not only have major consequences in China but would send a shock wave through the global economy and could set off a major financial crisis.


3--NATO seeks regime change in Russia - envoy, RT


4--Americans Not In The Labor Force Rise To Record 92.9 Million As Participation Rate Declines Again, RT
End result: the labor force participation rate dropped once more, declining to only 62.8%, which as the chart below shows is just off the lowest print recorded since 1978.

Source: BLS


5--Nutty Valuations, Bill Bonner


Why are we raising the flag again now? Economist and fund manager John Hussman, of Hussman Funds, explains:
Last week, the CAPE ratio of the S&P 500 Index surpassed 27, versus a historical norm of just 15 prior to the late-1990s market bubble. [The CAPE ratio – also known as the Shiller P/E ratio – looks at inflation-adjusted earnings over a 10-year period to control for cyclicality in earnings.]

The S&P 500 price-revenue ratio surpassed 1.8, versus a pre-bubble norm of just 0.8.
On a wide range of historically reliable measures (having a nearly 90% correlation with actual subsequent S&P 500 total returns), we estimate current valuations to be fully 118% above levels associated with historically normal subsequent returns in stocks.
Advisory bullishness (Investors Intelligence) shot to 59.5%, compared with only 14.1% bears – one of the most lopsided sentiment extremes on record.

The S&P 500 registered a record high after an advancing half-cycle since 2009 that is historically long-in-the-tooth and already exceeds the valuation peaks set at every cyclical extreme in history but 2000 on the S&P 500 (across all stocks, current median price-earnings, price-revenue and enterprise value-EBITDA multiples already exceed the 2000 extreme).


6--Japan Now Spends 43% Of Tax Revenue To Fund Interest On Debt, ZH


7--15 Recent Bank Scandals That Show Just How Powerless You Really Are


8--Stuck in the housing middle with you: Americans moving less and inventory near record lows., Dr Housing Bubble


You had 7,000,000+ completed foreclosures since the crisis hit where many people moved into rentals and big investors bought a property to rent out. A one-off transaction. This also explain the massive decline in the homeownership rate.....


inventory for sale
During the bad years of the crisis, we had something like 3.8 million existing homes for sale on the market. Today we are closer to 2 million. With investors chasing yield and supply shrinking, prices got pushed up and we saw this hit strongly in 2013 and 2014. But this wasn’t driven by massive sales volume or your traditional channel of typical home buyers. This was largely done by a low rate environment, investors, and low inventory....


The market seems largely stuck. The national median home price is $208,000. That is certainly a reasonable amount and with very low mortgage rates, you would expect more buyers to be out on the hunt. But as we discussed, 6 out of 10 Millennials prefer renting over buying and this would be your next target audience to take the baton from the aging baby boomers. This is where the clash also occurs. Baby boomers seem to assume that their offspring have the same desire to own property as they do and that this applies to everyone. That isn’t always the case and also, desire and incomes don’t always align.
The fact that inventory is so low and current owners are staying put longer simply speaks to the lingering impacts of the housing bust. 


9--Biderman on FOX Business: Why economy will slow while stocks grow - See more at: http://charlesbiderman.com/2015/02/27/biderman-on-fox-business-why-economy-will-slow-while-stocks-grow-and-why-hes-bearish-on-oil-due-to-heavy-etf-inflows/#sthash.CjYZMgqn.dpuf


10--For 90% Of Americans: There Has Been No Recovery Lance Roberts


Every three years the Federal Reserve releases a survey of consumer finances that is a stockpile of data on everything from household net worth to incomes. The 2013 survey confirms statements I have made previously regarding the Fed's monetary interventions leaving the majority of Americans behind:
"While the ongoing interventions by the Federal Reserve have certainly boosted asset prices higher, the only real accomplishment has been a widening of the wealth gap between the top 10% of individuals that have dollars invested in the financial markets and everyone else. What monetary interventions have failed to accomplish is an increase in production to foster higher levels of economic activity.
With the average American still living well beyond their means, the reality is that economic growth will remain mired at lower levels as savings continue to be diverted from productive investment into debt service. The issue, of course, is not just a central theme to the U.S. but to the global economy as well. After five years of excessive monetary interventions, global debt levels have yet to be resolved."
.
Fed-Survey-2013-NetWorth-091014
However


11--In order to continue to drive the housing recovery forward you need fresh entrants into the housing market in the form of household formations. As discussed by Walter Kurtz recently:
"The biggest issue, however, remains household formation. As of the end of last year, for example, the number of American households was not growing at all. This is likely due to record low marriage rates as well as a slew of other factors (lack of employment, wage growth, etc.). Whatever the reason, household formation needs to stabilize before we see stronger results in the US housing market."
Household-formation
The current decline in housing is not a "weather related" anomaly but a function of "real" affordability. I say "real" affordability, because buying a house is not just about the price, but the ability for a family to qualify for and pay the mortgage. Unfortunately, despite the ever ebullient hopes of mainstream analysis, the core requirements of rising wage growth, full-time employment, loan qualification and the ability to save a downpayment keeps home ownership elusive for many. That is unlikely to change anytime soon. Of course, I have already told you that previously.




12--U.S. Strategy in Iraq Increasingly Relies on Iran, NYT


13--The US-NATO expansion of the conflict in Ukraine is indeed a declaration of war against Russia. And from what I can make out the Russian people see the writing on the wall - they can hear the train coming. Sadly the American people have no clue what is going on nor do most of those in Europe.

This project has been set up with criminal precision. After all the CIA and the Pentagon have had alot of practice over the years. This is what Washington does best.


It's all just far to neat and tidy to be seen otherwise. This is not a conspiracy but a well designed military plan to take down Moscow. They are playing with fire. In some respects the 'project' is now impossible to stop. The question for the moment is how long will this attack on Russia go on and what level of conflict will result? Will it go nuclear? If so the world is fucked.

The Pentagon role now is to send legions of NATO trainers into Ukraine to "push Kiev's reluctant troops forward" in order to "deter Russian aggression." It's a long term military operation that is going to be exceedingly expensive. It's got to be sold to the American people and folks throughout Europe. In order to make this public relations campaign successful the perpetrators have to flip the switch - turn the story ass backwards - blame the other side for doing what US-NATO are in fact doing


14---Bernanke's plan to nationalize the banks? ZH


Back on February 7, 2009, one month before the Fed unveiled its massive (for its time) first episode of Quantitative Easing, the Federal Reserve was flailing. And, as revealed today by the latest annual batch of Fed transcript releases, precisely one month before the Fed commenced monetizing tens of billions in government debt and MBS, Bernanke held perhaps the longest conference call in the Fed's history (the transcript alone is 65 pages) in which he revealed that he was working on something entirely different: an "aggregator bank" concept, which would have been essentially a quasi-nationalization of  the US banks whereby Fed funds is commingled with the bank's capital in order to avert public attention from the trillions of bad assets on the bank books.


It is during the discussion of this plan, which mysteriously disappeared from the Fed's plan of action between February 7 and a month later, when America set off on its path from which 7 years later it is still unable to ween itself (and in fact now everyone else is also pursuing QE), that we learn for a fact precisely what most have suspect if not known for a fact, namely that the resulting "bailout" of the US economy by way of QE was nothing more than a way to keep bank shareholders "thrilled."...
.

But I think there are some advantages to that from a political point of view. I will say that both I and the staff—Bill Dudley and others—are somewhat concerned, at least given the way things stand now, about the market reaction. First, the lack of details will create some uncertainty and concern, particularly because there’s not a great deal said about the “problem children,” the BAC and Citi. Secondly, I think the markets will be disappointed in the following sense: As I will describe, this is a real truth-telling kind of plan. It’s fundamentalist. It’s not about giving the banks a break. It’s not about using accounting principles  to give them backdoor capital. It’s very much market-oriented and “tough love.” And I think we all will like that. I like that. But the banks’ shareholders aren’t going to be thrilled about it.
Beautiful


For one brief , fleeting instant, the Fed was willing to do what is right, and no only not halt Mark to Market (the Fed itself admits accounting gimmicks boost banks), but force banks to recognize their losses without "giving them backdoor capital" - something else the Fed now admits to doing. But the reason why the Fed's plan would have been applauded is that as Bernanke says it is "market-oriented" and "tough love."
But most importantly, the Fed revealed what the overarching motive behind the entire economic "bailout" has been- in other words what it was all about: the banks’ shareholders.
And.... he was right, even if he "liked it." Because someone else apparently did not.
Precisely one month later, unclear why, the Fed changed course 180 degrees, and instead of dispensing "tough love" and going with a market-oriented means to fixing the economy, one which however would have wiped out all bank shareholders, Bernanke unleashed central-planning unlike anything even seen in the USSR. Not only that, but we also know what QE is by what it isn't:


15--Expanding debt and leverage no longer boosted wages., zh


 

something changed around 2009. Expanding debt and leverage no longer boosted wages. For the first time in 30 years, juicing debt and leverage did not push wages higher--rather, wages declined or stagnated, despite trillions of dollars of Fed stimulus, near-zero interest rates and all the other tricks of financialization.
 
The returns on additional debt and leverage have diminished to near-zero. This is the endgame of financialization: expanding debt and leverage no longer move the needle on wages and household income. Rather, adding more debt is weighing on wages.
 
After 30 years of success, the endgame is finally here. We are witnessing a profound secular sea-change: the failure of expanding debt and leverage to lift the real economy of wages and household income.


The dollar index has gained around 18% since last July, when it started taking off and emerging currencies began to tumble...

The world is much more interdependent and globalized than in 1979 or 1997, the economies of the “periphery” are now half the world economy, and the US economy is weakened and in uncharted territory, printing trillions of new dollars and still attempting to force the world to continue to submit to its domination. It’s possible that we’ve entered an age when the US simply can’t continue to export its crises with impunity......

According to the Bank of International Settlements in early December, at mid-2014 non-bank borrowers outside the US owed $9 trillion of dollar denominated debt, a 50% increase since 2008. Of this $9 trillion, $5.7 trillion is in emerging markets, mainly in the form of corporate bonds and international bank loans to companies. This includes $1.1 trillion of dollar debt in China, more than double its amount at the end of 2012. Most of emerging market dollar debt is corporate and not sovereign, but states’ reserves could be tapped if major bailouts are needed....

If international speculators start dumping emerging market corporate bonds, these companies would be forced to acquire dollars to pay off their debts, thus accelerating the dollar’s rise. If there is a wave of defaults, contagion could set in (since speculators are herd animals) and capital flight could take off. There is the risk for a sell-off in emerging market bonds, leading to conditions like in 1997. The multitrillion dollar carry trade may be on the verge of unwinding, meaning capital fleeing the periphery and rushing back to the US. Vast amounts of capital are already leaving some of these countries, and the secondary market for emerging bonds is beginning to dry up. A rise in US interest rates would only put oil on the fire.....

While a stronger dollar will not hurt the consumption-based US economy, the rising dollar and US monetary tightening are about to give the developing world a severe blow. Ambrose Evans Pritchard of the Telegraph wrote on December 17:
“The stronger the US boom, the worse it will be for those countries on the wrong side of the dollar. [...] The US Federal Reserve has pulled the trigger. Emerging markets must now brace for their ordeal by fire. They have collectively borrowed $5.7 trillion, a currency they cannot print and do not control. This hard-currency debt has tripled in a decade, split between $3.1 trillion in bank loans and $2.6 trillion in bonds. It is comparable in scale and ratio-terms to any of the biggest cross-border lending sprees of the past two centuries. Much of the debt was taken out at real interest rates of 1pc on the implicit assumption that the Fed would continue to flood the world with liquidity for years to come. The borrowers are ‘short dollars’, in trading parlance. They now face the margin call from Hell…. Stephen Jen, from SLJ Macro Partners said that ‘Emerging market currencies could melt down. There have been way too many cumulative capital flows into these markets in the past decade. Nothing they can do will stop potential outflows, as long as the US economy recovers. Will this trend lead to a 1997-1998-like crisis? I am starting to think that this is extremely probable for 2015.’”
This is exactly in the interests of US financial imperialism: to economically undermine any rivals that question dollar hegemony...


The Financial Times wrote on February 22:
“History suggests that severe accidents are more likely when the Fed is tightening, and the dollar is rising. […] Whether it likes it or not, the Fed is the world’s central banker, more than ever before. The dollar has become the unit of account in a foreign credit market that is half as large as US GDP. All of the major emerging markets are deeply embroiled, including China, Brazil and India. The market is plenty big enough to cause trouble in the US economy itself, should an accident occur. An accident certainly cannot be ruled out. […] Even in retrospect, it is not easy to identify viable policy options for the emerging markets (EM), other than extremely cumbersome capital controls, that could have insulated the emerging economies from the Fed’s unconventional easing. […] Portfolio managers in the global bond market may dump EM debt very quickly as interest rates begin to rise, forcing some EM corporates to buy dollars to redeem maturing debt. This could push the dollar higher, tightening monetary conditions even more. And this would reduce capital investment in the EMs, raising the risk of recession and inducing bond managers to dump more EM credit into the market. The BIS is worried that the results could resemble the collapse of a traditional leverage bubble in the banking sector, even though the institutional components would be very different.”
This situation creates obvious risks even for the core economies, which are not exactly stable


17--New Financial Paradigm: shareholder payouts take precedence over productive corporate investment, NC


This paper provides evidence that the strong empirical relationship of corporate cash flow and borrowing to productive corporate investment has disappeared in the last 30 years and has been replaced with corporate funds and shareholder payouts. Whereas firms once borrowed to invest and improve their long-term performance, they now borrow to enrich their investors in the short-run. This is the result of legal, managerial, and structural changes that resulted from the shareholder revolution of the 1980s. Under the older, managerial, model, more money coming into a firm – from sales or from borrowing – typically meant more money spent on fixed investment. In the new rentier-dominated model, more money coming in means more money flowing out to shareholders in the form of dividends and stock buybacks.

These results have important implications for macroeconomic policy. The shareholder revolution – and its implications for corporate financing decisions – may help explain why higher corporate profits in recent business cycles have generally failed to lead to high levels of investment. And under this new system, cheaper money from lower interest rates will fail to stimulate investment, growth, and wages because, as we show here, additional funds are funneled to shareholders through buybacks and dividends.
Key Findings
• In the 1960s and 1970s, an additional dollar of earnings or borrowing was associated with about a 40-cent increase in investment. Since the 1980s, less than 10 cents of each borrowed dollar is invested.
• Since the 1980s, shareholder payouts have nearly doubled; in the second half of 2007, aggregate payouts actually exceeded aggregate investment. Today, there is a strong correlation between shareholder payouts and borrowing that did not exist before the mid-1980s.
• This change in corporate finance, associated with the “shareholder revolution”, means there is good reason to believe that the real economy benefits less from the easier credit provided by macroeconomic policy than it once did.


18---Investors just got another wake-up call on the bull market , marketwatch


The bull market in stocks just lost a major support: Total margin debt on the NYSE is now in a distinct downtrend.


Margin, of course, refers to what investors borrow from their brokers to purchase securities. The higher the number, the more bullish they are, owing to the fact that they pay interest to borrow the money. The New York Stock Exchange each month reports the total amount among member firms. Late last week, the NYSE released its data for January, and it’s that number that is so worrisome.
It’s not that the raw numbers are alarming: The NYSE reported that total margin debt for January stood at $445 billion, an undeniably big number. But it’s been falling steadily over the past year, from a peak of $466 billion in February 2014. The latest total is now below its average level in the trailing 12 months.


To put this in context, consider that when the bull market began in March 2009 and the Dow Jones Industrial Average DJIA, -1.07%   was below 6,600, total margin debt was only $182 billion. As the Dow nearly tripled over the next six years, margin debt also rose steadily — until recently.
Margin debt’s downtrend is bearish, according to research conducted by Norman Fosback, the former president of the Institute for Econometric Research and current editor of Fosback’s Fund Forecaster. “If the current level of margin debt is above the 12-month average, the series is deemed to be in an uptrend, margin traders are buying, and stock prices should continue upwards,” Fosback wrote in his investment textbook “Stock Market Logic.”


“By the same line of reasoning, sell signals are rendered when the current monthly reading is below the 12-month average. This is evidence of stock liquidation by margin traders, a phenomenon which usually spurs prices downward.”


19--Stephen Roach Warns: "The Fed Is In Total Denial... On What It Put The World Through A Decade Ago", ZH


KE  Why is the 10 year at 2.5%?
SR--certainly it indicates weak recovery and subdued inflation, but also a fed that it has no intention of being aggressive in normalizing interest rates
the fed is in complete denial that cheap money, accommodative policy, reduced price of risk had anything to do with the catastrophic outcome of 08 and 09